Crop Insurance Update on Fresh-Market Recordkeeping Requirements for Apple Producers

According to the Risk Management Agency (RMA) Informational Memorandum PM-10-07-071 dated December 22, 2010, a policyholder has until the acreage reporting date of January 31st to report and designate all acreage by type (fresh or processing). By reporting the type, you are certifying that you have the necessary documentation to support this designation. For example, if you report that 65% of your production is designated as fresh, you must have the necessary records to show that 50% or more was sold as fresh within one of the past four seasons. These records must be presented whenever the insurance provider requests them. The Apple Crop Provisions do not specify when these records could be requested by the provider. My recommendation is that when you submit your acreage report supply these records and request, in writing, that these records be considered acceptable. This will potentially save confrontations at claim time.
This past year, some companies requested these records very early in the insurance year, while others did not. Those companies that requested the documentation early and worked with growers to be certain the records were acceptable had a much smoother claims process than those that did not request the documentation until claims were filed. 

According to the Informational Memorandum, the amount of production sold under a State Marketing Program would constitute acceptable verifiable records. This holds true for those direct marketing some of their production. These records must be kept for at least three years due to policy retention requirements. However, this provision is not mentioned in another Bulletin (MGR-11-015) issued November 17, 2011.

This Bulletin appears to relax certain requirements and provides additional details that should be of interest to apple producers. Two excerpts from that Bulletin are as follows:
Effective for the 2012 and succeeding crop years, policyholders who do not have separate records by unit of fresh apple production in one of the last four years but do have records of total fresh apple production may still be able to qualify for the fresh apple price. Approved Insurance Providers (AIPs) may consider records of total production (rather than by unit) from one of the four most recent crop years that reflect fresh apple sales. If only a portion of the acreage is reported as fresh, and the total amount of production sold as fresh can reasonably be determined to be reflective of at least 50 percent of the production that would have been from the apple acreage reported as fresh, such records may be used as verifiable records attributable to that portion of the acreage as fresh. Policyholders still must designate all their acreage by type (i.e. fresh or processing) by the acreage reporting date.

The AIPs should remind their agents and inform their policyholders that by designating fresh apple acreage on the acreage report, the policyholder is certifying they have verifiable records to support that they have sold in one or more of the four most recent crop years at least 50 percent of the total production as fresh apples (rather than by unit) from acreage reported as fresh apple acreage.

A verifiable record must reflect the value received was commensurate with the value of fresh apples versus processing apples. It is incumbent upon the policyholder to provide records, when requested, that demonstrate the value received for sold production is consistent with the value of fresh apple production. Section 16J(2) of the 2012 FCIC 18010 Crop Insurance Handbook provides guidance regarding what is considered an acceptable verifiable record.

The following examples illustrate the flexibility this action provides:

For example, for the 2012 crop year, a policyholder reports fresh apple acreage on three basic units. The policyholder is able to provide records proving at least 50 percent of the total production sold, from all three units, were sold as fresh apples in one or more of the four most recent crop years. Such records can be used as a verifiable record for all the fresh apple acreage for the 2012 crop year.

A second example would be for the 2012 crop year a policyholder reports two blocks of processing apple acreage and one block of fresh apple acreage in one basic unit. Records of fresh apple production sold from the entire unit can be used as a verifiable record provided the AIP can determine the records of total fresh apple production sold in one of the four most recent years would reasonably account for at least 50 percent of the total fresh apple production from the block reported as fresh apple acreage for the 2012 crop year.

Agents should also be advised to remind policyholders that the prior years’ records used to certify fresh apple production become records that must be maintained for three years in accordance with the policy record retention requirements.

Record Requirements for Optional Units by Type

When requested by the AIP, the insured must certify and provide verifiable records used to meet the fresh apple production requirement [see 16K(1)(a)]. These records must indicate the crop, name of the insured, name of the buyer, the minimum production sold as fresh, date the production was sold, the amount of production sold in the applicable unit of measure, and the price. Verifiable records may include: packer or buyer records, daily sales records, and records from a State Marketing Program.
   
Exception: In order to meet the 2011 crop year apple policy requirements for fresh, insureds may use their apple records from the 2007 through 2010 crop years to certify (when requested) that at least 50 percent of their apple production from their apple acreage was sold as fresh [see Sec. 16K(1)]. Thus in subsequent years, when insureds elect to insure their apple acreage as fresh, AIPs may consider records of total production (rather than by unit) that reflect fresh apple sales from the 2007 through the 2010 crop years (i.e., for the 2012 crop year, records from the 2008 through 2010 crop years would be applicable; however, records from the 2011 crop year would not be applicable. Additionally, for the 2013 crop year, records from the 2009 through 2010 crop years would be applicable; however, records from the 2011 through 2012 crop years would not be applicable, etc.) as verifiable records.

However for the total apple acreage, if only a portion is reported as fresh, the total amount of production sold must reflect at least 50 percent of the production being sold as fresh. Such records may be used as verifiable records attributable to that portion of the acreage as fresh.

My suggestions for all growers is to develop a recordkeeping system that works for you and your business and then consult your crop insurance sales person and make sure what you are doing fulfills the requirements for crop insurance. If it does not, try to adapt it to the recordkeeping process that is approved. I would also consult your market and see what they have available in terms of records that may assist you. By everyone working together through this process, hopefully we will have a much better claims season this year than last. For more information and the Loss Adjustment Manual for apples please go to this USDA link.  Additional information can be found at:

•    2012 Crop Insurance Handbook
      See: Vertical Integration on page 272 and Acceptable Verifiable Records page  430
•    2013 Crop Insurance Handbook
     See: Vertical Integration on page 273 and Acceptable Verifiable Records page 264-268.1