Please note information in this post could change based an RMA releasing their final rules and procedures and a final rule on conservation compliance. This post will be revised in the future based on that new information.
The U.S. Department of Agriculture (USDA) recently reminded producers that the 2014 Farm Bill has relinked conservation compliance to eligibility for premium support paid by the Federal crop insurance program (click here to see press release). Under the 2014 Farm Bill, producers who skip the other farm safety net programs offered by the Farm Service Agency (FSA) but still take out crop insurance will need to have completed and filed a current Highly Erodible Land Conservation and Wetland Conservation Certification (Form AD-1026) with FSA. Farmers without an AD-1026 on file will be ineligible for FSA programs and for premium support paid by the Federal Crop Insurance Corporation. The Risk Management Agency (RMA) has stated in an interim rule that no premium support will be withheld till at least the 2016 reinsurance year. Since conservation compliance may be new to some who use crop insurance, let’s review what conservation compliance means and what happens under the crop insurance program when a producer is found to be out of compliance.
What is Conservation Compliance?
Conservation compliance is concerned with the production of an annual crop on highly erodible land and conversion and production on wetlands. These two aspects of conservation compliance have been required since the 1985 farm bill. In previous farm bills, conservation compliance was traditionally linked to participating in commodity programs, such as the former Direct and Counter-Cyclical programs. Conservation compliance had previously been a part of the crop insurance program but was removed in the 1996 farm bill to encourage more producers to purchase crop insurance. The 2014 farm bill relinked the two after fears that a push towards a more crop insurance-based farm safety net could lead to marginal lands being put into production without requiring compliance.
Looking at the two aspects of conservation compliance, highly erodible land compliance provision (often referred to as “sodbuster”) requires a producer to have an approved conservation plan in order to produce a crop on highly erodible land or not produce a crop on land classified as highly erodible between 1980 and 1985. A producer would also need an approved conservation plan to produce on highly erodible land in 1990 regardless of when the land was put into production. The sodbuster provision is the easier of the two aspects to stay in compliance with because a producer just needs to follow the approved conservation plans on highly erodible land.
The second aspect is the wetlands conservation compliance provision (often referred to as “swampbuster”) which requires a producer to not produce a crop on a converted wetland. If the conversion happens after February 7, 2014 (the date the 2014 farm bill was enacted), then the producer will be ineligible to receive the premium subsidy for future crop years. But the producer could potentially remain eligible if it is determined that fewer than 5 acres were converted and the producer pays 150 percent of the cost to mitigate the wetlands conversion to a USDA fund utilized to restore wetlands.
What Happens if You Violate the Swampbuster Provision?
If you are found to violate the swampbuster provision, then you will have 1 year to begin a mitigation plan to remedy the violation. This 1 year will begin after all administrative appeals have taken place. If the mitigation plan is not initiated within the 1-year period, then you will be ineligible for the premium subsidy for all following years – meaning you are still eligible to buy crop insurance, but you will pay 100% of the premium.
What Happens if a Crop Does Not Currently Have a Crop Insurance Policy?
If the commodity is not currently covered under the crop insurance program but becomes eligible in the future, then the 2014 farm bill ineligibility will only apply to wetland conversions taking place after the policy becomes available. The new farm bill appears to simplify many aspects of the wetlands conversion analysis. Here producers found to be in violation will be given 2 years, after a final determination and the appeals process has run its course, to implement a mitigation plan. If not implementing the mitigation plan within 2 years, then the producer will be ineligible in future years for the premium subsidy.
How Do You Show Compliance?
Much like in the past for former federal farm programs like the Direct Payment Program, you will need to file an AD-1026 with FSA each year, self-certifying that you are in compliance with these two provisions. RMA has set a June 1 deadline each year that a producer will need to file a new AD-1026 by. This deadline is before the beginning of the next reinsurance year (starts on July 1), unless otherwise exempt.
USDA is supposed to evaluate all the certifications in a timely manner but nothing in the statute tells us what constitutes “a timely manner.” If the evaluation is not completed in a timely manner, then the producer remains eligible. If the producer fails to certify and is later found to be out of compliance, then they can be required to pay into USDA’s fund for wetlands mitigation, a contribution at USDA’s discretion which cannot be larger than the amount of premium subsidies paid over the year(s) the producer was in violation.
Conclusion
Conservation compliance is now an issue that producers relying on crop insurance must consider. Most producers will already have a conservation plan in place on their farms and will not need to worry about the sodbuster provision. The potential is for the swampbuster provision to cause issues for producers down the road in future crop years.
For more information on conservation compliance, click here.
For more information on RMA’s interim rules, click here.
For more information on conservation compliance in 2014 farm bill, click here.
For more information on conservation compliance provisions and crop insurance, click here.
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