[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]





  IMPLEMENTING THE AGRICULTURAL ACT OF 2014: COMMODITY POLICY AND CROP
                               INSURANCE

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                        GENERAL FARM COMMODITIES
                          AND RISK MANAGEMENT

                                 OF THE

                        COMMITTEE ON AGRICULTURE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 10, 2014

                               __________

                           Serial No. 113-17

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Printed for the use of the Committee on Agriculture
                         agriculture.house.gov
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                        COMMITTEE ON AGRICULTURE

                   FRANK D. LUCAS, Oklahoma, Chairman

BOB GOODLATTE, Virginia,             COLLIN C. PETERSON, Minnesota, 
    Vice Chairman                    Ranking Minority Member
STEVE KING, Iowa                     MIKE McINTYRE, North Carolina
RANDY NEUGEBAUER, Texas              DAVID SCOTT, Georgia
MIKE ROGERS, Alabama                 JIM COSTA, California
K. MICHAEL CONAWAY, Texas            TIMOTHY J. WALZ, Minnesota
GLENN THOMPSON, Pennsylvania         KURT SCHRADER, Oregon
BOB GIBBS, Ohio                      MARCIA L. FUDGE, Ohio
AUSTIN SCOTT, Georgia                JAMES P. McGOVERN, Massachusetts
SCOTT R. TIPTON, Colorado            SUZAN K. DelBENE, Washington
ERIC A. ``RICK'' CRAWFORD, Arkansas  GLORIA NEGRETE McLEOD, California
SCOTT DesJARLAIS, Tennessee          FILEMON VELA, Texas
CHRISTOPHER P. GIBSON, New York      MICHELLE LUJAN GRISHAM, New Mexico
VICKY HARTZLER, Missouri             ANN M. KUSTER, New Hampshire
REID J. RIBBLE, Wisconsin            RICHARD M. NOLAN, Minnesota
KRISTI L. NOEM, South Dakota         PETE P. GALLEGO, Texas
DAN BENISHEK, Michigan               WILLIAM L. ENYART, Illinois
JEFF DENHAM, California              JUAN VARGAS, California
STEPHEN LEE FINCHER, Tennessee       CHERI BUSTOS, Illinois
DOUG LaMALFA, California             SEAN PATRICK MALONEY, New York
RICHARD HUDSON, North Carolina       JOE COURTNEY, Connecticut
RODNEY DAVIS, Illinois               JOHN GARAMENDI, California
CHRIS COLLINS, New York
TED S. YOHO, Florida
VANCE M. McALLISTER, Louisiana

                                 ______

                      Nicole Scott, Staff Director

                     Kevin J. Kramp, Chief Counsel

                 Tamara Hinton, Communications Director

                Robert L. Larew, Minority Staff Director

                                 ______

      Subcommittee on General Farm Commodities and Risk Management

                  K. MICHAEL CONAWAY, Texas, Chairman

RANDY NEUGEBAUER, Texas              DAVID SCOTT, Georgia, Ranking 
MIKE ROGERS, Alabama                 Minority Member
BOB GIBBS, Ohio                      FILEMON VELA, Texas
AUSTIN SCOTT, Georgia                PETE P. GALLEGO, Texas
ERIC A. ``RICK'' CRAWFORD, Arkansas  WILLIAM L. ENYART, Illinois
CHRISTOPHER P. GIBSON, New York      JUAN VARGAS, California
VICKY HARTZLER, Missouri             CHERI BUSTOS, Illinois
KRISTI L. NOEM, South Dakota         SEAN PATRICK MALONEY, New York
DAN BENISHEK, Michigan               TIMOTHY J. WALZ, Minnesota
DOUG LaMALFA, California             GLORIA NEGRETE McLEOD, California
RICHARD HUDSON, North Carolina       JIM COSTA, California
RODNEY DAVIS, Illinois               JOHN GARAMENDI, California
CHRIS COLLINS, New York              ----
VANCE M. McALLISTER, Louisiana

                                  (ii)
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Conaway, Hon. K. Michael, a Representative in Congress from 
  Texas, opening statement.......................................     1
    Prepared statement...........................................     3
Lucas, Hon. Frank D., a Representative in Congress from Oklahoma, 
  opening statement..............................................     6
    Prepared statement...........................................     7
Scott, Hon. David, a Representative in Congress from Georgia, 
  opening statement..............................................     4

                                Witness

Scuse, Hon. Michael T., Under Secretary, Farm and Foreign 
  Agricultural Services, U.S. Department of Agriculture, 
  Washington, D.C................................................     8
    Prepared statement...........................................    10
    Supplementary information....................................    37
    Submitted questions..........................................    45

                           Submitted Material

Texas Wheat Producers Association, submitted letter..............    45

 
  IMPLEMENTING THE AGRICULTURAL ACT OF 2014: COMMODITY POLICY AND CROP
                            INSURANCE

                              ----------                              


                        THURSDAY, JULY 10, 2014

                  House of Representatives,
         Subcommittee on General Farm Commodities and Risk 
                                                Management,
                                  Committee on Agriculture,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to call, at 9:31 a.m., in 
Room 1300 of the Longworth House Office Building, Hon. K. 
Michael Conaway [Chairman of the Subcommittee] presiding.
    Members present: Representatives Conaway, Neugebauer, 
Rogers, Gibbs, Austin Scott of Georgia, Crawford, Gibson, 
Hartzler, Noem, LaMalfa, Hudson, Davis, Collins, McAllister, 
Lucas (ex officio), David Scott of Georgia, Vela, Enyart, 
Vargas, Bustos, Maloney, Walz, Negrete McLeod, Costa, 
Garamendi, and Peterson (ex officio).
    Staff present: Bart Fischer, Kevin Kramp, Matt Schertz, 
Nicole Scott, Skylar Sowder, Tamara Hinton, Anne Simmons, Liz 
Friedlander, Mary Knigge, John Konya, and Riley Pagett.

OPENING STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE 
                     IN CONGRESS FROM TEXAS

    The Chairman. This hearing of the Subcommittee on General 
Farm Commodities and Risk Management to discuss the 
implementation of the Agriculture Act of 2014, including 
commodity policy and crop insurance, will come to order.
    I want to thank Michael Scuse, the Under Secretary for Farm 
and Foreign Agricultural Service, for being here. He has got 
quite the title. Michael and I had the chance to meet for the 
first time the day before yesterday. And I told him we were 
going to beat him about the head and shoulders today. I was 
teasing him about the setup here. We have this august body 
sitting up here. We have him way down there at a lower table, 
so we are looking down on him. It is the one time Congress has 
the advantage over the Administration, or the Executive Branch, 
and we take full advantage of that. So it is good to have you.
    It has been 5 months since the farm bill became law. And 
the purpose of this hearing is to evaluate the implementation 
of the commodity and crop insurance titles. Again, I want to 
welcome our witness, Under Secretary Scuse.
    The commodity title provisions of previous farm bills 
included direct payments, counter-cyclical payments, ACRE, 
SURE, which were repealed by the 2014 Farm Bill. These 
provisions were replaced by a choice of two policies that will 
only trigger when a producer suffers a loss. During 
consideration of the farm bill, the Congressional Budget Office 
predicted this would reduce spending under that bill and would 
be something on the order of $18.4 billion. These budget 
savings and reforms came with the promise of enhanced risk 
management tools under crop insurance. I understand the lift 
that the Department has in implementing these provisions. I 
appreciate the complications involved. This is why the farm 
bill provided extra funds to the affected agencies. And while I 
commend the Department for their efforts so far, I want to 
challenge the Department to fully deliver on the promise of the 
farm bill.
    The Department's assurance of a timely, if only partial, 
implementation of the Supplemental Coverage Option is 
appreciated. We appreciate the RMA Administrator, Brandon 
Willis, for working to ensure that SCO is properly implemented. 
We hope to learn more today about the Department's plans for a 
full implementation of SCO for all crops and counties as 
required by the farm bill. We are encouraged by RMA's efforts 
to move forward with crop margin coverage, enterprise units by 
practice, coverage levels by practice, STAX, beginning farmer 
and rancher provisions, and peanut revenue coverage. The 
Committee appreciates that there is an effort to get the job 
done on each of these fronts. And while some delays are 
understandable, they should be held to a minimum.
    I am deeply troubled though over the Department's handling 
of two very important issues that we will discuss today. The 
first is the Actual Production History Adjustment that will 
provide critical relief for those producers struggling through 
severe drought for a number of years. And the second is the 
rollout of conservation compliance, which I fear will undermine 
crop insurance and our overall conservation goals if the 
approach is overly punitive.
    There are farmers and ranchers who have experienced severe 
drought for 3 years. Many remain in severe drought this year. 
And a good many of these areas are in D4 drought conditions. 
Despite all this, we understand that the Department intends to 
administratively delay the APH Adjustments relief until 2016, 
which would be the third year of our 5 year farm bill. I 
respectfully urge the Department to respond to this natural 
disaster in states like Texas and Oklahoma, New Mexico and 
Colorado and other states around the country with the same 
speed and determination as one would expect in the case of a 
wild fire or a hurricane.
    One other farm bill provisions where the Department has 
said it can only partially implement a provision on time, we 
hope to exhibit patience. All we ask on the APH Adjustment is 
that some effort be made to partially implement the provision 
in time for the 2015 crop year where relief is needed the most.
    Beyond providing immediate relief to farmers and ranchers 
who were hit the hardest, timely action might help insulate the 
Department from legal challenges. The APH Adjustment is meant 
to be self-executing. Farmers were not meant to have to ask 
permission to exclude qualifying yields. The right is the 
producers, and it became the producers' right on the day the 
farm bill became law.
    My second concern regards conservation compliance. This was 
never a smart provision, and the interim rule explains why so 
many of us were concerned with it. For example, page 11 of the 
rule says that if a farmer plants a crop next spring and it is 
found to be non-compliant on June 1, even if he or she were to 
come back into compliance by July 1, within a month, the farmer 
would still be denied premium support for 2016. This 
effectively means no insurance. As bad as the compliance 
provision is, the objective was to impose the penalty in the 
following year, and only if the producer did not come back into 
compliance.
    I maintain that farmers are our best conservationists. They 
know their land, and they know better than you and I how to 
keep it productive. From my experience, farmers are at their 
best in making conservation investments when they are 
profitable. This provision as interpreted by the Department, 
along with the EPA's new waters of the U.S. regulation, are 
just two examples of why farmers and ranchers are scared to 
death about the regulatory overreach of this Administration.
    Finally, on two positive notes, I want to commend the 
Administrator of the Farm Service Agency, Juan Garcia, for his 
exemplary work in implementing Livestock Disaster Assistance. 
We hit some bumps along the road early on, but this was the 
first rule out of the gate and it turned out well. We really 
appreciate Juan and his team's excellent work. And, second, I 
want to commend the Secretary for the role that he played in 
securing passage of the farm bill and his responsiveness during 
implementation. Fully implementing the farm bill in a timely 
way not only fulfills a pledge to farmers and ranchers, but it 
honors the work that the Secretary did to help the farm bill 
happen.
    [The prepared statement of Mr. Conaway follows:]

  Prepared Statement of Hon. K. Michael Conaway, a Representative in 
                          Congress from Texas
    It has been 5 months since the farm bill became law. The purpose of 
this hearing is to evaluate implementation of the commodity and crop 
insurance titles.
    I want to welcome our witness, Under Secretary Scuse.
    The commodity title provisions of previous farm bills, including 
Direct Payments, Countercyclical Payments, ACRE, and SURE, were 
repealed by the 2014 Farm Bill. These provisions were replaced by a 
choice of two policies that only trigger when a producer suffers a 
loss. During consideration of the farm bill, the Congressional Budget 
Office predicted this would reduce spending by $18.4 billion.
    These budget savings and reforms came with the promise of enhanced 
risk management tools under crop insurance.
    I understand the lift the Department has in implementing these 
provisions. I appreciate the complications involved. This is why the 
farm bill provides extra funds. And, while I commend the Department for 
efforts so far, I want to challenge the Department to fully deliver on 
the promise of the farm bill.
    The Department's assurance of a timely--if only partial--
implementation of the Supplemental Coverage Option is appreciated. We 
appreciate RMA Administrator, Brandon Willis, for working to ensure 
that SCO is properly implemented. We hope to learn more today about the 
Department's plans for the full implementation of SCO for all crops and 
counties as required by the farm bill.
    We are encouraged by RMA's efforts to move forward with Crop Margin 
Coverage, Enterprise Units by Practice, Coverage Levels by Practice, 
STAX, Beginning Farmer and Rancher provisions, and Peanut Revenue 
Coverage. The Committee appreciates that there is an effort to get the 
job done on each of these fronts. While some delays are understandable, 
they should be held to a minimum.
    I am deeply troubled over the Department's handling of two very 
important but very different issues. The first is the APH Adjustment 
which would provide critical relief for those struggling against severe 
drought. The second is the rollout of conservation compliance which I 
fear could undermine crop insurance and our overall conservation goals 
if the approach is overly punitive.
    There are farmers and ranchers who have experienced severe drought 
for 3 years. Many remain in severe drought this year. A good many of 
these areas are in D4 drought condition. Despite all of this, we 
understand the Department intends to administratively delay APH relief 
until 2016, the THIRD year of a FIVE year farm bill.
    I respectfully urge the Department to respond to this natural 
disaster in states like Texas, Oklahoma, New Mexico, Colorado and other 
states around the country with the same speed and determination as one 
would expect in the case of a wildfire or a hurricane.
    On other farm bill provisions where the Department has said it can 
only partially implement a provision on time, we are exhibiting 
patience. All we ask on APH is that some effort be made to partially 
implement the provision in time for 2015 where relief is needed most.
    Beyond providing immediate relief to farmers and ranchers who are 
hit the hardest, timely action might help insulate the Department from 
legal challenges. The APH adjustment is meant to be self-executing. 
Farmers were not meant to have to ask permission to exclude qualifying 
yields. The right is the producer's and it became the producer's right 
on the day the farm bill became law.
    My second concern regards conservation compliance. This was never a 
smart provision and the interim final rule explains why many of us 
remain concerned.
    For example, page 11 of the rule says that if a farmer plants a 
crop next spring and is found to be non-compliant on June 1, even if he 
were to come back into compliance on July 1, within a month, the farmer 
would still be denied premium support for 2016. This effectively means 
no insurance. As bad as the compliance provision is, the objective was 
to impose the penalty in the following year and only IF the producer 
did not come back into compliance.
    I maintain that farmers are the best conservationists. They know 
their land and they know better than you or I how to keep it 
productive. From my experience, farmers are at their best in making 
conservation investments when they are profitable.
    This provision, as interpreted by the Department, along with EPA's 
new waters of the U.S. regulation, are just two examples of why farmers 
and ranchers are scared to death about the regulatory overreach of this 
Administration.
    Finally, on two positive notes: I commend the Administrator of the 
Farm Service Agency, Juan Garcia, for his exemplary work in 
implementing livestock disaster assistance. We hit some bumps along the 
road early on but this was the first rule out of the gate and it turned 
out well. We really appreciate Juan and his team's excellent work. 
Second, I commend the Secretary for the role he played in securing 
passage of the farm bill and for his responsiveness during 
implementation. Fully implementing the farm bill in a timely way not 
only fulfills a pledge to farmers and ranchers but it honors the work 
that the Secretary did to help make the farm bill happen.
    I now recognize the Ranking Member, my good friend, Mr. Scott, for 
any remarks he may have.

    The Chairman. I now recognize my good friend, Ranking 
Member David Scott, for any remarks he may have. David?

  OPENING STATEMENT OF HON. DAVID SCOTT, A REPRESENTATIVE IN 
                     CONGRESS FROM GEORGIA

    Mr. David Scott of Georgia. Thank you, Chairman Conaway. 
And let me thank you for putting this very critical hearing 
together, focusing on crop insurance. I am mainly concerned 
with Title I and Title XI. Of course, Title I defines the 
commodities of peanuts, rice, soy beans, wheat, corn, so forth. 
Title XI specifically enhances the coverage of the permanently 
authorized Federal insurance program. It is very important for 
us to understand that this farm bill completely, completely 
changes the way in which farmers receive assistance now. 
Farmers must now make a decision as to which crop insurance 
program they will sign on to this fall, either the agriculture 
risk coverage, ARC, or price loss coverage, PLC. And then once 
the farmer makes that decision, they are committed to it for 5 
years. For this reason, it is critical that we take the time, 
make sure our farmers and our producers get the correct 
information, the right information, so that they can make the 
right decisions.
    And, specifically, I want to start with Title XI. There has 
been great concern, and Chairman Conaway has already alluded to 
it, regarding the Risk Management Agency which largely 
administers the Federal Crop Insurance Program. The issue is 
why the RMA imposes what is known as downward trending 
adjustment on the Actual Production History, or the APH in 
Georgia and South Carolina, while waiving this requirement on 
all the other states? That is not right. In the case of South 
Carolina and the case of Georgia peach producers, the APH of 
the producer is based on the preceding 5 years of the Actual 
Production History. However, in Georgia, in South Carolina, 
peach growers, the proven yield of the producers that comprise 
their APH are then administratively adjusted downward by the 
RMA, and this effect of this downward adjustment makes for a 
reduction in the yield levels that the producer may insure. 
This imposes a tremendous hardship on the peach producers in my 
State of Georgia who I have represented here in Congress for 12 
years, represented in the State Legislature and the State 
Senate for 20, represented in the State Representative House 
for 8. And that is 40 years. And then on top of that, I was 
born in South Carolina, grew up on a farm there. So when you 
talk about Georgia, you talk about South Carolina, you are 
hitting David Scott right in the heart.
    So we need to get a better understanding from the Under 
Secretary today. We understand the theory behind the downward 
adjustment is that it is--they say it is necessary in order for 
an insurance guarantee to be consistent with the production 
expectations for the peach crop, which is anticipated to be 
lower in the earlier years of perennial crop. However, any 
lower yield associated with the peach crop is already reflected 
in the APH of the Georgia and South Carolina producers, which 
is based on its 5 year history. Therefore, this downward 
trending adjustment is unnecessary. It is punitive. It is 
discriminatory to Georgia and South Carolina peach growers. 
This is not right. And we have to correct it, Mr. Under 
Secretary.
    As I mentioned, the downward trending adjustment has been 
waived in each of the 2011 through 2014 crop years for the 
producers of perennial crops, including peaches, in states from 
Maine to North Carolina. However, the same relief was not 
granted to my farmers in Georgia or in South Carolina. South 
Carolina and Georgia peach growers suffered a devastating 
freeze in March, costing millions of dollars in losses, losses 
that were exacerbated by the RMA's discriminatory treatment. 
And this downward trending adjustment must be waived also for 
Georgia and South Carolina as they are in states from Maine to 
North Carolina. All we are asking for is to be treated equal. 
And as my granddaddy used to say on the farm, ``We all want to 
be fed out of the same spoon.''
    Now, my other concern is with regards to peanuts, and again 
Title XI. The 2014 Farm Bill contains provisions providing for 
what is called revenue assurance, specifically for peanut 
farmers beginning with the 2015 crop year. Funds for this 
initiative were included in the existing farm bill. We need to 
know more about this program. We need to know how much money is 
in the program. We need to get a clear understanding of how 
this money, these funds, will be used, the accessibility and 
benefit for our peanut farmers.
    In conclusion, Mr. Chairman, we are here at this hearing 
today because of these changes. I just briefly want to 
highlight how dramatic these are. First, direct and counter-
cyclical payment programs in the state based revenue program 
known as ACRE, Average Crop Revenue Enhancement Program, have 
all been eliminated. And in their place, as I mentioned 
earlier, a farmer now has to choose one of two farm programs 
that begin with the 2014 crop year. One, price loss coverage. 
And what this program does, it makes a payment to a producer 
when the market price for a covered crop is below a fixed 
reference price. Or there is the Agriculture Risk Coverage, 
ARC, a program that makes a payment when either the farm's 
revenue from all crops that account for the revenue from a 
crop, the farmer has to choose the alternatives below 86 
percent of the pre-determined bench value. Together, it is 
important that we have these programs. And a highlight is that 
the savings should be $16.6 million.
    And, finally, it is important for us to recognize our 
cotton growers who are no longer coming under these programs, 
but we put a different program in called the Stacked Income 
Protection Program for Upland Cotton acreage. And it is an 
additional area of revenue that a cotton producer may use alone 
or in combination.
    And, finally, the second program, the supplemental coverage 
option, provides all crop producers with the option of 
purchase. So we have a lot of issues here. I look forward to 
hearing the Under Secretary. Thank you very much for coming. 
And thank you, Mr. Chairman.
    The Chairman. Thank you, David, I appreciate your comments.
    We will now recognize the Chairman of the Committee, Frank 
Lucas, for any comments he might have.

 OPENING STATEMENT OF HON. FRANK D. LUCAS, A REPRESENTATIVE IN 
                     CONGRESS FROM OKLAHOMA

    Mr. Lucas. Thank you, Mr. Chairman. Under Secretary Scuse, 
I appreciate your being here today. And I appreciate all of the 
hard work that you and your staff have been doing over the last 
several months. The Agricultural Act of 2014 is a shift to a 
more risk based safety net. Gone are the days of making 
payments regardless of market conditions. Congress gave you a 
large task, and I appreciate the willingness of the Secretary 
and the Department to listen and act when problems arise.
    The Secretary and you have worked with this Committee on 
issues that have arisen in the Livestock Disaster Programs, and 
many of the improvements Congress made to the crop insurance 
title. And I sincerely thank you for that.
    That being said, I am concerned about a few key insurance 
problems which Chairman Conaway has already highlighted. 
Producers in my state pay incredibly high premiums for their 
crop insurance coverage, often much higher than their 
colleagues in other parts of the country. For example, compared 
to wheat producers in your home State of Delaware, wheat 
producers in Oklahoma pay almost three times more for their 
crop insurance coverage. We have more yield variability in 
Oklahoma, so we pay higher rates. And that is understandable, 
at least to a degree. But after years of prolonged drought, we 
are now paying much higher rates. To add insult to injury, the 
amount of production my producers can ensure has been decimated 
as well, even though that loss in yield was through no fault of 
their own.
    This second factor is precisely why I included the APH 
Adjustment in the farm bill. For anyone who is facing the 
prospect of drought, or who has been suffering for years 
through prolonged drought, this provision is designed to 
provide immediate relief. We are almost finished with wheat 
harvest in Oklahoma. Four years of drought, combined with 
widespread freeze damage, have yielded one of the worst crops 
in state history. The APH Adjustment would provide widespread 
relief for wheat producers, planting and insuring their crops 
this fall. Congress was clear: all producers who have been 
affected by droughts should be able to exclude those years. 
They should be able to do so immediately. I understand there 
are challenges, but I think producers affected by drought 
deserve the effort.
    Again, I thank you for all that you have done, and I look 
forward to working together in the future to ensure that our 
producers have the full benefits of the new safety net that we 
all worked so hard together to provide.
    Thank you, Mr. Chairman. I yield back.
    [The prepared statement of Mr. Lucas follows:]

Prepared Statement of Hon. Frank D. Lucas, a Representative in Congress 
                             from Oklahoma
    Mr. Scuse, I appreciate you being here today and I appreciate all 
of the hard work that you and your staff have been doing over the last 
several months. The Agricultural Act of 2014 is a shift to a more risk-
based safety net. Gone are the days of making payments regardless of 
market conditions.
    Congress gave you a large task and I appreciate the willingness of 
the Secretary and the Department to listen and act when problems have 
arisen. The Secretary and you have worked with this Committee on issues 
that have arisen in the livestock disaster programs and many of the 
improvements Congress made to the crop insurance title, and I sincerely 
thank you for that.
    That being said, I am concerned about a key crop insurance 
provision, which Mr. Conaway has already highlighted.
    Producers in my state pay incredibly high premiums for their crop 
insurance coverage, often much higher than their colleagues in other 
parts of the country. For example, compared to wheat producers in your 
home State of Delaware, wheat producers in Oklahoma pay almost three 
times more for their crop insurance coverage. We have more yield 
variability in Oklahoma, so we pay higher rates. That is understandable 
(at least to a degree), but after years of prolonged drought, we are 
now paying MUCH higher rates.
    To add insult to injury, the amount of production my producers can 
insure has been decimated as well, even though that loss in yield was 
through no fault of their own.
    This second factor is precisely why I included the APH Adjustment 
in the farm bill. For anyone who is facing the prospect of drought or 
who has been suffering through years of prolonged drought, this 
provision is designed to provide immediate relief.
    We are almost finished with wheat harvest in Oklahoma. Four years 
of drought combined with widespread freeze damage has yielded one of 
the worst crops in state history. The APH Adjustment would provide 
widespread relief for wheat growers planting and insuring their crop 
this Fall.
    Congress was clear. All producers who have been affected by drought 
should be able to exclude those years, and they should be able to do so 
immediately. I understand there are challenges, but I think producers 
affected by drought deserve the effort.
    Again, I thank you for all that you have done and look forward to 
working together in the future to ensure our producers have access to 
the full benefits of the new safety net that we all worked together to 
provide.

    Background Note: In 2014, wheat producers in Delaware paid $0.0284 
for $1 of crop insurance coverage. By contrast, wheat producers in 
Oklahoma paid $0.0812 per $1 of crop insurance coverage, almost three 
times the rate in Delaware.

    The Chairman. I thank the gentleman. The chair will request 
that other Members submit their opening statements for the 
record so that our witness may begin his testimony, and to 
ensure there is ample time for questions.
    I welcome to our witness table today, the Honorable Michael 
T. Scuse, Under Secretary for Farm and Foreign Agricultural 
Services, United States Department of Agriculture, Washington 
D.C.
    Michael, the floor is yours for your comments. Thank you.

 STATEMENT OF HON. MICHAEL T. SCUSE, UNDER SECRETARY, FARM AND 
              FOREIGN AGRICULTURAL SERVICES, U.S.
           DEPARTMENT OF AGRICULTURE, WASHINGTON D.C.

    Mr. Scuse. Thank you. Chairman Lucas, Chairman Conaway, 
Ranking Member Scott, and Members of the Subcommittee, I am 
pleased to be here today to update you on the United States 
Department of Agriculture's progress in implementing the 
commodity and crop insurance titles of the 2014 Farm Bill.
    The new farm bill improves the safety net for producers, 
expands crop insurance tools and continues our market 
development programs. Implementations of these programs is a 
top priority for USDA. In roughly 5 months since enactment, 
USDA has made considerable progress in implementing key 
provisions.
    USDA's first priority was to implement the disaster relief 
programs for livestock producers. LSP, LIP, ELAP and TAP were 
implemented in 60 days. As of July 2, USDA has provided more 
than $1.2 billion under LFP and LIP to livestock producers.
    On June 9, CRP continuous signup was restarted, as was the 
CRP transition incentives payment for beginning and socially 
disadvantaged producers. In lieu of a general signup this year, 
we are allowing producers with CRP contracts expiring in 
September to receive a 1 year contract extension.
    Another priority for USDA and FSA is helping producers 
understand ARC, PLC, margin protection program for diary, and 
NAP buy-up programs, and what these programs mean for them and 
their families. On May 29, USDA announced awards totaling $6 
million through our university partners for the development of 
online decision tools and producer education on these programs. 
The University of Illinois and the University of Missouri with 
Texas A&M will simplify complex decisions that producers need 
to make by easy to use tools that producers can access on their 
home computers. State extension specialists will be trained on 
these tools and host meetings to educate producers later this 
fall.
    This summer, FSA plans to provide producers' information on 
their current base acres yields and 2009 to 2012 planting 
history, and offer them an opportunity to verify this 
information with their local Farm Service Agency office. Later 
this fall, there will be an opportunity to update yields and 
reallocate bases, the critical first step in implementing ARC 
and PLC. By mid-winter, all producers on a farm will be 
required to make a one-time unanimous election between price 
protection, county revenue protection and individual revenue 
protection for the 2014 through 2018 crop years. By early 2015, 
producers can expect to sign contracts for ARC and PLC for the 
2014 and 2015 crop years. FSA plans to implement the margin 
protection program for dairy by September 1.
    The Committee can also expect to see a proposed definition 
of significant contribution of active personal management later 
this year.
    Crop insurance has become an increasingly important 
component of the farm safety net. Due to efforts that RMA began 
last summer, a whole farm revenue protection program was 
approved by FCIC in May. RMA expects information about this 
program to be available in time for producers to make decisions 
for the 2015 crop sales. Last week, RMA published an interim 
rule on seven sections of the farm bill. That rule will apply 
to producers as soon as this fall, including beginning farmer 
and rancher provisions, the authority to correct errors and 
make late payments, and restrictions for producers who plant on 
native sod. RMA expects to offer enterprise units for irrigated 
and non-irrigated crops, and coverage levels by practice for 
the 2015 spring crops. APH adjustment will be available for 
crops planted in the fall of 2015.
    The rule links eligibility for any premium subsidy paid by 
FCIC on a policy or plan of federally reinsured crop insurance 
to compliance with highly erodible land conservation and 
wetland conservation compliance provisions. Although no 
producers will lose premium subsidy for the current reinsurance 
year, first time compliers will need to visit a Farm Service 
Agency to certify their compliance if they have not already 
done so. USDA intends to provide more details on the new 
conservation compliance requirements later this fall. Education 
on this requirement will be a priority for USDA in the coming 
months.
    RMA plans to release supplemental coverage option materials 
later this month, and information for corn, grain, sorghum, 
rice, soybean, spring wheat and cotton will be made available 
later this summer or early fall. In addition, RMA will be able 
to offer SCO for spring barley beginning in 2015. Also this 
fall, RMA will be examining additional crop and county coverage 
under SCO. We understand that producers need as much 
information as possible regarding when they make their ARC and 
PLC election. Policy materials and county availability for the 
Stacked Income Protection Plan for producers of Upland Cotton 
will be made available in August, and RMA anticipates that STAX 
will be available for over 98 percent of cotton acreage in 
production. Additionally, FSA will have information on the 
Cotton Transition Assistance Payment Program available later 
this summer.
    In closing, I would like to thank the Committee for this 
opportunity to update you on USDA's progress in implementing 
title I and title XI of the 2014 Farm Bill. Farmers, ranchers, 
rural communities and other USDA stakeholders have waited 
several years for this legislation, and USDA has made 
significant implementation progress.
    I would be happy to answer any questions that you may have 
at this time. Thank you, Mr. Chairman.
    [The prepared statement of Mr. Scuse follows:]

Prepared Statement of Hon. Michael T. Scuse, Under Secretary, Farm and 
     Foreign Agricultural Services, U.S. Department of Agriculture,
                            Washington, D.C.
    Chairman Conaway, Ranking Member Scott, and Members of the 
Subcommittee, I am pleased to be here before you today to provide an 
update of the U.S. Department of Agriculture's (USDA) progress in 
implementing Title I, the Commodity Title, and Title XI, the Crop 
Insurance Title, of the Agricultural Act of 2014, also known as the 
farm bill.
    The new farm bill improves the safety net for producers, expands 
critical crop insurance tools and continues our market development 
programs. USDA and the Farm and Foreign Agricultural Services (FFAS) 
Mission Area have made the implementation of these programs a top 
priority. In the roughly 5 months since enactment, the three agencies 
under FFAS, the Farm Service Agency (FSA), the Risk Management Agency 
(RMA) and the Foreign Agricultural Service (FAS) have made considerable 
progress in implementing many of the key provisions. Today I will focus 
on titles I and XI.
    In the Commodity Title, USDA's first priority was to implement the 
disaster relief programs for livestock producers. With enactment of the 
farm bill in February, Secretary Vilsack directed FSA to implement the 
livestock assistance programs by April 15th, and we met that goal. In 
fact, we implemented the disaster programs--including the Livestock 
Forage Program (LFP), Livestock Indemnity Program (LIP), the Emergency 
Livestock Assistance Program (ELAP) and the Tree Assistance Program 
(TAP)--in just 20 percent of the time it took USDA to implement in 
2008. USDA has, through LFP and LIP, provided more than $1.2 billion in 
help to livestock producers, many of whom had been waiting for over 2 
years for assistance.
    USDA's next priority for the mission area was resuming conservation 
efforts. On June 9, FSA restarted continuous sign-ups in the 
Conservation Reserve Program (CRP), as well as the CRP Transition 
Incentives Program (TIP) for beginning and socially disadvantaged 
farmers and ranchers. In lieu of a general sign-up this year, we're 
allowing producers with CRP contracts expiring this September to 
receive a 1 year contract extension. And we've implemented the farm 
bill requirement that in certain cases producers enrolled through 
general sign-up for at least 5 years can opt-out of their contracts.
    Another important priority for USDA and FSA is helping farmers and 
ranchers understand the new farm bill safety net programs including 
Agriculture Risk Coverage (ARC), Price Loss Coverage (PLC), Margin 
Protection Program (MPP) for dairy, and enhanced protection under 
Noninsured Disaster Assistance Program also known as NAP buy-up--and 
what these programs mean for their families. On May 29, USDA announced 
$3 million for two teams of universities representing the geographical 
diversity of agriculture--one led by the University of Illinois, and 
another led by the Food and Agricultural Policy Research Institute 
(FAPRI) at the University of Missouri and the Agricultural and Food 
Policy Center (AFPC) at Texas A&M. The awardees are tasked with 
integrating the complex data and scenarios of the new safety-net 
programs into easy-to-use tools that producers can access on their home 
computers to explore program options and coverage levels. These tools 
will be available later this summer and in early fall.
    Experts at the state cooperative extension services will be trained 
and, starting in late summer, producers will be able to pose questions 
to and seek advice from extension agents about the new safety net 
programs. FSA also recently launched a website with tables of monthly 
updated data for those who want to begin exploring how the ARC and PLC 
guarantees and payments will be determined for the 2014 crop.
    Late this summer FSA also plans to provide producers information on 
their current base acres, yields and 2009-2012 planting history and 
offer them an opportunity to verify this information with their local 
FSA office. Then later this fall, there will be an opportunity to 
update yields and reallocate bases--this is the critical first step in 
implementing the ARC and PLC programs. By mid-winter all producers on a 
farm will be required to make a one-time, unanimous and irrevocable 
election between price protection, country revenue protection and/or 
individual revenue protection for 2014-2018 crop years. By early 2015 
producers can expect to sign contracts for ARC or PLC for the 2014 and 
2015 crop years.
    Late this summer, FSA also plans to implement MPP for dairy. The 
farm bill has a target for MPP to be in effect by September 1 and 
USDA's goal is to meet that deadline. Late this summer FSA also plans 
to publish the details on the Dairy Product Donation Program (DPDP). 
While current margins are well above $4 per hundredweight and DPDP is 
not expected to trigger, USDA will have the program details finalized.
    By law, dairy producers may not participate in both MPP and RMA's 
Livestock Gross Margin for Dairy (LGM-Dairy) programs. As a result, FSA 
and RMA jointly sent guidance at the end of June on the transition 
period, which will afford dairy producers maximum flexibility by 
allowing them to transition to the MPP-Dairy program in either 2014 or 
2015. This flexibility will allow producers under LGM-Dairy, who 
already have LGM-Dairy target marketings that go into 2015, to 
participate in MPP-Dairy in 2015 after their insurance contract is 
over, as opposed to keeping these producers out until 2016.
    Later this year, the Committee can expect to see a proposed 
definition of ``significant contribution of active personal 
management.''
    The crop insurance program has become an increasingly important 
component of the farm safety net, and crop insurance protections for 
all farmers, particularly beginning farmers and ranchers, have been 
strengthened under the new farm bill.
    In order to implement the numerous crop insurance changes as 
quickly as possible, the Risk Management Agency (RMA) began preparing 
to implement the Stacked Income Protection Plan (STAX) and Supplemental 
Coverage Options (SCO) programs months before farm bill passage. 
Specifically, since both the House and Senate had similar provisions 
related to STAX and SCO, RMA began efforts to develop and implement 
policies and procedures soon after passage. These efforts have paid 
dividends, and RMA will have information on SCO availability this month 
and STAX availability in August.
    In April, RMA began revising the premium rates charged for 
Catastrophic Risk Protection Endorsement (CAT) coverage base them on 
the average historical ``loss ratio'' plus a reasonable reserve. This 
change will not increase costs for growers. RMA will update actuarial 
documents throughout the year as applicable to fully implement this 
section. Additionally, in April RMA implemented a prohibition of 
catastrophic coverage on crops used for grazing by issuing a guidance 
document to amend the Special Provisions for the annual forage policy.
    In May, RMA completed the update to its systems to reflect the 
permanent enterprise unit subsidy as mandated by the farm bill. Also in 
May, due to efforts that RMA began last summer, a Whole-Farm Revenue 
Protection program, as required by the farm bill, was approved by the 
FCIC Board of Directors. RMA expects the Whole-Farm Revenue Protection 
product information to be available to farmers later this year in time 
for producers to make plans and decisions for 2015 crop sales. In mid-
May, RMA's Risk Management Education Request for Application (RFA) for 
Risk Management Education Partnerships grants and Crop Insurance in 
Targeted States grants were published in the Federal Register. These 
RFAs provide funding opportunities related to financial benchmarking.
    Last week RMA published an interim rule on seven sections from the 
farm bill: highly erodible land and wetland conservation for crop 
insurance, enterprise units for irrigated and non-irrigated crops, 
adjustment in actual production history (APH) to establish insurable 
yields, crop production on native sod, coverage levels by practice, 
beginning farmer and rancher provisions, and authority to correct 
errors.
    This rule will allow RMA to begin offering some of these benefits 
to producers as soon as this fall, including the beginning farmer and 
rancher provisions, the authority to correct errors and make late 
payments, and restrictions for producers who plant on native sod. RMA 
expects to offer enterprise units for irrigated and non-irrigated crops 
and coverage levels by practice for spring crops in 2015. Adjustment in 
APH will be available for crops planted in the fall of 2015. This was 
one of the few crop insurance provisions that did not exist in either 
the House or Senate version of the farm bill prior to conference. While 
RMA understands how important this provision is to many farmers who 
have suffered from natural disasters, it is not possible to implement 
this provision for the 2015 crop year.
    The interim rule links eligibility for any premium subsidy paid by 
FCIC on a policy or plan of federally reinsured crop insurance to be in 
compliance with Highly Erodible Land Conservation (HELC) and Wetlands 
Conservation (WC) provisions. Although no producers will lose premium 
subsidy for the current reinsurance year, ``first time compliers'' will 
need to visit a FSA office to certify their compliance if they have not 
already done so. USDA intends to provide more details on the new 
conservation compliance requirements by the fall. New conservation 
compliance requirement education will be a priority for USDA in the 
coming months.
    RMA plans to release policy materials later this month for SCO, 
which provides coverage for the layer of risk between 86 percent and 
the coverage level selected by the insured. This means an insured that 
elects a 70 percent coverage level could elect to cover an additional 
16 percent of risk under SCO. County availability for winter wheat will 
be published this month. Information for other crops such as corn, 
grain sorghum, rice, soybeans, spring wheat, and cotton will be made 
available later this summer or early fall for the spring planting. I am 
pleased to announce that in addition to these crops, RMA will be able 
to offer SCO coverage for spring barley beginning in 2015. This fall, 
RMA will look at additional crops that can receive SCO coverage as well 
as additional counties. USDA and I understand that producers need as 
much information as possible regarding when they are required to make 
their ARC or PLC election because producers who elect ARC on a farm 
will not be eligible for SCO, and RMA is working to provide additional 
information on new crops and counties that may have SCO prior to the 
ARC and PLC election period.
    Policy materials and county availability for STAX will be made 
available in August. RMA anticipates that STAX will be available for 
over 98 percent of cotton acreage in production. FSA plans to have more 
information on cotton transition payments available later this summer. 
For the counties where STAX is not available in 2015, upland cotton 
producers will be eligible for an additional transition payment.
    RMA is also preparing statements of work and cost estimates for 
contracted feasibility studies on food safety and swine catastrophic 
loss. In addition, it will be issuing a consultation notice as a first 
step in the research and development of a policy to insure biomass 
sorghum and sweet sorghum grown for the purposes of producing a 
feedstock for renewable biofuel, renewable electricity, or biobased 
products.
    Finally, RMA appreciates that Congress recognized the importance of 
program maintenance and program integrity by providing $9 million to 
conduct policy reviews and to ensure actuarial soundness and financial 
integrity. As crop insurance continues to be more important to our 
farmers and ranchers, it is vital that we also protect the interest of 
taxpayers. This money will enhance RMA's investments from discretionary 
funding for these activities. At this moment, I would like to express 
my thanks to the FSA and RMA employees who are working tirelessly to 
assist the American farmers and ranchers who waited so patiently for 
these programs. I commend the FSA and RMA employees for their hard 
work.
    In closing, I would like to again thank the Committee for this 
opportunity to update you on USDA's continued progress in implementing 
title I and title XI of the 2014 Farm Bill. Farmers, ranchers, rural 
communities and other USDA stakeholders have waited several years for 
this legislation, and USDA has made significant progress to implement 
each provision of this critical legislation.

    The Chairman. Thank you, Michael.
    The chair will remind Members that they will be recognized 
for questions in order of seniority for Members who were here 
at the start of the hearing. After that, Members will be 
recognized in order of arrival. And I appreciate our Members' 
understanding.
    I now recognize myself for 5 minutes.
    Michael, thank you for all the great work that RMA and FSA 
and your team have done. You laid out a few of those 
accomplishments, particularly Livestock Disaster Assistance, 
and we are truly thankful for the hard work. But under the 
guise of, ``What have you done for me lately?'', we will have 
some questions about some of the things that are yet to be 
done. I don't want to take the edge off how appreciative we are 
of what you have accomplished, but there are some things that 
are of concern to us. I also want to thank your FSA team; they 
are anxiously waiting for a lot of the stuff that you are 
trying to kick out to them so that they can actually work with 
their producers. There is a sincere joint effort in all of 
that.
    Talking about the APH Adjustment, we have had a lot of back 
and forth with your staff. I need some help understanding why 
this is going to be so difficult, why you say you can't we get 
it done in 2015. We had an intern last week pull down 20 years' 
worth of NASS data for 54 counties in Texas on wheat. It 
covered about 75 percent of the wheat crop. They did the 
calculations. They figured out which years could be kicked out 
under the APH Adjustment. So, if we were able to do that with 
the resources we had, why can't RMA, with the new resources 
they have, and the broader access to data that they have, can't 
get at least a partial roll out of the APH quicker than the 
2016 crop year?
    Mr. Scuse. Mr. Chairman, I appreciate the concern about 
getting the APH done as soon as we possibly can. And we very 
much would like to do that.
    If you look at everything that RMA is going to be rolling 
out for 2015, and the resources that it takes for the Risk 
Management Agency to roll out those programs for 2015, it is no 
small task just on those. One of the reasons why the Risk 
Management Agency is able to roll out this many programs for 
2015, Risk Management Agency looked at the bills that had been 
passed by the House and Senate previous to the bill that was 
ultimately passed by both and signed by the President. We 
anticipated these programs, so we started to work on these 
programs long before the final bill was passed and signed into 
law.
    The APH was not in any of those previous forms of 
legislation. And it was a last minute addition to the final 
farm bill, and one that we did not anticipate having to 
implement. Having said that, it is not just about going back 
and getting 20 years of data for every single county, but it is 
20 years of data for every single county for every single crop 
that is grown in that county. And on top of that, we also have 
to work with our approved insurance providers, the 18 companies 
out there that are responsible for writing the crop insurance. 
It is no small effort to do the IT programs for all the 
commodities that are grown in all of the counties in the entire 
United States.
    So what I am going to offer up, Mr. Chairman, to the 
Committee, if you will, I will offer up a detailed written 
explanation of the issues that we are facing in trying to 
implement APH.
    [The information referred to is located on p. 37.]
    The Chairman. Okay. I appreciate that. As I mentioned in my 
opening statement, the APH Adjustment is self-executing. The 
law says producers shall be able to do this. Given that, what 
is going to happen if producers take it upon themselves to make 
their own adjustments, do their own calculations, and then work 
through the process? Wouldn't it be better for the Agency to do 
it versus each individual producer taking it upon themselves to 
say, ``Hey, the law says I can do this, and I am going to do it 
on my own?'' What do we tell producers?
    Mr. Scuse. We can't implement something that we do not have 
the information on.
    The Chairman. Okay.
    Mr. Scuse. And if we do not have the information that has 
been verified by the Agency, then it is something that is very 
difficult for--and impossible for us to implement. And on top 
of that, we also have to--Mr. Chairman, we actually have to go 
back and work with the companies. We also have to look at the 
actuarial soundness of these changes and what rates may change 
because of this legislation.
    The Chairman. Right. I certainly understand the impact on 
rates, but there is no actuarial soundness to the production 
issue itself. That is just a fact that is out there though, 
right? I understand you have something to do after you have 
the----
    Mr. Scuse. Right. After we get the----
    The Chairman. Right.
    Mr. Scuse. At some point in time, you are going to have to 
verify the actuarial soundness of these changes.
    The Chairman. Right. All right. Well, we have a few follow-
up questions of a more legal nature that we will submit for the 
record. So with that, I would recognize my Ranking Member for 5 
minutes, David?
    Mr. David Scott of Georgia. Yes. Thank you, Mr. Chairman.
    Mr. Scuse. Yes. Thank you.
    Mr. David Scott of Georgia. And our Ranking Member of the 
Full Committee, Mr. Peterson has come in. So I would love to 
allow him to say something.
    The Chairman. Do you have an opening statement?
    Mr. Peterson. Well, I am going to ask a couple questions. I 
can do it now or--I thank the gentleman.
    The Chairman. Go right ahead.
    Mr. Peterson. Yes. My concern is on the implementation of 
the dairy program. I had a discussion with the Secretary last 
week. So I am a little unclear about exactly what the situation 
is. But I am concerned that this thing is not going to get 
rolled out quick enough, and we are going to have a problem 
getting people to understand this. Talking to dairy farmers in 
my area, especially the smaller ones, they have no idea that we 
have done anything. They have no idea that this margin 
insurance exists. They are not used to going into the FSA 
office. A lot of them aren't in the program. The rates are in 
the statute, so there is no rulemaking or anything. The rates 
are in the statute in terms of what the insurance costs for the 
different sized producers. The issue is determining what the 
base is and determining what new producers are--and so forth 
and so on. But I don't think that is going to affect the 
decision making.
    I just think that you need to get your FSA people up to 
speed on this. Because in talking to them, they don't know 
anything about this. I think you need to get this information 
out for the dairy farmers that this new margin insurance 
program exists, that these are what the rates are, that they 
need to start thinking about this. I am just worried that we 
are going to get a very poor enrollment from what I am hearing 
out there. And especially because we have some of the best 
prices we have ever had, and people are going to think, ``Well, 
what the heck, I don't need any insurance, because I have $20+ 
milk.'' Everybody knows high prices bring low prices. It is 
going to be a problem. So I just think you need to get your FSA 
people up to speed as soon as you can. You need to get 
something out to the dairy farmers that this is coming. And you 
need to do it now instead of in September, I believe. And so I 
don't know what your timeframe is, but----
    Mr. Scuse. We take the education and outreach for all of 
these programs very seriously. And I understand your concerns.
    The Committee that is working on the dairy program will be 
in Washington next week. We are going to finalize that program 
as quickly as we can. And as soon as we finalize it and we have 
the educational tools from the universities, we will do all the 
outreach that we possibly can to the industry, working with the 
industry, working with cooperative extension, working with our 
Farm Service Agency and the 2,100 offices around the United 
States. But, Congressman, we take our responsibility for the 
education and outreach very seriously, and we are going to do 
everything that we can to reach as many of those producers as 
we possibly can as soon as we can.
    Mr. Peterson. So from what I understand, you are kind of 
holding things up until you figure out the answers on the base 
and the new producers and so forth? You want to have everything 
done before you roll this out? Is that what I understand?
    Mr. Scuse. Yes. We would like to have it completed before 
we roll everything out, and answer as many of the questions as 
we possibly can to eliminate any of the confusion that may 
exist if we roll it out piecemeal.
    Mr. Peterson. Well, I just don't agree that there is going 
to be confusion, because the decision that people are going to 
make is not going to be, in most cases, based on what their 
base is. That is going to be pretty obvious: 2011, 2012 or 2013 
is going to be pretty obvious what is going to be the best 
situation. Very few people are going to be affected by the new 
producer stuff and having sold the dairy and so forth. So you 
are holding up the whole situation over things that are not 
central to making this decision. The problem I am picking up 
out there, people have no idea that this even exists. Why 
couldn't the FSA office, or somebody, send a letter to these 
dairy farmers saying that there is a margin insurance program 
coming, these are the rates that are in the statute, we are 
going to be finalizing the base issues and so forth later on. 
Just so they understand this is coming, because I am really 
worried that----
    Mr. Scuse. Congressman, I will take that under 
consideration. I will go back and look at it and see if we can 
do something about getting notification out to the dairy 
producers, just notifying them that this is coming, and the 
timeframes.
    Mr. Peterson. Yes.
    Mr. Scuse. So I will go back and take a look at it, 
Congressman.
    [The information referred to is located on p. 38.]
    Mr. Peterson. I appreciate that, and I thank the Chairman. 
I yield back.
    The Chairman. The gentleman yields back. Thank you. I 
recognize David Scott now for 5 minutes. David?
    Mr. David Scott of Georgia. Thank you, Mr. Chairman.
    Under Secretary, let us go immediately to the point I 
brought up concerning the treatment of the downward adjustment 
trend to Georgia and South Carolina peach producers. First of 
all, we need to correct that. It is very punitive. It is not 
fair. It is costing. And it is not a level playing field. Can 
we get your commitment to address this issue for the 
satisfaction of the peach farmers in Georgia and South 
Carolina?
    Mr. Scuse. I will do even better than that. We have the 
Administrator for the Risk Management Agency in South Carolina 
today who will be leaving South Carolina and going to Georgia. 
We are looking at this issue as we speak, and we are taking it 
very seriously. And we are looking for a solution.
    Mr. David Scott of Georgia. And what would that solution 
be? What would be a part of that solution? And will a part of 
that solution take into consideration that extraordinary freeze 
in March that affected Georgia and South Carolina to the tune 
and the losses of millions of dollars? Will that be taken into 
consideration as well, as you attend to this issue?
    Mr. Scuse. It is--it would be premature for me to speculate 
on what the solution might be. I haven't--again, the 
Administrator is down there today and the rest of this week 
talking with the producers, and talking with the staff. So it 
would be premature for me to speculate at this time what the 
solution ultimately will be. But we do take this very 
seriously.
    Mr. David Scott of Georgia. Well, would a part of that 
solution be to give Georgia and South Carolina the same waivers 
and consideration that you give the other peach growers from 
Maine to North Carolina?
    Mr. Scuse. That is one of the options we are looking at.
    Mr. David Scott of Georgia. Good. And would you please work 
with my office, and the people in Georgia and South Carolina, 
to give us updates on this?
    Mr. Scuse. Sure. And, again, when the Administrator returns 
to Washington, as we make progress in this, we will be more 
than glad to keep your office posted.
    [The information referred to is located on p. 39.]
    Mr. David Scott of Georgia. And let me just ask you, is 
there--why in the first place would we have these waivers for 
some peach farmers from Maine to North Carolina and we didn't 
have it in the first place for South Carolina and Georgia? Is 
there something I am missing?
    Mr. Scuse. And I can't answer your question. I will get you 
a response. But that was done before I came into office. But we 
will get you a response.
    Mr. David Scott of Georgia. Okay. I just want you to know I 
am very concerned about that. I would like to work with you and 
follow-up on that to make sure we correct that to the 
satisfaction of everyone. Our farmers are faced with 
tremendously devastating issues right now. It is almost so 
difficult for them to actually farm for the amount of other 
things that they have to deal with. Now, let me go to the other 
issue I raised about this reserve assurance fund for peanuts. 
Can you tell us about that? And I do recall that we put money 
in there in this fund. I would like to know how much money did 
that finally come to, how will that be utilized?
    Mr. Scuse. Congressman, I will be perfectly honest with 
you. I am not aware of any money that was put in a fund. I do 
know that there was a requirement for us to come up with a 
peanut insurance policy. It is one that we have been working on 
now for quite some years. I know it is of great concern for the 
producers in your state. We continue to work on a peanut 
revenue policy. I think the requirement is for us to have one 
rolled out by 2015. That will depend on a couple different 
factors, whether we have a--someone do a private submission, or 
if we have to go out and develop it through the Risk Management 
Agency. So it is something that we take very seriously, and we 
are looking into.
    Mr. David Scott of Georgia. Okay. And, again, you will keep 
me appraised of that?
    Mr. Scuse. Yes, sir.
    [The information referred to is located on p. 39.]
    Mr. David Scott of Georgia. I mean, after all, my State of 
Georgia leads the nation in peanuts and peaches, as well as 
poultry and pecans.
    Mr. Scuse. Understood.
    Mr. David Scott of Georgia. Watermelons and blueberries. 
Thank you, Mr. Under Secretary.
    The Chairman. The bragging is unflattering. Mr. Neugebauer, 
5 minutes.
    Mr. Neugebauer. Thank you, Chairman Conaway. Thanks for 
having this important hearing. Mr. Secretary, thank you for 
being here this morning.
    First of all, I want to start off with thanking you for the 
progress that you have made, and the hard work that your folks 
are doing to implement this very important farm bill.
    Unfortunately, these hearings are generally not about all 
the things that you are getting done, it is about the things 
that you didn't get done because those are the things that we 
are hearing about. You and I had a conversation yesterday about 
the implementation of the APH. And one of the things that we 
were talking about was that Congress had put about $70 million 
into the implementation for title XI. I think you weren't aware 
that they had put that much money. You thought that that was 
for title I, but in fact Congress put $70 million in for 
implementation of title XI. And additionally, section 20 
provides $9 million which you mentioned in your testimony, and 
it gives the Secretary discretion to move these dollars for 
implementation. I know that you have a lot to implement. I 
think one of the things that was so important about putting 
this implementation of the crop insurance, just because some of 
the commodity titles aren't really eligible for any title I 
programs. And one of those is cotton. Is there a 
misunderstanding here about what the money is for and how it 
should be used? And if so, do we need to clarify that?
    Mr. Scuse. We are definitely going to need to clarify that, 
because I am not aware of $70 million for us to implement these 
policies or provisions for the crop insurance title. So I am at 
a loss. And we will have to have a follow-up conversation.
    Mr. Neugebauer. Please do, because we recognize we have 
given you a big task to complete in a very short period of 
time. And so it is my understanding that this money was put 
into the farm bill. And if it is not, then I stand corrected. 
But if it is, and you didn't know about it, then we need to 
clarify that as quickly----
    Mr. Scuse. We certainly do. And we will look to clarify 
that.
    Mr. Neugebauer. I think along those same lines, because 
what you said was the APH issue wasn't necessarily about the 
money but just about the timeline, and I guess the importance 
about if there is a way here to put additional resources to 
work to speed up that timeline. I think something that Chairman 
Conaway mentioned that sparked a question on my part is if we 
do have these areas where that production history is critical 
to next year, is there an opportunity for say a partial 
implementation earlier for some of those areas, for example, 
Texas, Oklahoma and other states that have been involved in 
this serious drought so that they can go ahead and benefit from 
making that election on the production history?
    Mr. Scuse. I can't give you an answer to that right now, 
because we would have to go back and take a look within the 
Agency about everything that would be impacted by making that 
decision. We would also have to go back and talk to the 18 
approved insurance providers about the impacts for writing the 
policy. So there would be a lot of questions that we would have 
to answer if we were able to--before I could give you an answer 
on whether or not we would be able to do a partial 
implementation.
    Mr. Neugebauer. Well, the reason that is important is 
because, as I said, for commodities like cotton, basically the 
crop insurance program is their safety net. And so delaying the 
implementation of that becomes a critical issue to them. I want 
to go back to something else that we had a conversation about. 
What you and I agreed was that we have lawyers with different 
opinions, but that is on the enterprise units.
    Mr. Scuse. Yes.
    Mr. Neugebauer. The statute says--or the law--the bill said 
the corporation shall make available separate enterprise units 
for irrigated and non-irrigated acreage. The current 
interpretation that your agency has is that if you elect one, 
you have to elect the enterprise for the other. I do not think 
that was the original intent. We may try to get the lawyers to 
take another look at that. But what I would like to hear from 
you is if in fact we have an unintended consequence there that 
which caused that interpretation, I would love to hear that you 
would help support some efforts to clarify that.
    Mr. Scuse. Well, yes, most definitely we will look at 
getting some additional clarification on the issue. But I do 
want to point out that under that program previously--under 
enterprise units, if you had one farm in a county, or five 
farms, you had to enroll every farm in the enterprise units. 
Every farm within that county that you were tilling had to be 
part of that enterprise unit. If you look at how the program 
has been previously run, and then the legislation now to give 
you the ability to separate irrigated and non-irrigated, I 
think that is still keeping with how the original law was 
intended. And, again, I am not an attorney. I think that was 
part of what we were looking at when that decision was made.
    [The information referred to is located on p. 40.]
    Mr. Neugebauer. Well, and one of the things that we tried 
to do in this farm bill is expand the choices and the 
opportunities. And so what we did previously, particularly with 
the fact that we are shifting the safety net to more of a crop 
insurance oriented--anyway, I would love to----
    Mr. Scuse. And as I pointed out, there is the provision 
where you can, if you don't want to go with enterprise units, 
you can get separate insurance for irrigated and non-irrigated, 
which has been an issue for many of our producers around the 
United States for a long time. So, that was a really good 
addition to the farm bill that is going to help a lot of our 
producers that have both irrigated and non-irrigated.
    Mr. Neugebauer. I yield back.
    The Chairman. The gentleman's time has expired. Mr. Vela, 
for 5 minutes.
    Mr. Vela. Yes. I just have the same concerns that my Texas 
colleagues do in terms of the implementation of the APH 
Adjustments. I think you have kind of responded. You are going 
to come up with a detailed response and explanation on that. 
When can we expect that?
    Mr. Scuse. We will have that to the Committee next week.
    Mr. Vela. Okay. Thank you.
    Mr. Scuse. Okay.
    Mr. Vela. Mr. Chairman, I yield back.
    The Chairman. Thank you, Mr. Vela. Mr. Crawford, for 5 
minutes.
    Mr. Crawford. Thank you, Mr. Chairman.
    A quick question on the cotton transition program, Mr. 
Secretary. Is USDA still on track to conduct a sign-up for the 
cotton transition program in August and issue payments in 
October?
    Mr. Scuse. Yes.
    Mr. Crawford. Okay. Good. All right. Let me ask you about 
peanuts. I certainly appreciate the efforts to ensure that 
peanut revenue coverage is in place for the 2015 crop year. Do 
you have an update on that, how we are progressing there?
    Mr. Scuse. Again, we have been working on that program now 
for quite some time. We will continue to look at it and monitor 
and review any submissions that come before the Board. It would 
be my wish that we could have something by 2015. But, again, 
whatever is submitted has to have the approval of the FCIC 
Board before we can implement it. So if there is approval by 
the Board for a program this year, we could implement it for 
the 2015 crop year. Again, as I pointed out, if there is not a 
private submission that the Board could approve, then we would 
be tasked to go out and have a contractor develop one on our 
own in-house. And if that were the case, then the earliest that 
we would be able to do one would be 2016.
    Mr. Crawford. Okay. One of the challenges in particularly 
my district with rice producers is crop insurance trying to 
find a crop insurance product that works. There is an 
authorization for RMA to develop a margin product. It may be a 
little early. But can you comment on what the progress has been 
on that?
    Mr. Scuse. It is a bit early to--and premature to comment 
on anything that we have done so far with that. We do know that 
it has been an issue for the rice producers. Again, this is 
something that the rice producers have brought to our attention 
for several years. And it--and I agree with your point, they 
are growing a crop in water, so it is not--they are not looking 
at crop failure. They are looking at revenue.
    Mr. Crawford. Right.
    Mr. Scuse. So it does create a little bit of a different 
scenario for us to get a product for the rice producers out 
there that they are going to be satisfied with, again that the 
companies can run that is going to be actuarially sound.
    Mr. Crawford. Well, and you mention actuarially sound. And 
we are only talking about probably this year, 3 million acres 
at the most, by comparison.
    Mr. Scuse. Yes.
    Mr. Crawford. That makes it difficult for an actuary base 
to exist. Is that a fair statement?
    Mr. Scuse. I think you understand some of the problems that 
we face in developing a product. Okay.
    Mr. Crawford. Well, I just want to kind of keep my eyes on 
that one for obvious reasons. My district is probably the 
biggest rice producing district in the country. About \1/2\ of 
the rice crop is produced there. Let me switch gears, 
supplemental coverage option. One of the inequities that is 
resulting from the delay in SCO implementation is that farmers 
must elect sometime later this year, or early next year, 
between PLC and SCO versus ARC. For some farmers, SCO won't be 
available yet. So you can see where the problem exists there. 
It means that some farmers have to make a choice on whether or 
not supplemental coverage will be available. Can you comment 
on--is it safe for them to make that election for the 2015 crop 
year? Are we going to have that in place?
    Mr. Scuse. This is one of the hopes that the decision tools 
will be able to provide the information for them. They will be 
able to plug in the yields, the prices for the different 
programs, and see the overall impacts and make a decision for 
when SCO actually becomes available to them. Right now, SCO 
will be available in the 2015 crop year to 90 percent of the 
corn farmers in the United States, 90 percent of the soybean 
farmers in the United States, 95 percent of the cotton 
producers in the United States, 80 percent of the wheat, and 70 
percent of the rice producers. That is for the 2015 year. And 
we will continue to take a look at that and add to that in the 
coming year, and for the 2016 crop year. So the majority of 
producers will have SCO available to them in the 2015 crop 
year.
    Mr. Crawford. Excellent. Thank you, Mr. Secretary. I yield 
back.
    The Chairman. The gentleman yields back. Mr. Maloney, for 5 
minutes?
    Mr. Maloney. Thank you, Mr. Chairman. Again, Under 
Secretary Scuse, the farm bill contains a number of provisions 
that help small diversified producers like the ones I represent 
in the Hudson Valley of New York. And a number of us, including 
my colleague, Chris Gibson, who represents the same region of 
New York--a number of us worked on a number of provisions to 
help those types of farmers. In particular, I am interested in 
the whole farm revenue insurance program. The Secretary 
recently announced he thought those programs would be available 
for the 2015 crop year. I was just hoping you could expand on 
that and give us a little update on that timeframe and whether 
you are comfortable with that?
    Mr. Scuse. The whole farm revenue will be available in a 
pilot in 2015 for the areas where we had AGR and AGR-Lite. And 
so it will be available to those producers where we had those 
programs the last few years in a pilot, and then it will be 
expanded in 2016.
    Mr. Maloney. Well, and you anticipated my next question, 
which is how will the program, if you can tell us, differ from 
this existing AGR and AGR-Lite programs?
    Mr. Scuse. I would have to provide that to you in writing 
what the differences are. There are some differences between 
how the programs are going to be functioning. But we will 
provide you those differences in writing.
    [The information referred to is located on p. 41.]
    Mr. Maloney. That would be wonderful. Thank you. And as you 
know, there is also a provision in the bill called the CROP 
Act, which is dear to my heart, that I worked on. And that 
would help facilitate the development of new insurance, 
particularly for these smaller specially crop and diversified 
family farms that I mentioned. And one aspect of that is to 
allow the RMA to develop these plans in-house. Is there work 
being done on that that you can give us an update on?
    Mr. Scuse. We greatly appreciate your efforts and the 
efforts of other Members of the Committee in getting that 
language put in there to allow RMA to develop some of these. As 
you know, there are products out there that some of the larger 
companies may not want to develop because of the time or the 
money that it would take and what little return there might be 
on that investment. And this gives RMA an opportunity to look 
at some of those products. There has been a demand for crop 
insurance for additional products now for quite some time. I 
think this will allow us an opportunity to develop some of 
those products in-house, and help many of those smaller 
producers that aren't able to get coverage today. So it is one 
of the things that we are going to look at as the demand comes 
in for new products. We will take a look at developing those.
    Mr. Maloney. Is there any specific work being done now?
    Mr. Scuse. Not at this moment. But, again, we continue to 
look at the demand. And as the demand for products comes in, 
then we will look at developing some of these products in-
house.
    Mr. Maloney. Well, I appreciate that. And I appreciate your 
attention to that, because it is really very important for the 
types of farms that we have in the Hudson Valley in New York. 
So I am very glad to hear that you are eager to utilize those 
provisions.
    Mr. Scuse. We greatly appreciate that.
    Mr. Maloney. Finally, let me just ask you, sir, a question 
about fraud and the crop insurance program. You know, we had 
quite a debate in this Committee around nutrition assistance 
and around possible fraud in the SNAP program. There has been 
some attention paid recently to instances of fraud in the crop 
insurance program. I would like to give you an opportunity to 
speak about that since there are considerable amounts involved 
in these programs. Is this a concern? What is being done on it? 
And can you give us an update on that?
    Mr. Scuse. Well, let me start out by thanking the Members 
for the money that was added to the title XI to help us look at 
some of the issues that we have faced. That funding is greatly 
appreciated.
    We are looking at--we do data mining to go back and look at 
the producers, look at the acreage, look at the yields, look at 
the income. We also go out and do field spot checks. The Risk 
Management Agency works with the Farm Service Agency to go out 
and do those checks to verify production or non-production. We 
are going to be looking at using some of that funding to hire 
additional staff, again, to help us look at different policies 
and additional data mining so that we can have any abuse of the 
system cut to a bare minimum. So, again, we greatly appreciate 
the funding that was put in the farm bill for the use for us to 
look at those issues.
    Mr. Maloney. Thank you. Mr. Chairman, I yield back.
    The Chairman. The gentleman yields back. Thank you. Mrs. 
Hartzler, for 5 minutes?
    Mrs. Hartzler. Thank you, Mr. Chairman. First, I want to 
start off and thank you for the good work that you and the USDA 
has done to implement the Livestock Disaster Programs in such a 
timely fashion. I can tell you from my constituents in Missouri 
that the money is going out, and it is very much appreciated. 
Obviously, they were devastated with those droughts a couple 
years ago. So we very much appreciate that.
    We do have one concern though as it relates to the forage 
programs and the dairy farmers in our area. As you know grazing 
dairies intensively manage their operations, and this 
management practice allows them to meet the greater forage need 
of the dairy cows in their program. However, the current 
formulas used by the USDA uses beef cow forage values on a per 
unit basis that are significantly less than the needs of a 
dairy cow. And my office and others have raised this issue with 
the USDA. And I would like to know if the USDA plans to explore 
this inequity to address the concerns of these operations?
    Mr. Scuse. Thank you. And I visited your state in 2012 on 
several occasions. And I personally saw the effects of the 
drought and the impact that it had on your producers. In fact, 
on April 16, I went back to your state and I visited a dairy 
operation that we were going to be able to give LFP funding to. 
So--and they were very appreciative. But we--it is something 
that we take seriously. This is not the first time the issue 
has been brought up. There is a difference between dairy 
operations and beef operations and the pasture, the amount of 
forage that it does take. It is an issue, and it is something 
that we are looking into. I don't know that we are going to be 
able to address the problem. But it is something that we are 
looking at. And I would ask that the producers--the dairy 
producers that feel that they have been adversely affected work 
with Cooperative Extension, get better information and deliver 
that information to our Farm Service Agency offices so that we 
will have a better understanding of exactly what the issue is.
    Mrs. Hartzler. Okay. Well, thank you for looking in that. 
And we will certainly pass that on as well. On another topic, 
many producers have been chomping at the bit to learn more 
about the signup for the safety net programs. I understand they 
may start this fall. And the farm bill provides $3 million for 
decision making tools. And the USDA decided to split that money 
between two separate consortiums of universities. And I want to 
thank you again that the University of Missouri is part of 
that. But I was curious. Can you provide a little more insight 
into the reason USDA decided to create two separate tools as 
opposed to focus the resources on just a single tool?
    Mr. Scuse. We discussed that quite a bit about the funding. 
Of course, we went out--it was an open process. You know, it 
was open to any university to apply for the funding. When we 
look at the proposals that came back, and you looked at the 
proposal from Illinois and A&M, these were two very, very good 
proposals. One went a little bit further than the other when it 
came to the dairy and to the NAP buy-up. And we felt that the 
other proposal was a solid proposal for ARC and PLC. And then 
if you look at the comfort level for the producers and what 
they are going to be comfortable--which tool they would be 
comfortable using, to us it made a lot of sense to split the 
funding and allow the one group to do ARC/PLC dairy and the NAP 
buy-up, and then the other group to do ARC and PLC. We just 
thought it was really good to have two different tools out 
there for our producers to take a look at.
    Mrs. Hartzler. I am sorry. I just wanted to clarify. Did 
you say that both of them though will be doing PLC and ARC?
    Mr. Scuse. Both groups will have PLC and ARC.
    Mrs. Hartzler. Now, will that be divided up by county? So 
if a farmer in one county uses one tool and then somebody--or 
is it----
    Mr. Scuse. In theory, both tools should work the same way 
anywhere.
    Mrs. Hartzler. Okay. Just hope it doesn't cause confusion 
like medical records like----
    Mr. Scuse. Understood.
    Mrs. Hartzler. Electronic medical records.
    Mr. Scuse. One of the things that--one of the requirements 
is that before these tools are released, they will come back to 
USDA and they will be tested for accuracy.
    Mrs. Hartzler. Okay. Very good. Well, I have more 
questions. Time is up. Thank you very much. Thank you, Mr. 
Chairman.
    The Chairman. The gentlelady yields back. Rodney Davis, for 
5 minutes?
    Mr. Davis. Thank you, Mr. Chairman. And thank you, again, 
Mr. Scuse, for being here. I appreciated our conversation 
before the hearing began. And a lot of the questions that I had 
planned to ask have already been asked. That is the detriment 
of being a freshman and to being a little further down the 
dais. But I do want to thank you for what you guys are doing in 
implementing many of the provisions in the farm bill. As a 
freshman legislator and as a Member of the conference committee 
on the farm bill, it has been a great learning experience for 
me. And it is also something that I look forward to working 
with your agency on to further our implementation goals.
    I had one question though, and it is in regards to the 
standard reinsurance agreement. And the 2008 Farm Bill 
authorizes the SRA to be renegotiated every 5 years. And the 
last SRA was negotiated in 2010 and implemented in 2011. Are 
there any plans within your Department to renegotiate the SRA 
next year?
    Mr. Scuse. Not at this time.
    Mr. Davis. All right. Do you have any plans to renegotiate 
the SRA down the road?
    Mr. Scuse. I can't make that determination today. I don't 
know what is going to come down the road. But we have no 
intentions of renegotiating the SRA next year.
    Mr. Davis. Okay. Well, I look forward to your written 
responses to some of the questions that were asked earlier. And 
I look forward to working with you on implementing some of the 
new provisions, especially in relation to the crop insurance 
which is crucial to my district in central Illinois.
    And thank you for your visits. And I yield back the rest of 
my time.
    The Chairman. The gentleman yields back. Mr. Scott, do you 
want to give it a go?
    Mr. Austin Scott of Georgia. Thank you, Mr. Chairman. I 
will do my best to get--I have been a little under the weather 
lately. But just to share my colleague from Georgia's concerns 
about the peaches and the peanuts, and certainly appreciate 
seeing your response to that. And I will submit my other 
questions in writing. Thank you.
    Mr. Scuse. Thank you.
    Mr. Austin Scott of Georgia. I yield back.
    The Chairman. The gentleman yields back. Mr. LaMalfa, for 5 
minutes?
    Mr. LaMalfa. Thank you, Mr. Chairman. Thank you, Mr. Scuse, 
for appearing here today. I know you have as many different 
Members as there are here as there are different aspects of the 
programs you have to administer and make work. So I know it is 
not easy. As you know in California, we are facing huge drought 
problems with many constituents affected different ways over--
at least over \1/3\ of the state is suffering under some of the 
worst of the drought conditions. And it seems to be getting 
worse. Optimism for the El Ninnos coming off of--filling up the 
reservoirs next year. So I don't know. We are looking pretty 
tough.
    Mr. Crawford talked pretty well about some of the rice 
issues earlier that affect a lot of my constituents. I am a 
rice grower myself. But also, we have great concerns with our 
livestock growers as well with the disaster funding that has 
been very critical for them. And, again, their concern that 
there has been a backlog ever since the passage of the farm 
bill that the offices aren't able to keep up with that. And so 
I know you have staffing issues there. And there is kind of a 
which one do you work on the most of the different aspects you 
have to try and catch up to in the short amount of time.
    In two of my 11 counties, for example, I represent, cattle 
outnumber the people. So you can understand how big of a deal 
this is for those payments to be made for these ranchers up 
there. And some of them are still waiting on 2013 payments, and 
that the 2014 payments are going to be behind. So can you just 
speak briefly about how we can assure them that we are going to 
catchup to the backlog as you are balancing everything that you 
are dealing with there?
    Mr. Scuse. Sure. I visited your state earlier this year. I 
went to one cattle operation. And, unfortunately, the day that 
I was there, the gentleman was dividing his herd into two. And 
\1/2\ the herd was going to be sold that day because of the 
lack of pasture. I visited another sheep operation where they 
could no longer irrigate out of the river because of the salt 
line, and the cost for drilling a well was going to be 
prohibitive. So I can appreciate what your constituents are 
going through.
    What we are doing, we have hired temporary staff in offices 
where we know that we need additional staffing levels. On top 
of that, we have asked the SEDs in each state to look at their 
staffing levels, where they currently are, and if they are in 
non-livestock production areas to see about a temporary shift 
of those workers into areas where we have the livestock 
production taking place. So we are looking at different ways to 
manage--to better manage the resources that we have available 
so that we can get through the signup.
    Mr. LaMalfa. Do you squeeze the balloon there, then it 
starts to fall short on the PLC program, for example, was----
    Mr. Scuse. Well, that is why we want to get--that is why we 
want to do the shift now. That is why we want to get as many 
resources in place today as we can, because we recognize the 
fact that we are going to have ARC and PLC signup, and we will 
be hiring additional temporary staff to help us with the signup 
for ARC and PLC and that work later this year. So we are trying 
to get as much--keep trying----
    Mr. LaMalfa. Would that still be--keep people on time for 
2015?
    Mr. Scuse. Pardon?
    Mr. LaMalfa. It will still keep people on time for 2015?
    Mr. Scuse. Yes.
    Mr. LaMalfa. And then some of the 2014, we are wondering 
about that. Is that going to catch up here pretty soon for 
those that are still----
    Mr. Scuse. Yes. You----
    Mr. LaMalfa. And adding the 2014 Fiscal Year as well?
    Mr. Scuse. And I appreciate your concern. But we are asked 
at the Farm Service Agency to do 3 year's worth of work in just 
a very short time period. The 2008 Farm Bill--these disaster 
programs expired before the 2008 Farm Bill did. So they weren't 
in existence in 2012. In 2013, these programs--when the farm 
bill was extended, these programs were included in that 
extension but were not funded. And now, if you look at the 
drought in California, as well as the Southwest, we are now 
asking our office staff to do 3 years' worth of work in a very 
short period of time. And in spite of that, I think they are 
doing a very, very good job. I will brag on my staff. I think I 
have the best workforce in all the Federal Government in those 
county offices. So we are looking at managing our resources as 
best we can to get as much of that backlog taken up as quickly 
as we can.
    Mr. LaMalfa. All right. Maybe you can comment more--my time 
has expired--on what is it we need to provide either in 
legislation or funding efficiently to help catch you up even 
more so, so we don't face 2015 problems. Thank you.
    The Chairman. The gentleman's time has expired. Mr. 
McAllister, for 5 minutes?
    Mr. McAllister. Thank you, Chairman. And thank you, 
Secretary. I will try to be--me being from Louisiana and being 
under the weather, it is probably going to be really tough to 
understand me. But I will try to be as clear as possible.
    I have just a couple of quick questions. We know farmers 
know how to farm. And when they farm, they do their job. But 
when it comes to implementation of crop insurance, some of the 
concerns I have is there are a couple of very important issues 
that were included in the farm bill. One provision just tells 
the FSA to be sure to share important information with the 
producers' crop insurance agent so that the agent has all the 
information they need to write the policy and not have it 
canceled because of some error. The provision is really aimed 
to avoiding errors in the first place. The second provision 
allows the agents to correct honest errors that have in the 
past led to the nullification of a policy, which is pretty 
harsh medicine to the farmer. We certainly hope and expect the 
Department to implement these provisions in a way that it in 
fact prevents errors from ever occurring in the first place. 
But if they do occur, as they will, to allow the errors to be 
corrected without yanking coverage from a producer. How is this 
implementation coming on these fronts?
    Mr. Scuse. Those are some of the things that we are looking 
at and taking very seriously. As you pointed out, we don't want 
any of our producers to be put at a disadvantage because there 
may not be proper information. One of the ways that we hope to 
accomplish this is there was funding in the farm bill for the 
acreage, crop reporting streamlining initiative. And what this 
does is this will allow us to share information between the 
Farm Service Agency, Risk Management Agency and vice versa, so 
that we don't have the two different crop reports, so we don't 
have a risk of misinformation unintentionally being given to 
one or the other. So those are some of the things that we are 
looking at. We also have the system, SCIMS where we can share 
information between the Farm Service Agency and the Risk 
Management Agency. So we take that very seriously. And we want 
to do everything that we can to make sure that our producers 
have the very best information, as well as their agents.
    Mr. McAllister. I appreciate that. And then second is I 
appreciate all your efforts to ensure that STAX is made 
available to all the cotton producers in all the counties and 
parishes in Louisiana, where we have the parishes, in time for 
the 2015 crop year. But I have heard that you expect the STAX 
to be made available to about 98 percent of cotton acreage by 
2015 crop year. Can you tell us what cotton producing counties 
or parishes you are having difficulty with, and when you expect 
those difficulties to be resolved so that we have 100 percent 
availability?
    Mr. Scuse. Those maps will be released I believe next 
month, so we will be able to see where these programs are going 
to be--where they are going to be available. But, again, it is 
98 percent of the production will be available to get that 
product. We are going to release the maps next month.
    Mr. McAllister. Okay. Well, I appreciate all the hard work. 
We know this has been a monumental task. And these are one of 
the--this is one of the agencies that does work well sometimes. 
So anything that we can do, we appreciate the hard work. And I 
yield back my time, Chairman.
    Mr. Scuse. Thank you. And I didn't have any trouble 
understanding you because Commissioner Strain is a good friend 
of mine.
    Mr. McAllister. There you go.
    The Chairman. The gentleman yields back. Mrs. Noem, 5 
minutes?
    Mrs. Noem. Yes. Thank you for being here. I am from South 
Dakota, so we are home of the disaster of Winter Storm Atlas 
that hit us last October. And so I want to really tell you how 
much I appreciate the fact that when we had signup for the 
Livestock Indemnity Program on April 15, my producers came back 
telling me that within 6 to 7 days, they had checks in their 
hands. So that was real help that was desperately needed, 
especially since we have been hit with the drought of 2012 as 
well. And so a lot of these guys took two hits right in a row. 
And that was absolutely devastating for South Dakota. So that 
gave them a little hope that they would be able to stay on 
their ranches and maybe someday see cattle back in their 
pastures. So thank you for that hard work and making it a 
priority, which we had asked and you really followed through 
and did that.
    I do have some concerns about the Livestock Forage Program, 
because I understand that there is some backlog that is going 
on and that you are moving people around trying to deal with 
the backlog that is happening across the country in some areas. 
Can you speak to that?
    Mr. Scuse. Yes.
    Mrs. Noem. And also, when you speak to it, give us an 
update on where we are as far as dollars out the door on the 
indemnity program and on the forage program, on both of those?
    Mr. Scuse. I don't have that particular breakdown. But if 
you look at the combination of the both, we are looking at $1.2 
billion in money out the door. The last week of June, for the 
example, we had just over 17,000 applications done that week. 
So we are still receiving a tremendous amount of applications. 
We are looking at not only hiring temporary staff and 
reallocating resources within the state, but we have also put 
together jump teams from other states that don't have livestock 
to go into those states where we do have a backlog and try to 
deal with that backlog and get it taken care of as quickly as 
possible. So we have used a combination of things, temporary 
staff, reallocation of resources in-state, and jump teams from 
other states to help us get through this.
    Mrs. Noem. Do you have an end date on when--like an 
occurrence like Winter Storm Atlas that we had--an end date 
where applications will no longer be accepted?
    Mr. Scuse. I believe--let me get that to you. I believe it 
is later on this year.
    Mrs. Noem. Okay. Okay. And then we have some----
    Mr. Scuse. January----
    Mrs. Noem. 2015?
    Mr. Scuse. That is really good. January of 2015. I didn't 
want to give you a wrong date.
    Mrs. Noem. Oh, you have staff back there? Yes, that is 
great.
    Mr. Scuse. But it is January. I have visited your state.
    Mrs. Noem. Yes.
    Mr. Scuse. I was there after the blizzard. I was there in 
2012. And I was also there for the first day of signup on April 
15.
    Mrs. Noem. I appreciate that. Also, I have heard some 
instances where extreme heat losses are not covered. Again, we 
have that in South Dakota. Unfortunately, while we are a land 
of extremes, but once in a while we will lose some cattle due 
to extreme heat and feed lots, especially. Can you speak to why 
that would happen that there would be a denial based in that 
program?
    Mr. Scuse. I will have to get back to you on what is and is 
not covered, because there are some things that are covered 
under LIP.
    [The information referred to is located on p. 43.]
    Mrs. Noem. Okay. Yes.
    Mr. Scuse. And then there are other things that are 
covered, or maybe covered, under the Emergency Livestock 
Assistance Program.
    Mrs. Noem. Okay. I have another question about conservation 
compliance, because I am concerned about how that--the rules 
are being written and how they will be implemented. But the 
interim rule suggests that all farmers need to sign up for all 
acres and show that they are in compliance. But yet the law is 
written such that they will only have to be in compliance on 
tillable acres that they till each year. So can you speak to 
why that appears to be being implemented a little bit 
differently than how the law states that--the law states that 
they will have to be required annually on tillable acres to be 
in compliance, rather than the producer having to come in and 
sign up there?
    Mr. Scuse. Because the conservation is now tied to crop 
insurance, so it is directly tied to the subsidy for the land 
that you are farming.
    Mrs. Noem. Yes. But it is only going to be tied to tillable 
acres?
    Mr. Scuse. I don't--you have to have a--you will have to 
have a conservation plan for your farm in effect when you sign 
up to give the 1026 Form, which those that do not currently 
have a 1026 Form filed with the FSA office will have to do so 
by the 1st of June next year.
    Mrs. Noem. Okay. So then if a producer is found to be out 
of compliance in 2015, my understanding is that they could not 
receive the subsidy in 2016 and could not be reinstated till 
2017, which seems as though even if it is a good faith effort, 
honest mistake, not someone who knowingly violated the 
conservation practice laws, is that true?
    Mr. Scuse. Yes. If you are not in compliance, you cannot 
receive the subsidy.
    Mrs. Noem. So even if a producer in 2016 went back in good 
faith and fixed that conservation practice, they are still 
going to be ineligible for----
    Mr. Scuse. They are going to be--they will be ineligible 
for 2016.
    Mrs. Noem. That is a heavy penalty for producers, 
considering the amount of subsidy on crop insurance policies to 
not be reinstated until 2017.
    Mr. Scuse. Well, remember, we are asking them to sign up 
that they will be in compliance on June 15. And then they are 
given a period of time to come into compliance.
    Mrs. Noem. How long is that period of time?
    Mr. Scuse. They will have until the next--now--I can't 
answer that right now, because that is going to be in the rule 
when it is ultimately----
    Mrs. Noem. Well, if they are--and that is what I would like 
the rule to reflect is that if they are found to be in 
violation and they can show that it is a good faith mistake, 
that they didn't knowingly violate their conservation practice, 
if there is a period of time for them to fix that and come back 
and repair what was done without losing the subsidy, that is 
how I would prefer to see it written, because I know producers 
out there many times are busy. They have a lot of acres they 
are covering. They may knowingly make a change--or unknowingly 
make a change, and to make it whole before they lose that 
subsidy would be the right thing to do.
    Mr. Scuse. Again, they are having--they have the ability to 
come into compliance before the 2016 crop year.
    Mrs. Noem. Yes, let me know what that timeframe is.
    Mr. Scuse. Okay.
    Mrs. Noem. How much time they----
    Mr. Scuse. They have the ability to come into compliance. 
That is the way the law is written, before the--crop year so 
that they will not lose that subsidy.
    Mrs. Noem. Okay. Yes----
    The Chairman. The gentlelady's time has expired. Mr. 
Gibson, your 5 minutes?
    Mr. Gibson. Thanks, Mr. Chairman. And I thank you and the 
Ranking Member for your leadership in pulling this together 
today. And, Mr. Under Secretary, thank you. This has been an 
informative hearing, and I appreciate your leadership and the 
work of the great Department.
    I just have a few points. I just want to follow-up on a few 
things. The first thing with regard to what Mr. Peterson was 
talking about earlier, I share the concern that we get the 
widest dissemination about the margin insurance program. I am 
doing my part on that doing a series of events to get the word 
out. I am encouraged to hear you are considering a letter that 
would go out to dairy farmers. And should you decide to do 
that, I would love to get a copy of it. Maybe we can get it to 
the Cornell Cooperative Extension and the Farm Bureau. I can 
use it, going forward, in radio engagements and the like. I 
think that is something we can do together, continue to get the 
word out on that.
    Likewise, on risk management--and I appreciated your 
colloquy with my colleague, Mr. Maloney, and that part of the 
intent of when we drew up some of the language was to bring in 
closer the Department with our farmers to collaborate, to take 
their input as you work together with the RMA to come up with 
new products. And I am just curious, have you come forward with 
any processes that would get the input of farmers for these new 
products?
    Mr. Scuse. Well, the way that this works, I travel a great 
deal around the country to meet with different producers, as 
does the Administrator. As I pointed out earlier, Administrator 
Willis is in South Carolina and Georgia this week. And we get 
feedback from producers on what products they would like to see 
us develop. Some of the products that have been developed in 
the past have come from the agricultural community, because 
that is what they have asked us for. We have been asked, for a 
period of years, for a peanut program and one for rice as well. 
And these are some of the things that we have taken very 
seriously and looked at. So a lot of the times, it comes from 
our visits out in the countryside talking with the producers 
and what they would like to see. A good example would be 
several years ago, sweet potatoes in Louisiana, the producers 
came. There was an opportunity there to have a facility built, 
but the farmers weren't willing to grow the sweet potatoes 
unless there was a revenue product or a crop insurance product 
out there for them. So we worked with them and developed that 
and helped build an entire industry down there. So that is a 
good example of how the system works that when they come to us 
with their concerns or with a product that they would like to 
have developed, we take it seriously and take a look at it in-
house and then see if there is a private submitter that is 
interested.
    Mr. Gibson. Well, thank you. And on behalf of my colleague, 
we would invite you to the Hudson River Valley. We have had the 
Secretary before as well. So our staff will be reaching out. We 
would love to have an event where you get to hear firsthand, 
from especially our crop growers, as you pull together these 
products. So we will be reaching out to your staff on that. And 
thank you for your willingness to move all about the country on 
this. It is very important.
    Last--similarly, the young farmers program--Sergeant Major 
Walz and I worked together on that. And I have one of the 
leaders in the Younger Farmer's Coalition right in our 
district, Lindsey Shute. And I am curious how the expansion we 
put in there for this farm bill, how that is coming along, and 
would likewise offer that if I could be of assistance linking 
you up with some of the leadership in the Young Farmer's 
Coalition as you roll out implementation, I would be honored to 
do it.
    Mr. Scuse. Those benefits for the young and beginning 
farmer programs will start in 2015. I think those were really 
outstanding provisions. As you know, the average age of the 
American farmer continues to get older. I finally surpassed it. 
But it does continue to increase in age. We need to do 
everything that we can to get that next generation involved in 
farming. The Department has worked--it is something that is 
near and dear to Secretary Vilsack and Deputy Secretary 
Harden's heart. They have worked very, very hard on some of 
these programs. And so we take it quite seriously. And we think 
that these were great additions to the farm bill to help those 
young producers get started in farming. I think with the--not 
just the provisions that pertain to them in the farm bill, but 
the provisions in general in the farm bill that is the safety 
net that they so desperately need, I think that is a help. And 
then if you look at the current prices for livestock and some 
of the grains, good prices help entice the next generation. I 
think a combination of things, we are looking better.
    Mr. Gibson. Well, thanks, Mr. Under Secretary, and look 
forward to working with you. With that, I yield back.
    The Chairman. The gentleman's time has expired. Mr. Rogers, 
for 5 minutes?
    Mr. Rogers. Thank you, Mr. Chairman. I just had a comment. 
As you know, this farm bill was very difficult to get through 
Congress. It gets increasingly difficult each cycle. It is very 
complex politically. And I recognize for you it is going to be 
very complex undertaking to implement. But I would remind you 
that there is a whole universe of producers out there that are 
excited but also anxious about how you are going to choose to 
implement it. One of the evidences of that came with Kristi 
Noem's question about this time period. So I would urge you 
that as you walk along on this that you stay in touch with this 
Committee about Congressional intent. If you do get to an 
implementation component that you have questions about, I can 
assure you that I will meet with you at any time. And I am sure 
the other Members of this Committee would explain why a 
provision was inserted, because I can tell you it wasn't easy 
for us to explain why we put an extra $100 million in for 
implementation. So be good with it. And be sure and stay in 
touch with us.
    And that is all I have, Mr. Chairman.
    The Chairman. Thank you. The gentleman yields back. We have 
time for a second round of questions. I think Mr. LaMalfa has 
another question and I have a couple more to ask.
    Michael, again, I appreciate you being here today. Thank 
you. Given that we have begun to blend title I and crop 
insurance and the decision making tools that have been 
referenced that are about to be released, and that your FSA 
folks are excited about and so are the producers, can you give 
us the assurance that RMA and FSA are working together to make 
sure those decision tools are appropriate with that blend 
between the two programs? Let us say you have one that does PLC 
and the other one does----
    Mr. Scuse. I can assure you that they are working closely 
together. Both of those--the Farm Service Agency and Risk 
Management Agency, they both are under me. And if I thought for 
1 minute that they weren't working together in getting this 
done, they would know how I feel about it real quick. Let us 
put it that way.
    The Chairman. It is good to hear that. Thank you. And then 
following up on conservation compliance: If a producer is in 
compliance today, as we understand compliance, will they be in 
compliance, going forward? I mean, are you going to be moving 
the goal post on them?
    Mr. Scuse. No. No, we are not going to move the goal post. 
If they are in compliance today, they are in compliance for 
next--for the next crop--unless they do something----
    The Chairman. Right, right, right.
    Mr. Scuse.--subject to some change. If they don't do 
anything----
    The Chairman. Yes, subject to some change.
    Mr. Scuse. But if there is no change to their operation--if 
they are in compliance today----
    The Chairman. If they are in compliance and they don't do 
any change to get out of compliance, they are good to go?
    Mr. Scuse. No--yes.
    The Chairman. Okay. Thank you. Mr. Scott?
    Mr. David Scott of Georgia. Thank you very much, Mr. 
Chairman. Thank you, Under Secretary.
    Let me ask you, because there are two safety net issues--
risk areas to the future farming, and threats. One we touched 
upon. And that is you touched upon a little bit earlier. And 
that is the age of the average farmer is now right at 60 years 
of age. Each year, it continues to escalate. And I am wondering 
if the Department--the Agriculture Department is really looking 
at this in a way in which to truly address this issue. And I 
know the waiving of $300 for the administrative fee--I mean, 
that is sort of like a little--not even a drop in the bucket. 
And I know you are doing some other things. But why not take a 
look at the farm bill, and how creative have you all been, in 
looking at how we can really put some incentives in here to 
really, truly help beginning farmers? We have land-grant 
universities, and most of which are in Farm Belt states. 
Florida, you have University of Florida, and you have Florida 
A&M University. Alabama, you have University of Alabama, 
Alabama A&M. Georgia, you have the University of Georgia, you 
have Fort Valley State, 1890s, 1862s institutions. We put 
millions of dollars in the farm bill for these. But we do not 
allow any of that money to be used for scholarships for those 
who would study Agriculture. Incentives for loan forgiveness 
for those students who will go into agriculture. I think that 
would be a very, very important step that we could take 
forward. Would the Agriculture Department be interested in 
taking a look at this, and it only would require some language 
change in the farm bill that would just simply say in addition 
to research, in addition to the other things that we put in 
there for these, that some of this money could be used to give 
kids scholarships to go into agriculture and farming, or pay 
their loans?
    Mr. Scuse. The Department continually looks at ways to get 
new people involved in agriculture, whether it be a young 
producer or someone that is coming out of another occupation, 
or our veterans. As I pointed out earlier, this is something 
that the Secretary and the Deputy both take very, very 
seriously and push very, very hard for us to look at in the 
Department. We are open, Congressman, to any suggestions.
    Mr. David Scott of Georgia. Okay. Great.
    Mr. Scuse. If you look at our microloan program and the 
success of that program that the Department created, and the 
farm bill increased the funding for that microloan program, 
that has helped a lot of people get involved in agriculture. 
But we are open to suggestions and any help that this body can 
give us.
    Mr. David Scott of Georgia. Well, that is one we are 
percolating on, and we will be working with you on that. 
Another is that some of the groups outside of Congress, like 
Farm Credit for example, and AgSouth we call it down in our 
part of the country, have an excellent program that they are 
moving with with getting beginning farmers. I was wondering if 
you all at the Agriculture Department were familiar with what 
Farm Credit was doing and how you might be able to work with 
them?
    Mr. Scuse. I think if you look at our loan program at the 
Department, there is a very high percentage of our loans that 
are targeted for young, beginning and socially disadvantaged 
producers out there. But, again, we are open to suggestions. 
Any way that we can get that next generation or someone new 
involved, we are looking for suggestions and help.
    Mr. David Scott of Georgia. Yes. I would encourage you to 
look at the Farm Credit. Now, the other area to mention, if I 
may, that we really have to seriously address, and that is 
workers for these farms and for our producers. I hear it all 
the time, they can't find workers to pick the blueberries. They 
are on the ground. They can't find workers to get the peach 
crop, pecans, so forth. Has the Department taken a strategy of 
being able to separate this issue and focus on the dire 
consequences that face this country and the future of 
agriculture and getting food into Publix and into Kroger for 
our American people, if we don't have workers, if we don't 
address this? I mean, there is a cry out there from wherever we 
hear it throughout the country from our farmers, we need to 
address this problem. If it is guesswork or whatever it is. And 
I was wondering if the Agriculture Department is developing a 
strategy in which they could deal with this in a way away from 
this--deal with it as a basic labor and economic issue facing 
the future of farming?
    Mr. Scuse. The labor issue is, as you pointed out, of great 
concern almost in every state. I think the Secretary, on 
numerous occasions, as have I when we have had the opportunity, 
have said that we desperately need for the sake of agriculture, 
meaningful immigration reform. Agriculture needs a workforce 
and a workforce that we know will be there, one that we can 
depend on. I personally have visited farms that had crops rot 
because we could not get a workforce to harvest those crops. If 
you look at our processing plants, if you look at our dairy 
operations, if you look at our fruit and vegetable operations, 
all of these are very dependent on a workforce. So we have 
spoken repeatedly on the need for meaningful reforms so that 
the agricultural community will in fact have that workforce 
available to them.
    Mr. David Scott of Georgia. Thank you, Mr. Under Secretary. 
Thank you, Mr. Chairman.
    The Chairman. The gentlemen's time has expired. Mr. 
LaMalfa, 5 minutes?
    Mr. LaMalfa. Thank you, Mr. Chairman. I will try to move 
quickly here. There is a lot to cover.
    We were talking earlier about the moving around of 
resources and personnel within USDA to address the backlog--on 
the livestock, forage program backlog portion. In California, 
we face droughts. Some areas are having trouble getting grazing 
permits, as they had been in the past with sage grouse going 
on, even wild horses. And so especially northeast California 
faced some really acute problems with grazing there. So can you 
address this--have you had the opportunity to push the 
resources up into that portion of the state with the acute 
problem there is there?
    Mr. Scuse. I am not aware of where we have moved our 
resources in the State of California. But we could get the 
information. I can get in touch with our State Executive 
Director, and we can provide you with that information on what 
we have done and what the issues are in that part of the state.
    [The information referred to is located on p. 43.]
    Mr. LaMalfa. All right. I appreciate being able to work 
with you on that. On the--with the Act in 2014--the 
Agricultural Act, we have more important key roles for the FSA 
and RMA they are going to be taking on. And so in implementing 
the new law, we are wondering are they going to be able to 
speak the same language? Because you are going to have growers 
that are going to have types of crops that are in the category 
of each of those organizations. And so are they going to be 
able to coordinate and work well together? Do you see any 
roadblocks or any hurdles that--
    Mr. Scuse. Congressman, I don't see any issues with us 
working together through the Farm Service Agency and Risk 
Management Agency. Both organizations know that we are there 
for the same purpose, and that is to serve our producers to the 
very best of our ability. So we will continue to look for ways 
to work together. I think right now, there are agencies along 
with NRCS. I think everyone right now is working together more 
closely than we have at any other time. I know Chief Weller has 
been great for us to work with at NRCS. We understand the 
importance of all of us getting together, especially because of 
this farm bill----
    Mr. LaMalfa. Well, being able to share data and things like 
that should be----
    Mr. Scuse. Yes. And so we understand the importance of 
working together, sharing the data, sharing the information and 
trying to get things done for our producers.
    Mr. LaMalfa. Good. Thank you. Finally, on specialty crops 
here, we have, in California, Mr. Gibson was talking about how 
important they are up in his state. And it is really huge in 
California, as you know, that the changes involved in the Whole 
Farm Insurance Program, and that overlaid on top of the 
catastrophic coverage, we are understanding the requirements 
there might be that they are going to have to have duplicate 
coverage for the same proportion of the crop--the amount of 
crop. I don't think that would really be the intended 
consequence, but it would make it very, very difficult for 
specialty crop growers to be able to be in both and participate 
in both, because it is not going to pencil out for them. So we 
don't think that was the intention in the farm bill, but we are 
getting feedback that that might be the direction the USDA is 
trying to take this. What can you say on that?
    Mr. Scuse. We will take a look at it.
    [The information referred to is located on p. 44.]
    Mr. LaMalfa. Okay. Because the overlap just blows up the 
program for the ability of the farmers to be in--the specialty 
crop growers to be in the catastrophic program as well as 
overlapping with the other aspects of the two. So anyway, I 
appreciate the time, Mr. Chairman. Thank you. And I thank you 
for appearing with us today.
    Mr. Scuse. Thank you.
    The Chairman. The gentleman yields back. Mrs. Bustos, for 5 
minutes?
    Mrs. Bustos. Thank you, Mr. Chairman. Mr. Scuse, thank you 
for your work on behalf of the American farmer, and especially 
as it pertains to crop insurance. When I go around and talk to 
our farmers, it is the issue I hear more about than anything. 
So thank you for your hard work on that.
    As you know, there are as many parts of the country where 
farmers and many of us have to worry about either too much 
water or not enough. And when you have a district like mine 
where your entire western border is the Mississippi River, and 
then you have the Illinois running through--the Illinois River 
running through the southern part, it is--we have had a lot of 
water, and we have had a lot of rain lately, as you may know. 
What I am wondering about is producers are dealing with the 
crop insurance prevented planting rules, and can you walk me 
through how this policy works for crop insurance?
    Mr. Scuse. Sure. I can give you the basics. Preventive 
planting, if a producer does not plant the crop and does not 
harvest, then they will get 60 percent of their premium.
    Mrs. Bustos. Okay.
    Mr. Scuse. If in fact they end up planting a second crop 
later on in the year, they will receive 35 percent of the 
premium. Their yield, that will not be held against them 
because they--in the first scenario, if they didn't plant it 
and didn't harvest it, the zero yield would not be held against 
them. That is the basic.
    Mrs. Bustos. Okay. So how is prevented planting treated for 
Actual Production History?
    Mr. Scuse. The zero will not count.
    Mrs. Bustos. Okay. Okay. All right. Good. That is all I 
need.
    Mr. Scuse. Okay.
    Mrs. Bustos. Thank you, sir.
    The Chairman. The gentlelady yields back?
    Mrs. Bustos. Yes, I do. Thank you.
    The Chairman. Okay. The gentlelady yields back.
    Before we adjourn, I would like to invite the Ranking 
Member, Mr. Scott, for any closing remarks he has. David?
    Mr. David Scott of Georgia. Thank you, Mr. Chairman. And 
thank you, Mr. Under Secretary. You have given an excellent 
presentation, very informative, very straight forward. As you 
have noted, we have a number of challenges. And we really, 
really appreciate you looking very, very closely at the 
Georgia/South Carolina situation regarding peaches and the 
adjustable downward trend methodology. They hope you will 
correct that. And we look forward to working with you with my 
office on that particular issue, as well as moving forward on 
the peanut issue as well. Thank you very much for being with 
us.
    The Chairman. The gentleman yields back.
    Mr. Scuse, I too want to thank you for your appearance 
today. You have made reference to the best workforce, 
particularly at the county level, in the government, and I 
would not disagree with that. You have great folks. And please 
express to them our appreciation for the hard work they are 
doing. A lot of them will work a lot of extra hours over the 
next several months, making sure the producers that they live 
next door to are taken care of. It is a labor of love. I want 
to thank them in advance for all they will do. Thank you to 
your team and everything that you are working on. I know they 
are working really hard at it.
    I would like to just reiterate one more time how important 
the Actual Production History Adjustment is and making that 
work. The intensity of your answer a while ago on making sure 
that RMA and FSA work together on the decision tools, and that 
there are no conflicts, I would hope you bring that same kind 
of intensity to taking a hard look at whatever the barriers 
might be with respect to making the Actual Production History 
Adjustment available to producers, particularly in those areas 
of our country that have been really hard hit. I don't know it 
has to be an all-or-nothing kind of circumstance. I would 
appreciate you continuing to push. If you have the authority to 
contract out some of that kind of thing, if that needs to get 
done. It is important to us, I appreciate your efforts so far.
    Most of what we have said, we have talked about the things 
that were of concern, going forward. Again, please don't let 
that taint the hard work you have already done, and the 
recognition for what your team has put in place. My producers 
are just normally anxious at the beginning of every farm bill. 
This isn't their first rodeo. They have seen it before. Your 
FSA folks and RMA folks have seen it as well. So we will get 
through these transition periods, and quickly, hopefully. And 
with as little impact--negative impact as we can. We know that 
is your goal. We are on the same side. We just wanted to make 
sure that we are doing our job to make sure that the resources 
available to you, that have been made available to you, are 
properly structured. So again, thank you very much for being 
here.
    Under the rules of the Committee, the record of today's 
hearing will remain open for 10 calendar days to receive 
additional material and supplemental written responses from the 
witness. You have mentioned several times you will get us 
written responses to some things posed by the Members at this 
hearing.
    The Subcommittee on General Farm Commodities and Risk 
Management is adjourned.
    [Whereupon, at 11:12 a.m., the Subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
  Supplementary Information Submitted by Hon. Michael T. Scuse, Under 
 Secretary, Farm and Foreign Agricultural Services, U.S. Department of 
                              Agriculture
Insert 1
          The Chairman. . . .

    Mr. Scuse. .
          Talking about the APH Adjustment, we have had a lot of back 
        and forth with your staff. I need some help understanding why 
        this is going to be so difficult, why you say you can't we get 
        it done in 2015. We had an intern last week pull down 20 years' 
        worth of NASS data for 54 counties in Texas on wheat. It 
        covered about 75 percent of the wheat crop. They did the 
        calculations. They figured out which years could be kicked out 
        under the APH Adjustment. So, if we were able to do that with 
        the resources we had, why can't RMA, with the new resources 
        they have, and the broader access to data that they have, can't 
        get at least a partial roll out of the APH quicker than the 
        2016 crop year?
          Mr. Scuse. Mr. Chairman, I appreciate the concern about 
        getting the APH done as soon as we possibly can. And we very 
        much would like to do that.
          If you look at everything that RMA is going to be rolling out 
        for 2015, and the resources that it takes for the Risk 
        Management Agency to roll out those programs for 2015, it is no 
        small task just on those. One of the reasons why the Risk 
        Management Agency is able to roll out this many programs for 
        2015, Risk Management Agency looked at the bills that had been 
        passed by the House and Senate previous to the bill that was 
        ultimately passed by both and signed by the President. We 
        anticipated these programs, so we started to work on these 
        programs long before the final bill was passed and signed into 
        law.
          The APH was not in any of those previous forms of 
        legislation. And it was a last minute addition to the final 
        farm bill, and one that we did not anticipate having to 
        implement. Having said that, it is not just about going back 
        and getting 20 years of data for every single county, but it is 
        20 years of data for every single county for every single crop 
        that is grown in that county. And on top of that, we also have 
        to work with our approved insurance providers, the 18 companies 
        out there that are responsible for writing the crop insurance. 
        It is no small effort to do the IT programs for all the 
        commodities that are grown in all of the counties in the entire 
        United States.
          So what I am going to offer up, Mr. Chairman, to the 
        Committee, if you will, I will offer up a detailed written 
        explanation of the issues that we are facing in trying to 
        implement APH.
APH Adjustment Issue
    Question. Why isn't the APH provision being implemented sooner?

   One reason RMA was able to implement so much of the farm 
        bill so quickly was that they began preliminary work before the 
        farm bill passed on many of the changes that were consistent 
        between the two bills. For example, the House and Senate each 
        had similar language for SCO and STAX.

   I appreciate that the APH adjustment is important to 
        producers who have suffered multiple years of widespread 
        drought. However, this was one of the very few provisions, as 
        ultimately written, in the Crop Insurance Title that wasn't in 
        either the House or Senate passed version of the farm bill. 
        This provision was significantly revised during Conference.

    Question. Why this cannot be completed for 2015?

   Determining what counties qualify

     There is a significant amount of administrative work 
            involved in not only determining which counties will 
            qualify, but also which historical years will qualify for 
            the yield exclusion. For example, to identify whether crop 
            year 2012 qualifies for exclusion for irrigated corn in 
            2012, yield data must be compared to crop years 2001-2011, 
            2011 must be compared to 2000-2010 and so forth, spanning 
            numerous years of past history for which the data is not 
            consistently available for all crops by practice and 
            location. At a minimum, to assess qualifying years back to 
            2001 requires consistently reported yield data from 1991 to 
            present. This must also be done at the irrigated and non-
            irrigated practice basis.

     RMA must establish procedures for how to address 
            sporadic and limited yield histories outside of the primary 
            growing regions to determine qualifying years. This will 
            require decisions regarding imputation, substitution or 
            other legal alternatives of missing years and data for 
            counties in order to make the option widely available.

      b For example, the National Agricultural Statistics Service 
            (NASS) did not
              publish crop level wheat estimates for Roger Mills 
            County, Oklahoma in
              2008 or 2013. In addition, practice specific (irrigated 
            vs. non-irrigated) esti-
              mates have not been reported since 2007.

      b RMA is establishing a framework to address these situations 
            with the im-
              plementation of STAX. RMA intends to use lessons learned 
            from STAX in
              the implementation of Section 11009 (as well as further 
            refinement and ex-
              pansion of SCO in 2016 to more effectively align the 
            coverage with practice
              (i.e., irrigated vs. non-irrigated).

      b While the data compiled for SCO could be utilized for Section 
            11009, this
              data is largely at the county level and does not reflect 
            or differentiate be-
              tween irrigated and non-irrigated acreage. RMA intends to 
            utilize crop in-
              surance data for SCO beginning with 2016 that allows for 
            more offers at
              the practice specific level, at which time APH yield 
            exclusions can also be
              appropriately aligned.

   IT Issues

     This complexity also carries over to the IT systems 
            and with the effort involved in SCO and STAX there simply 
            isn't the manpower to get this up and running this year. 
            Adjustments to APH requires substantial programming 
            modifications for RMA's business support systems to accept 
            the APH yield exclusions submitted by insurance providers. 
            RMA has an obligation to consider program integrity and 
            considerations of improper payments with the Improper 
            Payments Elimination and Recovery Act of 2012. RMA verifies 
            the calculation of approved yields in these cases, and 
            validates the year(s) qualifying for the exclusion.

      b RMA's Actuarial Filing System (an RMA Mission Essential 
            Function) has
              to develop an entirely new actuarial processing standard 
            to detail to AIPs
              and producers which years are eligible for exclusion 
            appropriately for each
              crop and county. RMA's Policy Acceptance Storage System 
            (PASS) Yield
              and Yield History processing records have to be modified 
            to validate proper
              eligibility for which years can and can't be substituted. 
            This all requires
              substantial time to reprogram systems.

      b Other considerations that must be addressed for the yield 
            exclusions in-
              clude validation and edit checks to recognize the 
            excluded years, and in-
              cluding other new farm bill changes like the 80 percent 
            T-Yield plugs for
              beginning farmer and rancher, conservation compliance, 
            enterprise units by
              practice, coverage levels by practice, as well as changes 
            in subsidy for be-
              ginning farmer and rancher along with crop insurance on 
            native sod that
              will have indirect impacts stemming from this significant 
            farm bill change.
              RMA, AIP, and Agent automation tools that include quoting 
            software
              changes must be made to accommodate all the various 
            choices of yield ex-
              clusions and substitutions impacting the overall 
            guarantee and policy pre-
              mium so producers can make informed buying decisions.

   In addition, this section requires substantial data analysis 
        and actuarial review/rating adjustments to ensure actuarial 
        soundness and maintain program integrity. By law, RMA must 
        assess actuarial soundness of existing premium rating 
        methodology in light of this provision and make appropriate 
        adjustments, if necessary. To the extent that yield exclusions 
        increase coverage, expected indemnities are also likely to 
        increase requiring RMA to calculate the amount of premium 
        increase that may be needed to cover anticipated losses. In 
        addition, if the premium rate changes needed are outside what 
        the current methodology produces, then an alternative mechanism 
        will be needed for assessing appropriate premium rate charges. 
        The actuarial analysis considerations span roughly 39,000 
        county crop programs, or half the Federal crop insurance 
        program.
Insert 2
          Mr. Peterson. So from what I understand, you are kind of 
        holding things up until you figure out the answers on the base 
        and the new producers and so forth? You want to have everything 
        done before you roll this out? Is that what I understand?
          Mr. Scuse. Yes. We would like to have it completed before we 
        roll everything out, and answer as many of the questions as we 
        possibly can to eliminate any of the confusion that may exist 
        if we roll it out piecemeal.
          Mr. Peterson. Well, I just don't agree that there is going to 
        be confusion, because the decision that people are going to 
        make is not going to be, in most cases, based on what their 
        base is. That is going to be pretty obvious: 2011, 2012 or 2013 
        is going to be pretty obvious what is going to be the best 
        situation. Very few people are going to be affected by the new 
        producer stuff and having sold the dairy and so forth. So you 
        are holding up the whole situation over things that are not 
        central to making this decision. The problem I am picking up 
        out there, people have no idea that this even exists. Why 
        couldn't the FSA office, or somebody, send a letter to these 
        dairy farmers saying that there is a margin insurance program 
        coming, these are the rates that are in the statute, we are 
        going to be finalizing the base issues and so forth later on. 
        Just so they understand this is coming, because I am really 
        worried that----
          Mr. Scuse. Congressman, I will take that under consideration. 
        I will go back and look at it and see if we can do something 
        about getting notification out to the dairy producers, just 
        notifying them that this is coming, and the timeframes.
          Mr. Peterson. Yes.
          Mr. Scuse. So I will go back and take a look at it, 
        Congressman.

    USDA Farm Service Agency will be sending guidance to state offices, 
including a draft form letter to producers, that can be sent out in 
advance of the implementation of the program to ensure producers are 
aware of the program and options available to them.
Insert 3
          Mr. David Scott of Georgia. Thank you, Mr. Chairman.
          Under Secretary, let us go immediately to the point I brought 
        up concerning the treatment of the downward adjustment trend to 
        Georgia and South Carolina peach producers. First of all, we 
        need to correct that. It is very punitive. It is not fair. It 
        is costing. And it is not a level playing field. Can we get 
        your commitment to address this issue for the satisfaction of 
        the peach farmers in Georgia and South Carolina?
          Mr. Scuse. I will do even better than that. We have the 
        Administrator for the Risk Management Agency in South Carolina 
        today who will be leaving South Carolina and going to Georgia. 
        We are looking at this issue as we speak, and we are taking it 
        very seriously. And we are looking for a solution.
          Mr. David Scott of Georgia. And what would that solution be? 
        What would be a part of that solution? And will a part of that 
        solution take into consideration that extraordinary freeze in 
        March that affected Georgia and South Carolina to the tune and 
        the losses of millions of dollars? Will that be taken into 
        consideration as well, as you attend to this issue?
          Mr. Scuse. It is--it would be premature for me to speculate 
        on what the solution might be. I haven't--again, the 
        Administrator is down there today and the rest of this week 
        talking with the producers, and talking with the staff. So it 
        would be premature for me to speculate at this time what the 
        solution ultimately will be. But we do take this very 
        seriously.
          Mr. David Scott of Georgia. Well, would a part of that 
        solution be to give Georgia and South Carolina the same waivers 
        and consideration that you give the other peach growers from 
        Maine to North Carolina?
          Mr. Scuse. That is one of the options we are looking at.
          Mr. David Scott of Georgia. Good. And would you please work 
        with my office, and the people in Georgia and South Carolina, 
        to give us updates on this?
          Mr. Scuse. Sure. And, again, when the Administrator returns 
        to Washington, as we make progress in this, we will be more 
        than glad to keep your office posted.

    USDA Risk Management Agency continues to work on this issue and 
will schedule a follow-up phone call with Rep. Scott's staff to 
summarize the resolution for the peach growers in this region.
Insert 4
          Mr. David Scott of Georgia. Okay. I just want you to know I 
        am very concerned about that. I would like to work with you and 
        follow-up on that to make sure we correct that to the 
        satisfaction of everyone. Our farmers are faced with 
        tremendously devastating issues right now. It is almost so 
        difficult for them to actually farm for the amount of other 
        things that they have to deal with. Now, let me go to the other 
        issue I raised about this reserve assurance fund for peanuts. 
        Can you tell us about that? And I do recall that we put money 
        in there in this fund. I would like to know how much money did 
        that finally come to, how will that be utilized?
          Mr. Scuse. Congressman, I will be perfectly honest with you. 
        I am not aware of any money that was put in a fund. I do know 
        that there was a requirement for us to come up with a peanut 
        insurance policy. It is one that we have been working on now 
        for quite some years. I know it is of great concern for the 
        producers in your state. We continue to work on a peanut 
        revenue policy. I think the requirement is for us to have one 
        rolled out by 2015. That will depend on a couple different 
        factors, whether we have a--someone do a private submission, or 
        if we have to go out and develop it through the Risk Management 
        Agency. So it is something that we take very seriously, and we 
        are looking into.
          Mr. David Scott of Georgia. Okay. And, again, you will keep 
        me appraised of that?
          Mr. Scuse. Yes, sir.

    USDA Risk Management Agency continues to work on this issue and 
will schedule a follow-up phone call with Rep. Scott's staff to 
summarize the status of the peanut revenue policy.
Insert 5
          Mr. Neugebauer. The statute says--or the law--the bill said 
        the corporation shall make available separate enterprise units 
        for irrigated and non-irrigated acreage. The current 
        interpretation that your agency has is that if you elect one, 
        you have to elect the enterprise for the other. I do not think 
        that was the original intent. We may try to get the lawyers to 
        take another look at that. But what I would like to hear from 
        you is if in fact we have an unintended consequence there that 
        which caused that interpretation, I would love to hear that you 
        would help support some efforts to clarify that.
          Mr. Scuse. Well, yes, most definitely we will look at getting 
        some additional clarification on the issue. But I do want to 
        point out that under that program previously--under enterprise 
        units, if you had one farm in a county, or five farms, you had 
        to enroll every farm in the enterprise units. Every farm within 
        that county that you were tilling had to be part of that 
        enterprise unit. If you look at how the program has been 
        previously run, and then the legislation now to give you the 
        ability to separate irrigated and non-irrigated, I think that 
        is still keeping with how the original law was intended. And, 
        again, I am not an attorney. I think that was part of what we 
        were looking at when that decision was made.

    Question: Why has the Risk Management Agency (RMA) written the new 
regulations regarding enterprise units for irrigated and non-irrigated 
acreage to require an insured producer to qualify independently for 
each practice in order to be eligible as opposed to allowing Enterprise 
units on one practice coupled with non-enterprise units on the other 
practice?

    Response: Section 11007 states that ``the Corporation shall make 
available separate enterprise units for irrigated and non-irrigated 
acreage of crops in counties.'' We believe that this section simply 
allows an existing enterprise unit, as currently defined in the crop 
insurance policy, to be divided into two enterprise units, one for 
irrigated and one for non-irrigated acreage. Since nothing in the 
section otherwise modifies the existing definition of an enterprise 
unit, each of these units must still qualify as enterprise units as 
defined in the policy. This definition requires an enterprise unit to 
include all the acreage of the crop in the county, and such acreage 
must be located in two or more sections, section equivalents, FSA farm 
serial numbers, or units established by written agreement. In addition, 
two or more of the sections, section equivalents, FSA farm serial 
numbers, or units established by written agreement must each have 
planted acreage that constitutes at least the lesser of 20 acres or 20 
percent of the insured crop acreage in the enterprise unit. Section 
11007 does not provide RMA authority to define an enterprise unit 
differently for different purposes. This means that acreage not meeting 
all the requirements for an enterprise unit cannot qualify as 
enterprise units.
    This is consistent with the premise of enterprise unit construction 
stemming from the 2008 Farm Bill, and follows current rules for an 
enterprise unit (EU) which requires all the acreage within a county to 
be in one EU. The new policy provision published in the Interim Rule 
follows similar rules, and allows for one EU to be subdivided into two 
EU's, one for all the irrigated acreage in the county and one for all 
the non-irrigated acreage in the county.
    If a producer does not qualify for separate irrigated and non-
irrigated EUs, there are two options based on the timing of the 
discovery: (1) If the discovery is made on or before the acreage 
reporting date (ARD) the insured may have one EU, if they qualify, 
which is the same as current rules. Or they will have basic (BU) or 
optional (OU) units depending on which unit structure the insured has 
reported on the acreage report; and (2) If the discovery is made after 
ARD, the policy allows the insured to have one EU if they meet the 
qualifications, or a BU will be assigned. In addition, allowing EU for 
one practice and another unit structure for the other practice 
complicates program administration and premium subsidy determinations.
    Meeting the enterprise unit requirements specified above is 
critical in justifying, on an actuarially soundness basis, the current 
enterprise unit discount. For example, to qualify as an enterprise 
unit, the producer must have acreage planted in least two sections, 
with a minimum of 20 acres (or 20 percent of all acres) of the unit in 
each section. This is because the enterprise unit discount, and the 
higher premium subsidy that goes with it, is based on the risk-reducing 
effects of spreading production over a wider area. For example, if you 
currently have a 500 acre EU made up of both irrigated and non-
irrigated acreage, and you decide to have separate EUs by irrigated and 
non-irrigated practice, the smaller premium discount associated with 
250 acres will apply to EU by practice instead of the larger premium 
discount associated with what would have been the 500 acre EU.
    The larger the enterprise unit, the lesser the risk and the greater 
the enterprise unit discount. To the extent smaller tracts of land may 
be considered as enterprise units, the average size of the discount 
diminishes and the premium subsidy will be commensurately reduced.
    Subdividing EU's by practice has implications for the EU subsidy. 
The 2008 Farm Bill directed RMA to set the EU subsidy rates such that a 
grower would get about the same number of subsidy dollars per acre as 
if he or she had selected optional or basic units. For example, if EU's 
are around 30 percent cheaper (due to lower risk), then the EU subsidy 
rate would need to be 30 percent greater to keep the number of subsidy 
dollars the same with optional/basic units.
    The reduction in risk for EU's is due to their size and 
geographical spread. On average, the bigger the EU, the more that risk 
is diversified away, and the bigger the discount.
    The 2014 Farm Bill now allows for EU to be subdivided, which 
undermines the risk reducing effects of combining land together, and 
reduces the EU discounts. The smaller discounts require decreased 
subsidy rates to equalize the subsidy dollars between EU's and 
optional/basic units
    The more that EU's start to resemble optional/basic units, the more 
that the EU subsidy rates will resemble those for optional/basic units.
    The enterprise unit qualification standards are intended to ensure 
that only those producers whose risks have truly been reduced receive 
the additional benefit of the enterprise unit discount and increased 
subsidy. For example: Allowing a producer to choose EU on irrigated 
acreage and optional units on non-irrigated acreage because the non-
irrigated acreage is in locations more susceptible to early season 
flooding, and other acreage more prone to later season drought and 
hail, would not necessarily be reducing their risk, but adversely 
selecting against the program while taking advantage of increased 
subsidy on the least risky acreage.
Insert 6
          Mr. Maloney. . . . In particular, I am interested in the 
        whole farm revenue insurance program. The Secretary recently 
        announced he thought those programs would be available for the 
        2015 crop year. I was just hoping you could expand on that and 
        give us a little update on that timeframe and whether you are 
        comfortable with that?
          Mr. Scuse. The whole farm revenue will be available in a 
        pilot in 2015 for the areas where we had AGR and AGR-Lite. And 
        so it will be available to those producers where we had those 
        programs the last few years in a pilot, and then it will be 
        expanded in 2016.
          Mr. Maloney. Well, and you anticipated my next question, 
        which is how will the program, if you can tell us, differ from 
        this existing AGR and AGR-Lite programs?
          Mr. Scuse. I would have to provide that to you in writing 
        what the differences are. There are some differences between 
        how the programs are going to be functioning. But we will 
        provide you those differences in writing.

    USDA's Risk Management Agency shared information highlighting the 
key differences between Whole Farm and AGR/AGR-Lite with Rep. Maloney's 
staff the week of July 14. A summary is below and a table is attached 
with more details.

   Whole-Farm Revenue Protection covers 50 to 85 percent of 
        revenue. AGR/AGR-Lite previously covered 65-80 percent. The 
        change reflects diversified farmers who wanted to be able to 
        insure lower levels and farmers that were not as diversified 
        that wanted to be able to purchase higher levels of coverage.

   The Whole-Farm Revenue Protection product does not have 
        `payment rates' that were present in the AGR/AGR-Lite programs 
        (75% and 90%) so once the loss threshold is met, 100 percent of 
        the loss is paid.

   Sales closing dates for Whole-Farm Revenue Protection will 
        be the spring sales closing dates applicable for the county, or 
        January 31, February 28, and March 15. Previously AGR had a 
        sales closing date of January 31 in all areas and AGR-Lite 
        allowed new insured's to purchase their policy on March 15 but 
        returning insured's had to purchase by January 31.

   Liability limits--Whole-Farm Revenue Protection has an $8.5 
        million liability limit compared to the AGR limit of $6.5 
        million and the AGR-Lite limit of $1 million. Eligibility also 
        requires no more than 35 percent or $1 million of expected 
        revenue to come from animals and animal products. AGR 
        previously had a 35 percent limitation for animals and animal 
        products to a maximum of 35 percent or $1 million and there was 
        not a limit for AGR-Lite. Whole-Farm Revenue Protection also 
        has an eligibility requirement of no more than 35 percent or $1 
        million of expected revenue from greenhouse/nursery and neither 
        AGR/AGR-Lite had this limit.

   The Whole Farm Revenue Protection recognizes that farm 
        operations may be expanding and that prices change over the 
        years and includes a new calculation in the determination of 
        the amount of insured revenue that allows for expanding 
        operations in addition to the indexing procedure that was also 
        available in the AGR/AGR-Lite programs.

   Whole-Farm Revenue Protection has a ``market readiness'' 
        feature that allows the value of washing, trimming, packing, 
        packaging, labeling, and any other similar on-farm activity 
        that is the minimum necessary to make the commodity market 
        ready to not be deducted from the revenue amount insured. (Not 
        covered under market readiness are activities that change the 
        form of the commodity (such as slicing apples), storage costs, 
        added value (gift baskets/wine, etc.), or any off-farm 
        activities.)

   Replanting coverage--Under Whole-Farm Revenue Protection, 
        producers may receive payment for replanting annual crops, when 
        appropriate. This coverage was not available under AGR/AGR-
        Lite.

   The new Whole-Farm Revenue Protection product requires a 
        Farm Operation Report to be filed during the common acreage 
        reporting period of July which is a new requirement that was 
        not previously present in AGR/AGR-Lite.

                      Whole-Farm Revenue Protection
               What Changed Compared to AGR and AGR-Lite?
                          [As of July 30 2014.]
------------------------------------------------------------------------
      Comparison           AGR-Lite           AGR             WFRP
------------------------------------------------------------------------
Liability Limit        $1 Million       $6.5 Million    $8.5 Million
Coverage Level         65, 75, 80*      65, 75, 80*     50-85 in 5%
                                                         increments
                                                        3 Commodities
                                                         for 80 and 85%
One Commodity          No Restriction   No Restriction  Not eligible for
                                                         WFRP if only
                                                         one commodity
                                                         and that
                                                         commodity has
                                                         an MPCI revenue
                                                         product
                                                         available.
Payment Rate           75, 90           75, 90          None
Animal or Animal       None             35% of          35% of expected
 Product Limit                           Expected        revenue up to
                                         Income          $1 million
                                                         (Max)
Nursery and            None             None            35% of expected
 Greenhouse Limit                                        revenue up to
                                                         $1 million
                                                         (Max)
Potato Requirement     Minimum of 2     Minimum of 2    Minimum of 2
                        Commodities      Commodities     Commodities
                        (with            (with           (with
                        calculation)     calculation)    calculation)
Replant Payments       None             None            Up to 20 percent
                                                         of expected
                                                         revenue for
                                                         annual
                                                         commodity with
                                                         20 acres or 20
                                                         percent of crop
                                                         needing
                                                         replant. Not
                                                         allowed if also
                                                         insured under
                                                         MPCI with
                                                         replant
                                                         provisions.
Other Federal Crop     Optional         MPCI required   Optional--MPCI
 Insurance                               if 50% of       allowed--No CAT
                                         expected        level MPCI
                                         income from     allowed.
                                         MPCI crops
                                         and allowed
                                         otherwise--CA
                                         T level
                                         allowed
Market readiness       No               No              Yes
 amounts left in
 insured revenue
Expanding operations   No               No              Average
                                                         allowable
                                                         historic
                                                         revenue
                                                         increased by
                                                         10% if approved
                                                         by AIP, to
                                                         allow for minor
                                                         farm growth
                                                         that might not
                                                         trigger
                                                         indexing.
Cancellation/          31-Jan           31-Jan          Same as sales
 Termination                                             closing date
                                                         for county. (2/
                                                         28, 3/15)
Contract Change        31-Aug           31-Aug          31-Aug
Sales Closing Date     March 15 New     31-Jan          In Actuarial
                       Jan 31                            Documents--same
                        Carryover                        as dates for
                                                         spring crops
                                                         for county: 2/
                                                         28 and 3/15
                                                         depending on
                                                         county
Rating Methodology     Same as AGR      Rates revenue   Same as AGR
                                         variability
                                         of individual
                                         commodities.
------------------------------------------------------------------------
* 3 Commodities.

Insert 7
          Mrs. Noem. I appreciate that. Also, I have heard some 
        instances where extreme heat losses are not covered. Again, we 
        have that in South Dakota. Unfortunately, while we are a land 
        of extremes, but once in a while we will lose some cattle due 
        to extreme heat and feed lots, especially. Can you speak to why 
        that would happen that there would be a denial based in that 
        program?
          Mr. Scuse. I will have to get back to you on what is and is 
        not covered, because there are some things that are covered 
        under LIP.

    Extreme heat is an eligible cause of loss under LIP. An eligible 
livestock owner on a farm that retains ownership in livestock that are 
being fattened in a feedlot and that die in the feedlot due to an 
eligible adverse weather event, such as extreme heat, will be eligible 
for compensation under LIP, if all other eligibility conditions under 
the program are met.
Insert 8
          Mr. LaMalfa. Thank you, Mr. Chairman. I will try to move 
        quickly here. There is a lot to cover.
          Mr. LaMalfa. Thank you, Mr. Chairman. I will try to move 
        quickly here. There is a lot to cover.
          We were talking earlier about the moving around of resources 
        and personnel within USDA to address the backlog--on the 
        livestock, forage program backlog portion. In California, we 
        face droughts. Some areas are having trouble getting grazing 
        permits, as they had been in the past with sage grouse going 
        on, even wild horses. And so especially northeast California 
        faced some really acute problems with grazing there. So can you 
        address this--have you had the opportunity to push the 
        resources up into that portion of the state with the acute 
        problem there is there?
          Mr. Scuse. I am not aware of where we have moved our 
        resources in the State of California. But we could get the 
        information. I can get in touch with our State Executive 
        Director, and we can provide you with that information on what 
        we have done and what the issues are in that part of the state.

    USDA sent the attached summary of applications and payments in Rep. 
LaMalfa's district on July 16, 2014.

                  Livestock Programs in CA-1 (LaMalfa)
                             [July 21, 2014]
 
 
 
2013 NAP:
 
  Butte County--12 producers have grazing coverage; seven
   have filed an application for payment for grazing and
   seven of those have been paid.
      Total NAP paid as of today...........................      $77,096
  Glenn County--46 producers have grazing coverage; 46 have
   filed an application for payment for grazing and 42 of
   those have been paid.
      Total NAP paid as of today...........................   $1,308,617
  Lassen/Plumas/Sierra Counties--23 producers have grazing
   coverage; six have filed an application for payment for
   grazing and five of those have been paid.
      Total NAP paid as of today...........................      $72,727
  Modoc County--33 producers have grazing coverage; zero
   have filed an application for grazing and zero have been
   paid
  Shasta County--26 producers have grazing coverage; eight
   have filed an application for payment for grazing and
   six of those have been paid.
      Total NAP paid as of today...........................      $78,401
  Siskiyou County--200 producers have grazing coverage; 13
   have filed an application for payment for grazing and 13
   of those have been paid.
      Total NAP paid as of today...........................      $99,149
  Tehama County--56 producers have grazing coverage; 39
   have filed an application for payment for grazing and 34
   of those have been paid.
      Total NAP paid as of today...........................     $740,854
 
LFP for 2012, 2013, and 2014:
 
  Butte--36 payments.......................................     $459,165
  Glenn--60 payments.......................................   $1,662,696
  Lassen/Plumas/Sierra--58 payments........................   $1,899,892
  Modoc--60 payments.......................................   $1,584,807
  Shasta--15 payments......................................     $182,646
  Siskiyou--87 payments....................................   $1,127,861
  Tehama--60 payments......................................   $1,418,689
 
CA Statewide FLP Totals:
 
  2012 Applications--558 Payments..........................   $2,651,413
  2013 Applications--1,457 Payments........................  $18,100,517
  2014 Applications--1,539 Payments........................  $26,563,694
                                                            ------------
    Total Applications--3,554 Total payments...............  $47,315,694
 

Insert 9
          Mr. LaMalfa. Good. Thank you. Finally, on specialty crops 
        here, we have, in California, Mr. Gibson was talking about how 
        important they are up in his state. And it is really huge in 
        California, as you know, that the changes involved in the Whole 
        Farm Insurance Program, and that overlaid on top of the 
        catastrophic coverage, we are understanding the requirements 
        there might be that they are going to have to have duplicate 
        coverage for the same proportion of the crop--the amount of 
        crop. I don't think that would really be the intended 
        consequence, but it would make it very, very difficult for 
        specialty crop growers to be able to be in both and participate 
        in both, because it is not going to pencil out for them. So we 
        don't think that was the intention in the farm bill, but we are 
        getting feedback that that might be the direction the USDA is 
        trying to take this. What can you say on that?
          Mr. Scuse. We will take a look at it.

    USDA sent a response to Rep. LaMalfa's office on July 29th via e-
mail. A copy of the response follows.
    RMA is aware of the questions regarding: (1) CAT level insurance 
with Multi-Peril Crop Insurance (MPCI), and (2) the requirement of 
corresponding coverage levels when underlying MPCI coverage is 
purchased with Whole Farm Revenue Policy (WFRP), as we recently 
received comments from several of our companies who provided reviews of 
the WFRP policy.
    These questions refer to the dual insurance provisions that allow 
an insured to buy individual coverage policies under MPCI insurance 
along with their WFRP insurance. This allows producers to tailor their 
risk management to still allow individual coverage for a commodity if 
they so choose without eliminating their ability to insure the rest of 
their commodities under WFRP. When an insured covers their farm under 
both types of crop policies, an adjustment to the WFRP premium is made 
to account for the coverage provided under the MPCI policy. In return, 
any indemnity paid under the MPCI policy is counted as revenue to count 
and reduces indemnity paid under the WFRP policy. RMA is working to 
assure that the premium adjustments made actuarially sound and 
accurately reflect the remaining risks. Offsetting the individual 
policy indemnity payments from the WFRP indemnity should ensure that 
producers do not receive disproportionate benefits.
    RMA is in the process of finalizing the WFRP policy and program 
materials and we are still evaluating these recently identified issues 
raised regarding coverage level requirements. We will be happy to 
provide an update once this is finalized.
                                 ______
                                 
         Submitted Letter by Texas Wheat Producers Association
    Brandon Willis,
    Administrator,
    Risk Management Agency, U.S. Department of Agriculture,
    Washington, DC 20250

    Administrator Willis;

    On behalf of the more than 35,000 wheat growers in Colorado, 
Kansas, Oklahoma and Texas, we are writing to urge you to implement the 
actual production history (APH) adjustment provisions of the 
Agricultural Act of 2014 in time for the 2015 crop year.
    In the most recent farm bill debate, producers made great 
sacrifices and worked with decision-makers to implement changes to farm 
safety net programs that drastically reduced the level of support and 
predictability traditionally provided by Federal farm programs. 
Producers were willing to make these sacrifices largely due to the 
ongoing coverage provided by the Federal Crop Insurance Program and key 
improvements to the program included in the final bill.
    Many of the changes contained in the Agricultural Act of 2014 
recognized crop insurance as the center of our modern safety net. 
Unfortunately, many of our growers have been stuck in the worst drought 
since the Dust Bowl of the 1930s and have found their crop insurance 
coverage diminishing at an alarming pace. Back-to-back drought years 
have reduced producers' APHs to levels that no longer reflect even 
average production expectations, therefore reducing crop insurance 
guarantees. Additionally, producers across this region will suffer the 
effects of this drought for years to come as their APHs are continually 
punished because a one-in-eighty year drought is included in their 10 
year production history.
    The farm bill was authored at the height of a drought that gripped 
the Plains states. In an analysis using National Agricultural 
Statistics Service data for Colorado, Kansas, Oklahoma and Texas, we 
estimate that more than \1/2\ of the 22 million annually planted wheat 
acres across these four states would be eligible to drop their 2013 
wheat yield due to the severity of the drought. We believe that further 
analysis would reveal even more eligible years of production due to the 
ongoing nature of the current drought.
    Implementing these provisions in time for the 2015 crop year would 
allow wheat producers across this region the opportunity to further 
protect their farms from the effects of drought. While the 
implementation of these provisions will provide benefits to growers 
across the country when future adverse weather conditions occur, it 
will make an immediate and lasting impact for our growers who have been 
operating under extreme drought conditions. We realize that a change to 
the APH calculation isn't as simple as flipping a switch. If it is not 
feasible to implement these provisions nationwide for the 2015 crop 
year, we ask that they be implemented for growers in states 
experiencing persistent drought to provide growers the needed benefits 
of the new provision while not over-burdening your agency.
    Thank you for your consideration,
            Sincerely,

Colorado Association of Wheat Growers;
Kansas Association of Wheat Growers;
Oklahoma Wheat Growers Association;
Texas Wheat Producers Association.
                                 ______
                                 
                          Submitted Questions
Response from Hon. Michael T. Scuse, Under Secretary, Farm and Foreign 
        Agricultural Services, U.S. Department of Agriculture
Questions Submitted by Hon. Frank D. Lucas, a Representative in 
        Congress from Oklahoma
Supplemental Coverage Option
    Question 1. We believe the SCO rule as implemented so far looks 
good. We would note particularly that the wording is cleared up 
concerning interaction between SCO and ARC by determining SCO 
eligibility by farm number and we believe that this is a good solution 
to what could have been a real implementation problem. Thank you.
    We would note one typo and observe one problem on the 2015 wheat 
deadline to drop SCO if a producer elects ARC. The typo is on page 2, 
in the second column, in the sixth line from the top. The reference is 
5(a) and it ought to be 6(a). The sentence should read: ``Premium for 
this Endorsement is calculated by multiplying your supplemental 
protection from section 6(a) by the premium rate and any premium 
adjustment percentages that may apply.'' Is our understanding correct?
    Answer. The Supplemental Coverage Option (SCO) endorsement released 
by RMA on its website correctly refers to 6(a). The SCO endorsement can 
be found at the following link: http://www.rma.usda.gov/policies/2015/
15sco.pdf.

    Question 2. Section 11003 requires that the Supplemental Coverage 
Option (SCO) be available to all producers on all insurable crops. The 
provision became effective on the date of enactment, February 7, 2014, 
but the statement of managers clarified that SCO would be made 
available in time for the 2015 crop year to allow ample time for 
implementation. However, the Risk Management Agency (RMA) has indicated 
that SCO will only be available on corn, soybeans, wheat, cotton, rice, 
spring planted barley, and grain sorghum and then only in certain 
counties. The SCO provision has been in each legislative draft of the 
farm bill since 2011 giving RMA significant lead time to examine what 
would be needed to ensure full and timely implementation.
    Answer. RMA has made every effort to make SCO as widely available 
as possible given the time frame between the enactment of the 2014 Farm 
Bill, the work needed to make sure SCO meets the applicable 
requirements of the Federal Crop Insurance Act, and contract change 
dates for the 2015 crop year. When SCO first appeared in earlier drafts 
of the farm bill, RMA began reasonable planning/development efforts--
and is why RMA was able to implement SCO in time for the 2015 crop year 
for a number of crops. While the appearance of SCO early in the farm 
bill process allowed time for preparation, there were limits to what 
could be done for a provision that was not yet law.
    The initial crops covered by SCO already had area-based insurance 
coverage developed, making implementation more straightforward. 
Expanding SCO beyond these crops required significantly more time and 
development and the process could not be undertaken until the farm bill 
was enacted.

    Question 2a. Please provide specific timelines regarding the 
following: (a) the scheduled availability of SCO in all counties with 
respect to corn, soybeans, wheat, cotton, rice, spring planted barley 
and grain sorghum; (b) the scheduled availability of SCO for all other 
title I commodities in all counties; (c) the scheduled availability of 
SCO with respect to non-title I commodities. Please explain the 
reasoning behind each timeline. We request such timelines as part of 
these questions submitted to you for the record.
    Answer. On November 19, 2014, RMA published a list of crops that it 
will analyze during the 2015 calendar year to determine if sufficient 
data exist to offer SCO for the 2016 crop year. In addition, RMA is 
currently looking at expanding availability for corn, soybeans, wheat, 
cotton, rice, spring planted barley and grain sorghum. which were first 
made available in the 2015 crop year for which it previously had group 
risk plans of insurance developed, making implementation more 
straightforward.

    Question 3. SCO is designed to supplement individual insurance 
policies (not just revenue policies), so delayed implementation of the 
peanut revenue policy should not prevent timely implementation of SCO 
for peanuts. Why will SCO not be available to peanut producers for the 
2015 crop year?
    Answer. RMA first made SCO available for crops covered by existing 
area-based risk plans of insurance making implementation more 
straightforward. While crop provisions were previously in place for a 
peanut area-based insurance plan, the peanut area coverage was 
discontinued in December 2009 due to little or no business and changes 
in the peanut industry. For 2016, RMA will strongly consider SCO for 
peanuts. RMA does intend to offer a peanut revenue policy for 2015.

    Question 4. Given that SCO triggers on an area wide basis, to what 
extent might currently uncovered counties be covered by triggering 
indemnities for producers in those counties based on losses experienced 
by similarly situated covered counties?
    Answer. In counties where there is insufficient data to establish 
SCO coverage, the use of data from the NASS crop reporting district, 
which includes other counties, was considered and utilized for spring 
crops. For SCO cotton, RMA has examined the use of data from specific, 
similarly-situated, counties to establish coverage (based on the 
development efforts for STAX). This approach is planned to be extended 
to other SCO crops for 2016.

    Question 5. The farm bill statement of managers expressed our 
intent that SCO yield and revenue policies be available to hybrid seed 
crops. What is the status of implementation?
    Answer. RMA understands the intent of the Managers and is working 
to make SCO available to the broadest number of crops possible. RMA 
included Hybrid corn and grain sorghum seed on a list published 
November 19, 2014, of crops RMA will analyze to potentially offer SCO 
for the 2016 crop year.

    Question 6. The farm bill statement of managers expressed the 
intent that SCO be made available on a yield basis for cottonseed. What 
is the status of implementation?
    Answer. RMA is strongly considering cottonseed for SCO for the 2015 
crop year.

    Question 7. The farm bill statement of managers expressed the 
intent that Area Risk Protection Insurance be made available to popcorn 
producers under written agreement until the policy is amended to allow 
for this. What is the status of implementation?
    Answer. Area Risk Protection Insurance (ARPI) for popcorn was 
recently approved by the Federal Crop Insurance Corporation Board of 
Directors, and is planned for implementation for the 2016 crop year.
Enterprise Units by Practice
    Question 8. Section 11007 reads as follows: ``Beginning with the 
2015 crop year, the Corporation shall make available separate 
enterprise units for irrigated and non-irrigated acreage of crops in 
counties.''
    We understand that RMA interprets this text to mean that if a 
producer elects to insure an irrigated crop of a commodity on an 
Enterprise Unit (EU) basis that the producer must also insure the non-
irrigated crop of the commodity on an EU basis. RMA has offered a 
number of reasons why the agency arrived at this conclusion.
    The first we understood to be a legal justification that the 
conjunction ``and'' in the section requires this result. However, had 
Congress used the conjunction ``or'' RMA might have just as easily 
maintained that the agency is free to make available EU for one 
practice or the other but is not required to make EU available with 
respect to both practices. The statutory text states that ``the 
Corporation shall make available separate enterprise units'' but the 
text does not require a producer to actually elect EUs with respect to 
both practices. The producer is free under the text to elect EU for 
both practices or elect EU for only one practice while electing 
optional or basic units for the other.
    Answer. See response to Question 8a.
    Question 8a. During the hearing, Under Secretary Scuse requested 
and was granted the opportunity to reply in writing to certain 
questions of Committee Members. In answer to the question regarding 
this particular issue, the written response of RMA was, ``We believe 
that this section simply allows an existing enterprise unit, as 
currently defined in the crop insurance policy, to be divided into two 
enterprise units, one for irrigated and one for non-irrigated acreage. 
Since nothing in the section otherwise modifies the existing definition 
of an enterprise unit, each of these units must still qualify as 
enterprise units as defined in the policy . . . Section 11007 does not 
provide RMA authority to define an enterprise unit differently for 
different purposes.'' With respect, statutory text enacted into law as 
part of the farm bill that amends another act of Congress, the Federal 
Crop Insurance Act (FCIA), is not required to conform to preexisting 
agency regulations which are subordinate to statutory text. Rather, 
agency regulations are meant to conform to statutory text. The 
statutory text supports, and is certainly not inconsistent with, the 
Congressional intent that a producer be able to elect an EU for all of 
a crop in a county produced under, for example, a non-irrigated 
practice without having to elect an EU with respect to the same crop in 
the county produced under an irrigated practice. In fact, this 
flexibility is precisely a part of the objective of section 11007 of 
the 2014 Farm Bill.
    Answer. RMA believes the Interim Rule regarding Section 11007 is 
consistent with the statute. RMA is currently evaluating comments 
provided to the Interim Rule that implemented this provision.
    Question 8b. Although the agency relies on the 2008 Farm Bill 
provisions to support this interpretation, nothing in the statutory 
text nor the statement of managers in that Act supports--much less 
requires--the agency's reading of the situation. In fact, we are deeply 
troubled by a paragraph in the answer to the question that reads in 
part: ``The 2014 Farm Bill now allows for EU to be subdivided, which 
undermines the risk reducing effects of combining land together, and 
reduces the EU discounts. The smaller discounts require decreased 
subsidy rates to equalize the subsidy dollars between EU's [sic] and 
optional/basic units.'' The response continues at some length on this 
point declaring that under certain conditions ``the premium subsidy 
will be commensurately reduced,'' that the 2014 Farm Bill ``reduces the 
EU discounts,'' and ``the EU subsidy rates will resemble those for 
optional/basic units''. We would stress in the strongest possible terms 
that the amendment made by the 2014 Farm Bill in section 11007 does 
absolutely nothing to change the requirements made by the amendments to 
the Federal Crop Insurance Act made under section 12011 of the 2008 
Farm Bill concerning premium support for EUs. Rather, the 2014 Farm 
Bill confers the same premium support on EUs conferred by the 2008 Farm 
Bill but changed how EUs are to be understood. The percentage of 
premium support for EUs is codified and fixed under the 2008 Farm Bill 
and nothing in the 2014 Farm Bill changed that percentage. Section 
11006 of the 2014 Farm Bill merely makes the availability of EUs 
permanent. The only way the agency could argue differently is if it 
maintained that the premium support requirements of the 2008 Farm Bill 
only applied to EUs as EUs were understood prior to the enactment of 
the 2014 Farm Bill, but this is a wholly unsupportable contention. 
Congress enacted a law to change the manner by which EUs may be elected 
(i.e., by practice) but Congress did not alter the EU premium support 
that inures to a producer that makes such an election. In fact, the 
Congressional Budget Office (CBO) charged Congress for this change to 
the law ($533 million) taking into account all of the cost 
considerations for which RMA now intimates the agency may seek to 
charge producers. We cannot overstate that the Committee will take 
strong exception to any action that results in a lower premium support 
level for EUs, however they are elected by the producer, than what is 
clearly provided for under section 12011 of the 2008 Farm Bill. 
Moreover, adhering to the premium support requirements of the 2008 Farm 
Bill does not permit an offsetting change in premium support for 
optional units or basic units as the written response of the agency 
seems to suggest. Nothing in the FCIA allows for this. Never was this 
discussed during farm bill discussions. Please clarify if the agency 
has somehow arrived at a different conclusion. Provided immediately 
below is the complete body of section 12011 of the 2008 Farm Bill, as 
amended by section 11006 of the 2014 Farm Bill, as it appears today in 
the FCIA:

          (5) Enterprise and whole farm units.--

                  (A) In general.--The Corporation may pay a portion of 
                the premiums for plans or policies of insurance for 
                which the insurable unit is defined on a whole farm or 
                enterprise unit basis that is higher than would 
                otherwise be paid in accordance with paragraph (2).
                  (B) Amount.--The percentage of the premium paid by 
                the Corporation to a policyholder for a policy with an 
                enterprise or whole farm unit under this paragraph 
                shall, to the maximum extent practicable, provide the 
                same dollar amount of premium subsidy per acre that 
                would otherwisehave been paid by the Corporation under 
                paragraph (2) if the policyholder had purchased a basic 
                or optional unit for the crop for the crop year.
                  (C) Limitation.--The amount of the premium paid by 
                the Corporation under this paragraph may not exceed 80 
                percent of the total premium for the enterprise or 
                whole farm unit policy.

    Concerning the agency's practical reasons for the inability to 
allow EU on one practice and optional unit/basic unit on the other 
practice, the agency appears to rely on a rating issue. In the example, 
provided in the written answer to a question posed at the hearing, the 
EU is on the irrigated and the optional unit/basic unit is on non-
irrigated. The EU on the irrigated should be rated to show the reduced 
risk since all the irrigated acreage is together. The non-irrigated 
optional unit/basic unit is already rated to show its increased risk. 
So, why would having the EU on the irrigated change that? RMA has 
always published different rates and reference yields for irrigated and 
non-irrigated units so why does having the EU on the irrigated acreage 
change that? It does not in our view.
    Answer. According to the Federal Crop Insurance Act, the 
Corporation is required to determine premium subsidy rates for 
enterprise units such that premium subsidy per acre would, to the 
maximum extent practicable, equal that of basic or optional units. 
Given the legislated direction, RMA determined enterprise unit subsidy 
rates based on an analysis of policyholder data that existed at the 
time. Enterprise unit subsidy rates have remained constant since the 
2009 crop year implementation. Subsequent analysis, based on more 
recent policyholder data, has yet to support an increase or decrease in 
enterprise unit subsidy. However, if changes in participation and 
premium rates (or premium discounts) consistently alters the 
relationship between premiums across types of units, then RMA is 
required to adjust enterprise unit subsidy rates. Allowing separate 
enterprise units for irrigated and non-irrigated acreage does alter 
this relationship for those making the election. For example, if a 
producer has a 500 acre enterprise unit consisting equally of irrigated 
and non-irrigated acreage and the producer elects separate enterprise 
units by irrigated and non-irrigated practice, then a smaller premium 
discount applies to each 250 acre unit compared to what would be 
applicable to the 500 acre enterprise unit. This is highly contingent 
upon the distribution of irrigated and non-irrigated acreage within 
existing policies. To the extent acreage is equally distributed, the 
effect (reduction in subsidy rate) could be more pronounced. To the 
extent acreage is dominated by one practice over another, the effect 
could be minimal if at all differentiable. RMA continues to analyze 
policyholder data to assess whether this election alters the aggregate 
relationship.

    Question 9. Despite significant communication between USDA and the 
Committees throughout farm bill deliberations, particularly during 
conference committee, there appears to be many misunderstandings on the 
import of various provisions where the provisions were written more 
generally. In the view of the department, would it be useful for 
Congress to be more prescriptive in future Acts in regard to statutory 
text and statement of managers, including the statutory nullification 
of agency regulations or actions where it is believed such regulations 
or actions may be construed to work to frustrate the requirements of a 
statutory provision? We are reluctant to go in this direction, but if 
it would help clear up any possible misunderstandings and expedites 
proper implementation, we would certainly be willing to pursue this 
route in future legislation.
    Answer. RMA strives to interpret the statute in a way that meets 
congressional intent and that provides a working, useful, and 
actuarially sound product to the producers. While non-ambiguous 
statutory text reduces the amount of discretionary decisions needed, 
the nature of crop insurance requires RMA to implement legislation 
within already existing confines of contractual agreements with private 
insurance companies and already existing law such as the requirement 
that the program remain actuarially sound. Therefore, clear legislative 
text does not always reduce the number of issues RMA must resolve in 
implementing new programs.

    Question 10. You also state in the interim rule that, ``Enterprise 
units by irrigated and non-irrigated practice will be available for any 
crop in which enterprise units are allowed through the actuarial 
documents.'' Please explain the practical implications of this 
limitation in terms of for what counties and crops producers will not 
be able to access EU by practice. Also, please explain what the agency 
will do to obtain the actuarial documents necessary to ensure all 
producers have access to EU by practice.
    Answer. The statement was intended to clarify that the actuarial 
documents will identify where separate enterprise units for irrigated 
and non-irrigated acreage are applicable since enterprise units are 
currently not available for all crops. Crops that offered enterprise 
unit coverage for 2014 include barley, canola, corn, cotton, flue cured 
tobacco, fresh market beans, grain sorghum, olives, pecans, rice, 
soybeans, sunflowers, sweet potatoes, and wheat. RMA continues to 
review crops for enterprise unit expansion, and, has already expanded 
enterprise units for dry peas and grass seed for the 2015 crop year. 
RMA also expanded enterprise units for dry beans and popcorn for 2015. 
In addition, for crop programs that do allow enterprise units, not all 
counties specify or allow coverage for both irrigated and non-irrigated 
production. For example, if non-irrigated acreage is currently not 
insurable in a given county due to excessive risk, then non-irrigated 
coverage will not be available, nor will separate enterprise units. 
Last, the provision to allow separate enterprise units for irrigated 
and non-irrigated acreage will first be available for crops and 
counties that have a November 30 contract change date (spring 2015 
crops).
Actual Production History Adjustment
    Question 11. Section 11009 allows a producer to exclude certain 
yields from the APH of the producer. The section amends the Federal 
Crop Insurance Act and the provision became effective upon enactment, 
February 7, 2014. However, RMA maintains that the provision requires 
agency implementation and that such implementation will take nearly 2 
years, making the provision first eligible with respect to the 2015 
fall planted crop. Please explain in detail why any agency 
implementation is necessary to carry out what we crafted as a self-
executing provision and why such a long delay is also necessary? Please 
also explain why the provision cannot be implemented for the 2015 
spring planted crop or partially implemented for this fall with respect 
to hardest hit regions of the country or crops where the provision is 
needed the most.
    Apart from any other considerations, has RMA evaluated the 
feasibility of implementing the APH adjustment for 2015, for the fall 
or spring planted crops, and found that it is technically feasible but 
that there are other considerations that make implementation for the 
2015 crop undesirable from an agency or departmental policy 
perspective? Or does RMA or the department maintain that implementation 
for 2015, fall or spring, is infeasible?
    Answer. To implement the APH adjustments provided for in section 
11009, substantial programming modifications must be made to the core 
foundation of RMA's business support systems to validate and accept the 
APH yield exclusions impacting insurance guarantees and associated 
premium costs submitted by Approved Insurance Providers (AIPs). These 
adjustments include modifications to be able to determine those 
producers who may qualify for the yield exclusion, for what years, what 
crops, what practices, and tracking the producer's elections. 
Furthermore, RMA's Policy Acceptance Storage System Yield and Yield 
History processing records have to be modified to validate proper 
eligibility for which years can and cannot be substituted. This will be 
accomplished by reprogramming RMA's Actuarial Filing System to develop 
a new actuarial processing standard to detail which years are eligible 
for exclusion appropriately for each crop and county.
    These modifications must be made to reasonably ensure that the 
threats of fraud, waste, or abuse to the Federal Crop Insurance Program 
are detected, deterred, mitigated, and addressed. Without these 
verifications, FCIC could be in violation of the Improper Payments 
Elimination and Recovery Improvement Act of 2012 which requires us to 
limit fraud, waste, and abuse of the program and ensure that improper 
payments do not occur.
    Another significant task will be determining which counties and 
historical years will qualify for the yield exclusion. The yield 
exclusion applies if the county yield is less than 50 percent of the 
simple average of the per planted acre yield of the agricultural 
commodity in the county during the previous 10 consecutive crop years. 
This is not a single one year calculation. The 10 year county average 
must be calculated for each year that may be in the producer's APH 
database. For example, to identify whether crop year 2012 qualifies for 
exclusion for irrigated corn in 2012, yield data must be compared to 
crop years 2001-2011, 2011 must be compared to 2000-2010 and so forth. 
These calculations must be done in all counties and for all crops where 
crop insurance is available.
    RMA must also make these calculations on an irrigated and non-
irrigated practice basis. In many instances, the requisite number of 
years of past history is not consistently available for all crops by 
practice and location. At a minimum, to assess qualifying years back to 
2001 requires consistently reported county yield data from 1991 to 
present for irrigated and non-irrigated practices. Therefore, RMA must 
establish procedures for how to address sporadic and limited yield 
histories outside of the primary growing regions to determine 
qualifying years for APH adjustments. This will require imputation or 
substitution of missing years or alternative approaches, if allowable, 
in order to make the option widely available. For example, crop level 
wheat estimates for certain counties were not published in 2008 or 
2013. In addition, practice specific (irrigated vs. non-irrigated) 
estimates have not been reported since 2007 for certain counties. 
Before the Actual Production History adjustment in section 11009 can be 
implemented, RMA will have to develop policies on these and other 
issues and these policies will have to be implement in a manner and on 
a timetable consistent with the obligations RMA and Federal Crop 
Insurance Corporation have under the Federal Crop Insurance Act and by 
agreement.
    Thus, RMA does not believe that individual producers, nor crop 
insurance agents are able or authorized to make these determinations 
themselves unless offered in the actuarial documents, and hence ``self-
execute'' when a yield may be excluded.
    As for when Section 11009 (Yield Exclusion) will be implemented, 
RMA has determined that Yield Exclusion will be implemented for the 
following 2015 spring crops: corn, soybeans, wheat, cotton, grain 
sorghum, rice, barley, canola, sunflowers, peanuts, and popcorn. APH 
Yield Exclusion is not available for crops offering both winter/fall 
and spring types of coverage with a June 30, 2014 contract change date. 
The 2015 crops were chosen for two reasons. First, they are crops with 
revenue coverage. This allows RMA to leverage the Information 
Technology (IT) applications that compute the insurance guarantee, 
premium costs, and data validations for these crops. This already 
existing IT infrastructure also includes the premium rating methodology 
appropriate to account for the increase in insurance guarantee as 
similarly used for yield trend adjustment, another program that 
provides for higher guarantees. Second, RMA conducted significant 
analysis and computation of county based production data to help FSA 
implement Agricultural Risk Coverage/Price Loss Coverage, and that same 
information can be leveraged to implement APH.
    RMA has always been working to implement all parts of the farm bill 
as quickly as possible. At the time RMA set implementation priorities, 
the agency felt that there were not enough agency and IT contract 
resources to implement Yield Exclusion for the 2015 crop year without 
significant program integrity risk. However, since that time, two key 
events have occurred that have allowed the agency to move Yield 
Exclusion implementation forward to the 2015 crop year.
    First, RMA and its IT contractors have been able to successfully 
implement the farm bill planned priorities on schedule and in multiple 
occasions ahead of schedule, preliminary work estimates creating an 
opportunity to pursue this important initiative. For example, RMA and 
its contracted IT resources are now expected to deliver the premium 
estimator over two months ahead of schedule to support the upcoming 
Whole Farm Revenue Protection program, while still adding Enterprise 
Units and Coverage Levels by Practice to the 2015 crop year 
implementation schedule.
    Second, since July, RMA has worked on the development of a county 
yield dataset (based on crop insurance data) to support FSA's ARC and 
PLC programs, and the associated educational tools developed by 
contractors. This work can be leveraged to provide the data needed to 
implement Yield Exclusion for major crops in the 2015 crop year.
    RMA will not be able to offer Yield Exclusion for 2015 winter wheat 
because, as described above, up until October 2014 RMA's resources were 
fully devoted to implementing other key farm bill initiatives, 
including broad availability of SCO and STAX, offering separate 
enterprise units by practice, offering separate coverage levels by 
practice, beginning farmer and rancher provisions, correction of error 
procedures, administrative relief for debt, native sod procedures, 
whole farm revenue, and Conservation Compliance. In order to offer 
Yield Exclusion for winter wheat, the necessary changes would have 
needed to be made by late summer, which also was prior to completion of 
the work to support ARC/PLC. RMA simply did not have the human 
resources to implement the provision at that time without significant 
program integrity risk, and failure to timely implement and support 
other key farm bill initiatives.
    While RMA fully appreciates why winter wheat growers would want to 
take advantage of Yield Exclusion, there are two main reasons why RMA 
is not in a position to offer Yield Exclusion for winter wheat. First, 
the necessary work required to be able to offer Yield Exclusion to 
winter wheat growers would not be completed for several months. After 
this time, in many areas, winter wheat would have already been planted, 
which means that insurance would have already be in effect. To allow 
coverage levels to be changed after insurance has become effective, 
would open the program up to significant program integrity issues since 
producers would be more likely to know early crop conditions and 
whether a loss is expected.
    Second, allowing Yield Exclusion for winter wheat would violate 
current existing risk sharing agreements between the USDA and the 
Approved Insurance Providers (AIPs). By the time winter wheat producers 
would be able to elect Yield Exclusion, the AIPs would have already 
decided how much risk they want to share with the USDA for these 
policies and changing the risk level after the fact would open up the 
companies to risk they did not anticipate.

    Question 12. At the hearing, Under Secretary Scuse left open the 
possibility for a partial implementation. We greatly appreciate Under 
Secretary Scuse's willingness to work with us on this extremely 
important issue. Is the agency examining ways to achieve this 
objective?
    Answer. RMA has determined that Yield Exclusion will be implemented 
for the following 2015 spring crops: corn, soybeans, wheat, cotton, 
grain sorghum, rice, barley, canola, sunflowers, peanuts, and popcorn. 
APH Yield Exclusion is not available for crops offering both winter/
fall and spring types of coverage with a June 30, 2014 contract change 
date. The 2015 crops were chosen for two reasons. First, they are crops 
with revenue coverage. This allows RMA to leverage the Information 
Technology (IT) applications that compute the insurance guarantee, 
premium costs, and data validations for these crops. This already 
existing IT infrastructure also includes the premium rating methodology 
appropriate to account for the increase in insurance guarantee as 
similarly used for yield trend adjustment, another program that 
provides for higher guarantees. Second, RMA conducted significant 
analysis and computation of county based production data to help FSA 
implement Agricultural Risk Coverage/Price Loss Coverage, and that same 
information can be leveraged to implement APH.

    Question 13. In regard to written responses to questions on APH 
posed at the hearing, we submit the following follow-up questions. We 
apologize for the specificity of the questions, but we had no 
opportunity to pursue these issues fully at the hearing. Due to the 
complexity of the issues, the Under Secretary properly recommended a 
thorough written explanation of the issues involved. We submit these 
follow up questions in hopes that they may assist in pursuing a more 
timely implementation.
    RMA response on APH: ``There is a significant amount of 
administrative work involved in not only determining which counties 
will qualify, but also which historical years will qualify for the 
yield exclusion.'' Question: Could this work be contracted out? If not, 
why? Is a staged implementation possible by crop or region? If not, 
why? It seems to us that this would be the easiest part of the process 
for major crops.
    Answer. RMA has already contracted out some of the actuarial 
analysis for this endeavor under the authority of an existing contract 
and will be working with the contractor to make determinations when 
data is limited. In addition, RMA already contracts out the automated 
systems programming of the business support systems underlying the 
Federal Crop Insurance Program. Adjustments to APH requires substantial 
programming modifications to the core foundation of RMA's business 
support systems to validate and accept the APH yield exclusions 
impacting insurance guarantees and associated premium costs submitted 
by Approved Insurance Providers (AIPs). These adjustments include 
modifications to be able to determine those producers who may qualify 
for the yield exclusion, for what years, what crops, what practices, 
and tracking the producer's elections.
    Furthermore, RMA's Policy Acceptance Storage System Yield and Yield 
History processing records have to be modified to validate proper 
eligibility for which years can and cannot be substituted. This will be 
accomplished by reprogramming RMA's Actuarial Filing System to develop 
a new actuarial processing standard to detail which years are eligible 
for exclusion appropriately for each crop and county.
    In addition, AIPs are required to follow RMA published policy, 
procedure, calculation requirements, and data processing requirements 
outlined in the Standard Reinsurance Agreement. RMA has to identify and 
then verify that the years excluded are eligible for exclusion and that 
the resulting insurance guarantees and associated policy premium 
charged are correct. The need to verify that the years excluded are 
eligible is needed to provide reasonable assurance that the threats of 
fraud, waste, or abuse to the Federal Crop Insurance Program are 
detected, deterred, mitigated, and addressed. Without these 
verifications, the Federal Crop Insurance Corporation could be in 
violation of the Improper Payments Elimination and Recovery Improvement 
Act of 2012 which requires us to limit fraud, waste, and abuse of the 
program and ensure that improper payments do not occur.

    Question 14. RMA: ``RMA must establish procedures for how to 
address sporadic and limited yield histories outside of the primary 
growing regions to determine qualifying years. This will require 
decisions regarding imputation, substitution or other legal 
alternatives of missing years and data for counties in order to make 
the option widely available.'' Question: Might contiguous county 
eligibility resolve much of the problem in this regard? Where it does 
not, could you use RMA data?
    Answer. To determine contiguous county eligibility one must first 
determine the initial qualifying county which is where the sporadic and 
limited data may exist. RMA is not aware of any authority or ability to 
interpret the APH provisions of the 2014 Farm Bill to allow it to use 
contiguous county data to make the determination for an initial 
qualifying county.

    Question 15. RMA: ``For example, the National Agricultural 
Statistics Service (NASS) did not publish crop level wheat estimates 
for Roger Mills County, Oklahoma in 2008 or 2013. In addition, practice 
specific (irrigated vs. non-irrigated) estimates have not been reported 
since 2007.'' Question: Importantly, this has not prevented RMA from 
changing the t-yields for Roger Mills County a number of times since 
2001 (four times for irrigated and three times for dryland, meaning the 
agency probably looked at both four times in that timeframe). The t-
yield is essentially a 5 year yield per planted acre number while the 
proposed APH adjustment compares to a 10 year yield per planted acre. 
This suggests the agency has historical t-yield data for insured crops 
and at the appropriate practice levels in order to satisfy the types of 
coverage by practice offered. If so, might RMA use the dataset used to 
calculate the 5 year averages (augmented with RMA data, as necessary) 
in order to arrive at the 10 year APH adjustment benchmarks? If so, 
this would indicate that the agency has the individual years of data to 
compare to the average in order to establish which years can be 
excluded. Is this correct?
    Answer. For determining T-yields in areas where data are sparse, 
RMA has the flexibility to look at information from other counties and 
other practices; which is not an option for this APH provision. Unlike 
T-yields, the analysis for this APH provision requires analysis to 
determine if each individual year for every county by irrigated and 
non-irrigated practice, for every year back to 2001, was less than 50 
percent of the 10 year average.

    Question 16. RMA: ``RMA is establishing a framework to address 
these situations with the implementation of STAX. RMA intends to use 
lessons learned from STAX in the implementation of Section 11009 (as 
well as further refinement and expansion of SCO in 2016 to more 
effectively align the coverage with practice (i.e., irrigated vs. non-
irrigated).'' Question: Could RMA use the county data already compiled 
for STAX/SCO to calculate the counties eligible for APH adjustment? 
Could RMA deal with missing county data using its own data or the 
contiguous county provision?
    Answer. Yes, RMA can use the county data already compiled for STAX/
SCO to calculate the counties eligible for APH adjustment; however, 
additional analysis is required to determine if each individual year 
for every county with an irrigated and non-irrigated practice, for 
every year back to 1995, was less than 50 percent of the 10 prior year 
average. Additionally, as stated in the response to Question 15, RMA is 
not aware of any authority that allows it to use contiguous county data 
to determine an individual qualifying county. RMA plans to use its data 
along with NASS data in the analysis of qualifying counties in an 
attempt to deal with missing county data.

    Question 17. RMA: ``While the data compiled for SCO could be 
utilized for Section 11009, this data is largely at the county level 
and does not reflect or differentiate between irrigated and non-
irrigated acreage. RMA intends to utilize crop insurance data for SCO 
beginning with 2016 that allows for more offers at the practice 
specific level, at which time APH yield exclusions can also be 
appropriately aligned.'' Question: Is data compiled for SCO practice-
specific already for counties that offer coverage by practice? In cases 
where it is not, is it an all-crop offer where eligibility for the APH 
adjustment would be determined on that basis?
    Answer. With the exception of cotton, practice-specific data has 
been compiled for SCO where such data is available from NASS. In cases 
where it is not, it is an all-crop offer where eligibility for the APH 
adjustment will be determined on that basis. SCO for cotton will be 
based on yield data reported to RMA from insured growers and is under 
development.

    Question 18. RMA: ``This complexity also carries over to the IT 
systems and with the effort involved in SCO and STAX there simply isn't 
the manpower to get this up and running this year.'' Question: Doesn't 
RMA have the ability to contract some of this out? Could RMA contract 
out the data analysis/compilation portion and focus in-house activities 
in this regard on the programing changes?
    Answer. RMA already contracts out the programming of the business 
support systems underlying the Federal Crop Insurance Program. For the 
2016 crop year, RMA has contracted out additional data analysis to 
assist in reviewing and expanding more crops.

    Question 19. RMA: ``RMA's Actuarial Filing System (an RMA Mission 
Essential Function) has to develop an entirely new actuarial processing 
standard to detail to AIPs and producers which years are eligible for 
exclusion appropriately for each crop and county.'' Question: Could the 
eligible years be stated in the Special Provisions?
    Answer. The eligible years could be stated in the Special 
Provisions, but that significantly complicates the Approved Insurance 
Provider's and RMA's ability to absorb the information and properly 
calculate insurance guarantees and associated policy premiums. The 
Special Provisions are hard copy documents that do not provide for an 
automated means to portray fluid information, process the information 
and validate information, but are used primarily for conveying regional 
underwriting rules or constraints, which is why Special Provisions are 
not the most efficient means to handle this provision. RMA's Policy 
Acceptance Storage System Yield and Yield History processing records 
have to be modified to validate proper eligibility for which years can 
and cannot be substituted. This can only be accomplished by 
reprogramming RMA's Actuarial Filing System to develop a new actuarial 
processing standard to detail which years are eligible for exclusion 
appropriately for each crop and county.

    Question 20. RMA: ``RMA, AIP, and Agent automation tools that 
include quoting software changes must be made to accommodate all the 
various choices of yield exclusions and substitutions impacting the 
overall guarantee and policy premium so producers can make informed 
buying decisions.'' Question: Can AIP software be modified to allow 
automatic or manual exclusions? Some AIPs may already have the ability 
to do this manually. The key is RMA being able to verify that the years 
excluded are in fact eligible to be excluded and obtaining the 
resulting APH calculation once the database with the county name and 
eligible years is created, isn't it?
    Answer. AIPs are required to follow RMA published policy, 
procedure, calculation requirements, and data processing requirements 
outlined in the Standard Reinsurance Agreement. The changes necessary 
to deliver this coverage may have varying degrees of complexity and 
success across AIPs being able to deliver associated IT changes. 
Regardless of whether a given AIP delivers this manually or 
systematically, as noted, RMA has to identify and then verify that the 
years excluded are in fact eligible to be excluded and that the 
resulting insurance guarantees and associated policy premium charged 
are correct. This is to provide reasonable assurance that the threats 
of fraud, waste, or abuse to the Federal Crop Insurance Program are 
detected, deterred, mitigated, and addressed. Without these 
verifications, FCIC could be in violation of the Improper Payments 
Elimination and Recovery Improvement Act of 2012 which requires us to 
limit fraud, waste, and abuse of the program and ensure that improper 
payments do not occur.

    Question 21. Given that section 11009 was made effective on 
February 7, 2014 and the provision is self-executing, is RMA concerned 
about the potential for litigation by producers who would be denied the 
relief the law provides to them? For example, the disclaimer in RMA's 
Common Crop Insurance Policy reads: ``AGREEMENT TO INSURE: In return 
for the payment of the premium, and subject to all of the provisions of 
this policy, we agree with you to provide the insurance as stated in 
this policy. If there is a conflict between the Act, the regulations 
published at 7 CFR chapter IV, and the procedures as issued by FCIC, 
the order of priority is: (1) the Act; (2) the regulations; and (3) the 
procedures as issued by FCIC, with (1) controlling (2), etc. . . . The 
disclaimer in the SRA similarly reads: ``Unless specifically provided 
for in this Agreement, if there is a conflict between a provision of 
the Act, the regulations, or FCIC procedures with the terms of this 
Agreement, the order of precedence will be: (1) the provisions of the 
Act; (2) the regulations; (3) this Agreement; and (4) FCIC procedures, 
with (1) controlling (2) and (2) controlling (3), etc.'' (emphasis 
added). If a producer files a lawsuit seeking the relief that section 
11009 was intended to immediately provide them and both the policy and 
the SRA (naturally) declare that the statute controls where there is 
any conflict between the statute and a policy or a contract, etc., how 
does the agency intend to prevail in the event of such a lawsuit when 
the law, the policy, and the SRA are all opposed to the agency's 
position? Please provide a detailed explanation.
    Answer. RMA cannot speculate on the outcome nor discuss any 
potential legal strategy of any potential lawsuit; however, as 
indicated above in FFAS 17 above, RMA does not believe section 11009 is 
self-executing.

    Question 22. Finally, we have heard at least some rumbling that the 
agency may choose to set rates for producers that wish to exercise 
their right under this provision at so high a level that the producer 
would not elect to exclude any yield. We trust the agency would not set 
rates artificially high to frustrate the laws of Congress. Does RMA 
intend to have proposed rates for the APH adjustment and other 
provisions peer reviewed by actuarial experts to ensure their 
appropriateness? If not, what assurance can the department provide to 
Congress that rates are being set appropriately?
    Again, we greatly appreciate Under Secretary Scuse's willingness to 
look into ways to partially implement this extremely important 
provision.
    Answer. RMA establishes premium rates based on the risk of loss, 
and does not set rates high to dissuade certain buying decisions or 
actions by producers. RMA is commissioning an external review of the 
application of the premium rating methodology approach to be used for 
the APH adjustment. As required by the Federal Crop Insurance Act, 7 
U.S.C. 1506(n), RMA must operate in an actuarially sound manner.
Specialty Crops
    Question 23. We understand that the Whole Farm Revenue Protection 
product was recently approved to combine the AGR and AGR-Lite policies. 
While the intent is good, we are hearing concerns about two specific 
changes that were apparently made. The first change is the disallowance 
of CAT as an underlying policy. The second change is that the Whole 
Farm Buy-up level has to be the same as the underlying coverage. We 
believe these changes need to be dropped or risk crop insurance taking 
a major step backward for specialty crops. Can you provide details on 
how the agency is implementing the Whole Farm Revenue Protection 
product, specifically in regards to these two issues?
    Answer. RMA has changed the requirement for similar coverage levels 
to simply require producers who choose to have an underlying policy to 
choose any level of additional (buy-up) insurance. Allowing the use of 
a fully subsidized CAT level MPCI insurance policy to offset the cost 
of the WFRP policy effectively increases the overall subsidy rate for 
WFRP coverage. In addition, CAT coverage has not been offered as an 
option for any other revenue product--once again due to its being fully 
subsidized. Therefore, RMA plans to maintain the restriction on 
purchasing a CAT policy with WFRP.
Crop Insurance Implementation Funding
    Question 24. Section 11021 of the farm bill provides a substantial 
amount of new funding every year for the department to implement crop 
insurance provisions of the farm bill, including $70 million over FY 
2014-FY 2018 for information technology and an additional $9 million 
per year for, among other things, reimbursing expenses incurred for the 
operations and review of policies, plans of insurance, and related 
materials. Regarding the additional $9 million per year, the Secretary 
was given added discretion in allocating those funds. Can you tell us 
how much of the funding made available for FY 2014 has been spent and 
exactly how that funding has been spent? Also, can you tell us how the 
agency intends to spend future dollars required to be made available 
under this section.
    Answer. First, I want to express appreciation to Congress for 
providing funding that will enable the Risk Management Agency (RMA) to 
hire additional staff and contract resources. The additional staff and 
contract resources will allow RMA to implement the program changes 
included in the 2014 Farm Bill, maintain current and new programs, and 
to improve program integrity. RMA intends to use all of the $9 million 
per year to improve program integrity and to aid in program maintenance 
and farm bill implementation in FY 2015. Due to the time needed to 
recruit and hire employees, all of the money was not allocated for FY 
2014. However, these funds have already allowed RMA to hire new 
employees to improve RMA's program integrity efforts, and to implement 
programs from the 2014 Farm Bill. For FY 2014, RMA has obligated 
approximately $5.3 million of the $9 million made available from 
Section 11021. RMA has used these funds on SCO implementation and for 
program integrity efforts. Specifically, RMA entered into contracts for 
additional work that allow a significant expansion of SCO crops for 
2016 and to address backlogged arbitration awards and settlements. RMA 
also entered into an agreement to improve improper payments and update 
program integrity processes. In addition, in an effort to improve the 
integrity of the tobacco crop insurance program, RMA partnered with the 
Agricultural Marketing Service to implement a tobacco crop insurance 
grading system.
    RMA plans to hire approximately 60 employees once RMA's hiring plan 
is complete. These employees will be focused upon operation and day to 
day maintenance of farm bill programs and issues related to program 
integrity. While RMA was not able to bring on board all the employees 
in FY 2014, many are now arriving and are on board. Starting in FY 
2015, RMA expects the full $9 million to be obligated annually.
Peanut Revenue Coverage
    Question 25. Will the new peanut revenue policy be available in 
time for the 2015 crop year as required by section 11018 of the farm 
bill and as indicated by both the agency and the department? Does the 
peanut revenue policy provide a possible roadmap for producers of other 
crops where such crops are primarily sold under contract and not 
publicly traded on an exchange?
    Answer. On September 18th, 2014 the FCIC Board approved a peanut 
revenue policy. The peanut revenue policy will be it available for the 
2015 crop year. While it is premature to know whether the peanut 
revenue can be used as a roadmap, experience with peanut revenue will 
provide insights into whether it is a possible roadmap for other crops 
that are not publicly traded on an exchange.
Information Sharing and Authority to Correct Errors
    Question 26. Section 11019 reads in relevant part: ``. . . the 
Corporation shall establish procedures that allow an agent or an 
approved insurance provider . . . at any time, to correct electronic 
transmission errors that were made by an agent or approved insurance 
provider, or such errors made by the Farm Service Agency or any other 
agency of the Department of Agriculture in transmitting the information 
provided by the producer for purposes of other programs of the 
Department to the extent an agent or approved insurance provider relied 
upon the erroneous information for crop insurance purposes.''
    The background in the interim rule similarly states, ``Lastly, 
electronic transmission errors, such as transpositions, committed by 
the insurance provider, agent or any agency within USDA can be 
corrected by the insurance provider at any time the error is 
discovered.''
    However, in the actual amendments to the regulations, the interim 
rule states, ``At any time, any incorrect information if the incorrect 
information was caused by electronic transmission errors by us or 
errors made by any agency within USDA in transmitting the information 
provided by you for purposes of other USDA programs.''
    We are concerned that the actual amendment is not consistent with 
the background in the interim rule nor, more importantly, with the 
statutory text. The correction of transmission errors that are made by 
an agent or approved insurance provider is not confined to the 
correction of errors ``caused by electronic transmission errors by us 
[the Risk Management Agency] or errors made by any agency within USDA 
in transmitting the information provided by you for purposes of other 
USDA programs.'' This limitation applies only to ``such errors made by 
the Farm Service Agency or any other agency of the Department of 
Agriculture.'' If Congress had meant to subject the correction of 
electronic transmission errors made by an agent or approved insurance 
provider to this limitation we would have drafted the language as 
follows: ``. . . the Corporation shall establish procedures that allow 
an agent or an approved insurance provider. . . at any time, to correct 
electronic transmission errors that were made by an agent, approved 
insurance provider, the Farm Service Agency, or any other agency of the 
Department of Agriculture in transmitting the information provided by 
the producer for purposes of other programs of the Department to the 
extent an agent or approved insurance provider relied upon the 
erroneous information for crop insurance purposes.''
    We appreciate that there was opposition to this section within the 
Department and we have no doubt that the opposition was motivated to 
protect program integrity which we also strongly support. However, we 
worked with the Department to arrive at an acceptable provision, taking 
into account these concerns. To administratively unravel what was 
agreed to in the legislative process would be a breach of the agreement 
we all worked hard together to reach in order to arrive at an outcome 
acceptable to all parties. Is the Department committed to adhering to 
what was agreed to during the farm bill as it is expressed in the 
statutory text and explained in the background of the interim rule as 
opposed to the actual amendment which does not reflect the agreement 
reached?
    Answer. The preamble to the Common Crop Insurance Policy Basic 
Provisions, published at 7 CFR  457.8, provides, in pertinent part, 
that throughout this policy, ``you'' and ``your'' refer to the named 
insured shown on the accepted application and ``we,'' ``us,'' and 
``our'' refer to the insurance company providing insurance. This 
preamble is similarly applied to other regulations that were impacted 
by the interim rule. Therefore, the limitations of who can correct an 
error is not limited to just RMA or any other USDA agency, but also 
includes the AIP. Additionally, consistent within the crop insurance 
program, references to the AIP, also include the agent or AIP 
representative who does business on behalf of the AIP. This is 
consistent with the farm bill provision which articulates that 
electronic transmission errors committed by the insurance provider, its 
agent, RMA, or any other USDA agency may be corrected at any time to 
the extent an agent or approved insurance provider relied upon the 
erroneous information for crop insurance purposes.
Conservation Compliance
    Question 27. This excerpt from the Interim Final Rule has generated 
considerable concern: ``This means that an insured who is determined to 
be non-compliant on June 1, 2015, (2015 reinsurance year) will, unless 
otherwise exempted, be denied premium subsidy effective July 1, 2015, 
the start of the 2016 reinsurance year, and will not be eligible for 
any premium subsidy for any policies during the 2016 reinsurance year. 
Even if the insured becomes compliant during the 2016 reinsurance year, 
the insured will not be eligible for premium subsidy until the 2017 
reinsurance year starting on July 1, 2016.''
    Chairman Conaway, in his opening remarks, and Rep. Noem, during 
questioning, raised this issue during the hearing. Rep. Noem 
specifically inquired whether a producer found to be out of compliance 
in 2015 would then be ineligible for crop insurance premium support 
during the 2016 reinsurance year and not be eligible for reinstatement 
of such support until the 2017 reinsurance year even if the producer 
had acted in good faith (i.e., without intent to violate compliance 
requirements) and came back into compliance for 2016. To this question, 
Under Secretary Scuse affirmed that a producer in such a circumstance 
would, in fact, be denied premium support in the 2016 reinsurance year 
but then stated several times that the producer would have a period of 
time to come back into compliance so as not to lose premium support for 
the 2016 reinsurance year. The Under Secretary stated that the amount 
of time permitted to the producer to come back into compliance would be 
established under the rule. Can the Department assure us that Under 
Secretary Scuse, and not the excerpt from the Interim Final Rule, is 
correct? Nobody that we are aware of intended that a producer who acts 
in good faith and who comes back into compliance should still be 
penalized by losing premium support. Should the Interim Final Rule be 
correct, it would not only harm producers relying on crop insurance but 
also conservation efforts on the farm. We predict this would also 
result in the repeal of the conservation compliance provision in fairly 
short order.
    Answer. It is important to distinguish between failure to certify 
compliance and a substantive violation of wetland or highly erodible 
land (HEL). Producers that do not certify compliance with WC and HEL by 
June 1, 2015, which means not having an AD-1026 on file with FSA by 
June 1, 2015, will not be eligible for premium subsidy for the 2016 
reinsurance year. As for substantive violations of wetland and HEL, as 
in the producer planted on HEL without a conservation plan or converted 
a wetland and planted an agricultural commodity, the producer may have 
one or more reinsurance years to come back into compliance before 
losing premium subsidy. The 2014 Farm Bill provides extra time for 
producers that are new to compliance, acted in good faith, have access 
to a new crop insurance policy, or are unable to comply due to the 
actions of their landlord. These exemptions will be explained in a 
regulation to be published by USDA early next year.

    Question 28. Chairman Conaway inquired whether a producer who is in 
compliance with conservation requirements today for purposes of title I 
eligibility would be in compliance for purposes of crop insurance 
conservation compliance under this section of the farm bill provided 
the producer took no action to fall out of compliance. Under Secretary 
Scuse stated that such a producer would in fact be in compliance with 
conservation compliance requirements for crop insurance purposes. 
Chairman Conaway further inquired whether the goalposts for 
conservation compliance would be moved to put such a producer out of 
compliance and Under Secretary Scuse stated that, no, the goal posts 
would not be moved and the producer would be good to go, in Chairman 
Conaway's words. Is the Committee correct in understanding that if a 
producer is considered in compliance for purposes of title I for the 
2014 crop year that the producer, absent any action by the producer to 
affect compliance, would be considered in compliance for purposes of 
the crop insurance conservation compliance provision?
    The AD-1026 appendix indicates that; ``Producers obtaining 
federally reinsured crop insurance will not be eligible for any premium 
subsidy paid by the Federal Crop Insurance Corporation (FCIC) for any 
policy or plan of insurance if the producer has not filed a completed 
Form AD-1026 with FSA certifying compliance with HELC and WC provisions 
OR is not in compliance with HELC and WC provisions.''
    Answer. Yes, a person who participates in Title I programs for 2014 
and is in compliance with the conservation compliance provisions for 
purposes of 2014 program benefits under Title I that are subject to the 
provisions is also in compliance with the provisions for purposes of 
eligibility for Federal crop insurance premium subsidy, absent any 
action by the person that would change that status.

    Question 29. The 2014 Farm Bill states that producers who are not 
planting an ``agricultural commodity'' (defined as one requiring annual 
tilling of the soil) are exempt from the conservation compliance 
mandate. By definition, exempted crops are in compliance with HELC and 
WC provisions since none exist. Therefore, it is unnecessary for 
producers not planting an ``agricultural commodity'' (as defined in 
statute) and only growing an exempted crop to do anything other than 
certify that they are not planting an ``agricultural commodity'' (or 
certify that they are growing only exempted crops). Why is it necessary 
for the AD-1026 form to require any additional information be filed for 
those crops or for USDA to require/undertake any additional action?
    Answer. The 2014 Farm Bill does not ``exempt'' any producer from 
the conservation compliance provisions. Section 1221(c)(3)(E) of the 
Food Security Act of 1985 as amended by section 2611 of the 2014 Farm 
Bill, requires any producer receiving premium subsidy for crop 
insurance to certify that they are in compliance with HELC and WC 
provisions.

    Question 30. The production practices within the specialty crop 
industry vary by commodity. In many cases, exempted commodities engage 
in regular replanting of new trees, vines, shrubs, etc. to keep an 
orchard healthy. In other cases, phytosanitary issues or lack of 
adequate water may require acreage to be placed in an idle state 
temporarily. It is our understanding that permanent crop acreage that 
is replanted or made temporarily idle will remain in its exempt status, 
so long as an exempted crop is intended to be planted there in the 
future. Is this an accurate understanding?
    Answer. The 2014 Farm Bill does not exempt any producer or land 
from the conservation compliance provisions. USDA does not consider a 
perennial growers' rotation practices as constituting an annually 
tilled crop. Therefore, generally, leaving land idle with no 
agricultural commodity planted or produced on the land is not a 
violation of the provisions. Producers are encouraged to contact their 
local USDA Service Center to obtain information and assistance 
regarding their specific farming operation situation.

    Question 31. Does the mere filing of an AD-1026 form require NRCS 
to make site visits on farms to verify the type of activity (exempt or 
covered) that is occurring there? If not, how will the information be 
confirmed?
    Answer. No, filing the form does not automatically result in a NRCS 
site visit. NRCS may visit a farm or ranch if the producer indicates 
``yes'' in any of the boxes in Part B, HELC/WC Compliance Questions or 
when the producer's farm or ranch is selected for quality assurance 
purposes. When a producer's farm or ranch is selected for a spot check 
NRCS will verify the accuracy of the certification, which may require a 
site visit.

    Question 32. Many specialty crop producers are involved in 
diversified operations that may include both exempt and covered crops. 
Assuming that these are affiliated entities where crop insurance has 
been purchased for each individual crop, if such a producer becomes out 
of compliance on a covered crop, how will that status affect their 
ability to purchase crop insurance for the exempt crops that are part 
of his/her operation?
    Answer. As required in the 2014 Farm Bill, a producer found to be 
in violation of the conservation compliance provisions will not be 
eligible for premium subsidy on any crop insurance policy. This 
approach is consistent with FSA's current rules which applies a 
violation to all farms not just the farm where the violation occurs. 
The 2014 Farm Bill did provide for a tenant exemption, which would 
limit the impact of the provision in certain cases. USDA will publish 
rules explaining the tenant exemption as well as other exemptions in 
early 2015.

    Question 33. For diversified operations involving affiliated 
entities that comprise both exempt and covered crops where the producer 
has elected NOT to purchase crop insurance on their covered crops (or 
if no policy is available), how will that status affect their ability 
to purchase crop insurance on their exempt crops? Will their covered 
crops be required to be compliant, even if they receive no benefit via 
the Federal crop insurance subsidy?
    Answer. The conservation compliance provisions do not effect what 
crops may be insured or a person's ability to obtain Federal reinsured 
crop insurance. The Food Security Act of 1985 requires the conservation 
compliance provisions apply to all land in which the person has an 
interest, not just the land or crops for which the person is seeking 
program benefits or crop insurance. Therefore, a person must be in 
compliance with the conservation compliance provisions on all their 
land in order to be eligible for Federal crop insurance premium 
subsidy. This approach is consistent with FSA's current rules, which 
applies a violation to all farms not just the farm where the violation 
occurs.
APH Issue for Peaches
    Question 34. The farm bill statement of managers expressed the 
intent that downward trending adjustments be discontinued with respect 
to perennial crops including peaches. The 2008 Farm Bill required a 
study on this issue. USDA conducted a study and found that using a 
shorter APH period of 4-6 years was adequate to reflect the lower yield 
expectation in the earlier years of a perennial crop. Regional offices 
on the East Coast discontinued the downward trending adjustment for 
perennials, including peaches, from Maine to North Carolina and west to 
Michigan. South Carolina and Georgia peach farmers, however, have 
remained subject to this unnecessary penalty that exacerbated their 
losses from the spring freeze of this year. Amendments to agriculture 
appropriations were introduced in both Chambers and would have been 
adopted had the bills not been pulled from floor consideration. The 
amendments continue to enjoy strong, bipartisan support and the 
Committee remains committed to their inclusion in the final 
appropriations measure. Will the relief sought by Rep. David Scott and 
others for Georgia and South Carolina peach producers be granted by 
RMA?
    Answer. After considerable consultation and outreach with 
producers, RMA released a Manager's Bulletin on October 15, 2014, 
addressing this issue.
Policy Development and Approval Issue for Grain Sorghum
    Question 35. The farm bill statement of managers expressed the 
intent that high priority be placed on the approval of a specialized 
irrigated grain sorghum policy that establishes improved rates and t-
yields based on a certain high level of crop management. What is the 
status of implementation?
    Answer. RMA has discussions with private parties working on such a 
policy; however, as of December 10, 2014, no submission has been 
submitted under Section 508(h) of the Act. If the private parties do 
not prevail in developing such a policy, RMA will consider contracting 
for a feasibility study and developmental efforts if warranted.
Administration--FSA County Office Closings
    Question 36. Please update the Committee on the Central, Branch and 
Satellite office structure and describe the criteria being used to 
determine office closures? In addition, does your agency plan to close 
any county offices before the end of calendar year 2014?
    Answer. No office closure plan has been approved at this time and 
the Agency has not developed a list of offices to close. FSA recognizes 
that overall reductions in funding limit the ability to staff field 
offices to levels as in the past. FSA offices traditionally have used a 
one-size-fits-all model, with each of its 2,124 locations processing 
the full array of FSA programs. With overall staffing levels down by 
roughly 20 percent since FY 2010, many FSA offices now are staffed 
inadequately or aligned improperly with program activity level.
    FSA is working on a service center structure concept to realign 
workforce and invest in technology to improve quality customer service 
to the full range of FSA programs, including expanded customer 
flexibility and options in program delivery, while serving as a 
referral gateway to other agricultural and rural services.
    The concept will establish a more flexible footprint in each State 
to best use staff resources, improve program outreach to new and 
current customers and enhance cross training of FSA employees.
    Consistent with provisions of the Food, Conservation, and Energy 
Act of 2008 (P.L. 110-246), FSA will hold public meetings in each 
impacted communities. Following the public meetings, UDSA will issue 
notification to Congress at least 90 days before any closure is 
approved by USDA.

    Question 37. The Committee understands that FSA periodically 
conducts workload analysis to determine state and county specific 
staffing levels. How does the agency determine these staffing 
recommendations?
    Answer. FSA determines staffing allocations in part based on 
workload. FSA programs, including assumptions for new programs (i.e., 
ARC/PLC and Disaster programs) and FSA program activity files are used 
as a basis for measuring the time required to support FSA customers and 
program implementation activities in county offices. The measurement of 
work associated with the actual units (i.e., number of farms, producers 
and program participation in each state) with a standard time component 
applied to each unit, provides a projection of our overall staffing 
needs. The estimated total workload is factored against our available 
resources for distribution to state and county offices.
Questions Submitted by Hon. Collin C. Peterson, a Representative in 
        Congress from Minnesota
Crop Commodity + Disaster Programs--FSA
    Question 1. Have you started training your field staff on the 
details of the ARC and PLC options as well as the base and yield update 
opportunities for landowners?
    Answer. National ARC/PLC training for FSA staff is planned for 
later this summer and will occur before the implementation of the ARC/
PLC programs. Also later this summer, FSA plans to provide producers 
with written information on their current base acres, yields and 2009-
2012 planting history, and offer them an opportunity to verify this 
information with their local FSA office, in preparation for later this 
fall, when producers will have the opportunity to update yields and 
reallocate bases.

    Question 1a. In your testimony you also mention that Extension 
specialists will be trained by late summer. How are these trainings 
being held?
    Answer. The universities developing the tools have agreed to 
conduct in-person training, which may be attended by extension 
specialists, or, if preferred by extension, the training will also be 
available by webinar.

    Question 2. Has USDA calculated how many minutes or hours it will 
take producers to go through the various options available to them, 
starting with the base and yield update decisions, plus then sign-up 
for either ARC or PLC?
    Answer. It is difficult to estimate the amount of time that it will 
take owners and producers to explore the various options, including 
electing and enrolling in ARC/PLC, because it depends on the complexity 
of the operation and the owner's or producer's knowledge of the 
program. USDA is working to ensure that owners and producers will have 
the information, education, and time that they need to become fully 
prepared to make these decisions. A large part of this preparation will 
include access to the online tools and learning opportunities through 
the extension services.

    Question 2a. And can landowners or their tenants do any of the work 
online or via a website? Or do they have to come in to the local 
office?
    Answer. Owners and producers may use the online tools to make their 
reallocation and yield update decisions before visiting the County 
Office. However, owners and producers must visit the County Office to 
reallocate base acres and update yields; elect PLC, ARC County Option 
(ARC-CO), or ARC Individual Option (ARC-IC); and then enroll in ARC/
PLC. They will also be able to use the online tools to prefill forms 
before visiting the County Office.

    Question 3. The livestock disaster programs were made permanent in 
the last farm bill, which is a very good thing. There has been 
significant flooding in some parts of the country, so which livestock 
disaster program do producers apply for if they have lost their feed 
source due to flooding and how does that program work?
    Answer. The Emergency Assistance for Livestock, Honeybees and Farm-
Raised Fish Program (ELAP) provides emergency assistance to livestock, 
honeybees and farm-raised fish producers that have suffered eligible 
losses due to an eligible adverse weather event or loss condition, 
including floods. The following type of livestock feed losses are 
considered eligible if incurred due to a flood:

   purchased and mechanically harvested forage or feed stuffs 
        that is damaged or destroyed

   additional livestock feed purchases above normal quantities 
        required to maintain the livestock until additional feed 
        becomes available

   Costs associated with transporting livestock feed to 
        eligible livestock including, but not limited to, costs 
        associated with equipment rental fees for hay lifts and snow 
        removal.

    Payments for eligible grazing losses are calculated based on a 
minimum of 60 percent of the lesser of:

   the total value of the feed cost for all livestock owned by 
        the eligible producer based on the number of days grazing was 
        lost, not to exceed 150 days of daily feed costs for all 
        livestock; or

   Grazing lost for eligible livestock based on the normal 
        carrying capacity of the eligible grazing land for the number 
        of grazing days lost, not to exceed 150 days of lost grazing.

    Payments for eligible livestock feed losses are calculated based on 
a minimum of 60 percent of the producer's actual cost of livestock feed 
damaged/destroyed, additional costs incurred for transporting livestock 
feed, and additional cost of purchasing additional livestock feed above 
normal.
    ELAP signup deadline for 2014 losses, losses incurred from October 
1, 2013, through September 30, 2014, ends November 1, 2014. To apply 
for ELAP, producers must submit, to their local FSA service center, an 
application for payment before November 1, 2014, and a notice of loss 
within 30 days of when the loss is apparent.

    Question 4. Where do things stand with the agencies under your 
mission area in regard to streamlining two sets of data on the same 
farm? I believe you streamlined some aspects already, including crop 
reporting, but can the agencies readily share information with each 
other?
    Answer. FSA and RMA continue to finalize data element definitions 
to make them consistent between agencies to support the Acreage Crop 
Reporting and Streamlining Initiative (ACRSI) as mandated under the 
2014 Farm Bill. Regular weekly meetings are being held on this. The 
agencies have been sharing basic producer, acreage, production, and 
loss data for several years under the Common Information Management 
System (CIMS); however, the goal under ACRSI is to support one-stop 
acreage and production reporting that can be used by both agencies. The 
agencies are developing an acreage reporting pilot project expected to 
be rolled out in 2015. The agencies have authorized an outside third 
party using standardized data elements to participate in this pilot 
alongside traditional acreage reporting channels.

    Question 5. In your testimony you said that producers who have LGM-
Dairy contracts through 2015 will be allowed to participate in the new 
margin protection program once their contract is up. Some of these 
producers entered into these contracts before the ink was dry on the 
farm bill. What if producers would like to end their contract early in 
order to participate in the margin program when it is ready in 
September? Is this something RMA would consider given the uncertain 
timeline for the farm bill?
    Answer. Because the LGM-Dairy plan of insurance is a legal contract 
between the insurance provider and the insured, RMA and the Farm 
Service Agency worked together to develop a transition period for 
producers currently enrolled in LGM-Dairy. This transition period will 
allow producers to switch over to the MPP-Dairy program once they have 
fulfilled the LGM-Dairy plan of insurance contract requirements. RMA 
released these guidelines at the end of June.

    Question 6. When will USDA start publishing margin numbers for 
dairy producers? I believe this is something that doesn't have to wait 
until all the rules are written. I understand that it currently takes a 
full month for USDA to calculate and release price information. Is 
there any way USDA can get this information out on a timelier basis? Is 
this something USDA is looking to improve? In this electronic day and 
age it seems we should be able to quickly provide price information to 
producers.
    Answer. The statute provides that the calculations used in MPP-
Dairy be made as soon as practicable using the full-month price of the 
applicable reference month. Full month prices are available a month 
after the applicable reference month. Therefore, there will be at least 
a 30 day delay in monthly price announcements.

    Question 7. The way that this year's growing season is turning out, 
there is likely the potential need for large scale grain drying. The 
ability to store larger amounts of propane obtained during non-peak 
periods is one of the few tools that producers have to deal with the 
spot shortages experienced during previous harvests.
    Can producers who finance the installation of grain bins under the 
Farm Storage Facility Loan Program include the cost of new or 
additional propane tanks as part of their loan? If not, can you explain 
the reasoning?
    Answer. Farm Storage Facility Loan (FSFL) provisions were recently 
amended to make liquefied petroleum (LP) tanks to fuel dryers are 
eligible.

    Question 8. Where do things stand with getting guidance to the 
field regarding a landowners' ability to prepare their expiring 
contract acreage, TIP acres, or early out CRP acreage for planting for 
the 2015 crop prior to the October 1st contract expiration? In other 
words, can all three types of landowners do ``early land prep'', and if 
so, when are you going to notify them of that ability and let the 
county offices know how to answer those landowners' questions?
    Answer. USDA restarted the CRP Continuous Signup and Transition 
Incentives Program last month and is currently working to clarify 
policy on early land preparation. In the upcoming weeks, policy will be 
issued to Farm Service Agency State and County office staff, providing 
them guidance regarding all three issues.
Crop Insurance--RMA
    Question 9. The Livestock Gross Margin (LGM) program has been 
successful in the dairy industry but has had limited success with the 
other livestock sectors. What outreach have you done with the beef and 
pork industry to make this LGM product something they will utilize? 
Could we expect changes to any of these programs in the near future?
    Answer. RMA continues to work with various organizations, including 
the National Pork Producers Council to create awareness of programs 
like the Livestock Gross Margin (LGM) program. RMA also provides 
feedback received from producers about potential changes to the plans 
of insurance to the private entities that own the products.
    Moreover, the Risk Management Education and Community Outreach 
Program will award 16 projects specifically directed to promote 
livestock insurance education this year. Since these are privately 
developed products, any changes would have to be considered by the 
owner's, go through a review process and be approved by the FCIC Board.
    At this time, RMA is not aware of any upcoming changes to these 
programs.

    Question 10. Is there a way to make an LGM product that would be 
helpful to hog producers that are dealing with PEDv?
    Answer. The Livestock Gross Margin Insurance Plan for Swine (LGM-
Swine) provides price protection using Chicago Mercantile Exchange 
Group futures contracts. However, the owner of the LGM-Swine product 
never intended to cover loss of livestock due to death or diseases.

    Question 11. What is the status of meeting the farm bill 
requirement for price elections for organic crops by the 2015 crop 
year? Is RMA working with other USDA agencies on sharing data that may 
be collected already on organic and directly marketed crops?
    Answer. RMA has made significant progress in the development and 
implementation of organic price elections for Federal crop insurance 
programs. RMA has separate organic price elections, projected prices, 
and harvest prices are currently available for 16 crops: almonds 
(California), apricots (fresh--Washington), apples (fresh and 
processing--Washington), avocados (California), blueberries 
(California, Oregon, and Washington), corn, cotton, fresh stonefruit: 
freestone peaches, nectarines, and plums (California), grapes for juice 
(Washington), mint (peppermint), oats, pears (Oregon and Washington), 
processing tomatoes (California) and soybeans. For the 2015 crop year, 
RMA will add ten more crops with organic prices elections, which brings 
the total to 26. The crops to be added for 2015 are as follows: millet, 
figs, walnuts, flax, popcorn, corn silage, hybrid seed corn, grain 
sorghum, silage sorghum, and hybrid sorghum seed. RMA has started 
analyzing crops to be added for the 2016 crop years.
    Price elections are developed whenever adequate organic price data 
is available that allow us to meet statutory mandates to be actuarially 
sound. We have also developed viable alternatives that increase the 
amount of organic coverage provided. These options include price 
coverage under the Contract Price Addendum, the Actual Revenue History 
plan of insurance, and the Whole Farm Revenue Protection plan of 
insurance.
    To gather organic price data and information, RMA has also funded 
research studies and organic price and production surveys. RMA will 
again contract with NASS to collect organic acreage, production and 
sales data from certified organic growers for the 2014 crop year. NASS 
will survey all producers who identified themselves as producing some 
amount of organic production in the 2012 Census of Agriculture, making 
the survey the most complete form of data collection RMA is able to 
obtain. The NASS data from this survey, combined with data from the 
earlier surveys, will provide three non-sequential years of organic 
price data during a seven year span.
    RMA will continue to pursue opportunities for the acquisition of 
additional organic price data and information. We will also continue to 
work toward developing crop-specific organic price elections consistent 
with our data quality requirements. RMA has also been working with AMS 
and FSA to explore what information may be available to be shared 
between Agencies to offer additional coverage for organic crops.

    Question 12. The FSA released an updated AD-1026 Form which I 
understand all producers who are participating in crop insurance have 
to fill out by June 1st of next year. However, I noted that on the 
actual form, it mentions the original Swampbuster date of December 23, 
1985 in regard to drainage work. For producers who haven't previously 
been subject to compliance, they are only subject to penalties if they 
take action to drain or alter a wetland after February 7, 2014, 
correct?
    Do you think it is confusing to those producers, many of whom may 
have never seen an AD-1026 Form before, to only include the 1985 date 
on the actual form?
    Answer. The 2014 Farm Bill states that eligibility for Federal crop 
insurance premium subsidy is not lost due to wetlands conversions prior 
to February 7, 2014. However, such conversions do result in 
ineligibility for Title I program benefits subject to the conservation 
compliance provisions. USDA has used Form AD-1026 since the 1980's to 
have producers certify compliance with the provisions. The 2014 Farm 
Bill states that the Secretary shall use existing processes and 
procedures for certifying compliance. Therefore, the form accommodates 
certification of compliance for programs that are subject to different 
dates. The question on Form AD-1026 regarding wetland conversions 
includes an entry for producers to identify the year the conversion 
activities took place. The Form AD-1026 Appendix, which is provided to 
every producer certifying compliance, has additional information about 
the dates applicable to the different programs. In addition, the USDA 
Service Center staff where the producer files Form AD-1026 is available 
to assist the producer to ensure they understand the form and answer 
any questions the producer may have.

    Question 13. Your testimony and the FAQs for the RMA Interim Rule 
indicate that any producer who receives a premium subsidy under crop 
insurance is subject to the conservation compliance provisions included 
in the 2014 farm bill. However, in the Background portion of the 
Interim Rule, it discusses the definition of ``agricultural commodity'' 
in Section 1201 of the 1985 Food Security Act. This definition only 
includes commodities ``planted and produced in a state by annual 
tilling of the soil, including tilling by one-trip planters or 
sugarcane.'' There is also a mention of these new provisions being 
applied ``unless specific exemptions apply.''
    Can you clarify whether any producer who receives a premium 
subsidy, regardless of the type of crop, forage or livestock that they 
produce, is covered by the 2014 compliance provisions?
    What are the ``specific exemptions'' that apply?
    Answer. The 2014 Farm Bill did not exempt any producer or crop from 
conservation compliance provisions. To be eligible for a premium 
subsidy for the 2016 reinsurance year and to be in compliance with HELC 
and WC provisions, a completed and signed form AD-1026 must be on file 
with FSA by June 1, 2015. The 2014 Farm Bill provided several 
exemptions that are applicable only to eligibility for Federal crop 
insurance premium subsidy, such as tenant relief and good faith 
exemptions for wetland violations only, persons subject to the 
conservation compliance for the first time because of the 2014 Farm 
Bill, when certain crop policies become available for the first time, 
and an exemption to pay an equitable amount instead of mitigating 
certain wetland conversions. Also, there are exemptions that apply to 
eligibility for both Federal crop insurance premium subsidy and Title I 
program benefits, such as tenant relief and good faith exemptions for 
high erodible land violations, and an exemption for noncommercial 
production of agricultural commodities on highly erodible acres of 2 
acres or less. USDA will publish a regulation in early 2015 that will 
provide further details about these exemptions.

    Question 14. You mentioned the $9 million provided in the farm bill 
to address program maintenance and integrity. Can you tell us what this 
funding will be used for?
    Answer. First, I want to express appreciation to Congress for 
providing funding that will enable the Risk Management Agency (RMA) to 
hire additional staff and contract resources. The additional staff and 
contract resources will allow RMA to implement the program changes 
included in the 2014 Farm Bill, maintain current and new programs, and 
to improve program integrity. RMA intends to use all of the $9 million 
per year to improve program integrity and to aid in program maintenance 
and farm bill implementation in FY 2015. In fact, these funds have 
already allowed RMA to hire new employees to improve RMA's program 
integrity efforts, and to implement programs from the 2014 Farm Bill. 
For FY 2014, RMA has obligated approximately $5.3 million of the $9 
million made available from Section 11021. RMA has used these funds on 
SCO implementation and for program integrity efforts. Specifically, RMA 
entered into contracts for additional work that allow a significant 
expansion of SCO crops for 2016 and to address backlogged arbitration 
awards and settlements. RMA also entered into an agreement to improve 
improper payments and update program integrity processes. In addition, 
in an effort to improve the integrity of the tobacco crop insurance 
program, RMA partnered with the Agricultural Marketing Service to 
implement a tobacco crop insurance grading system.
    RMA plans to hire approximately 60 employees once RMA's hiring plan 
is complete. These employees will be focused upon operation and day to 
day maintenance of farm bill programs and issues related to program 
integrity. While RMA was not able to bring on board all the employees 
in FY 2014, many are now arriving and are on board. Starting in FY 
2015, RMA expects the full $9 million to be obligated annually.

    Question 15. I hear from producers in my district that RMA's APH 
transfer policy has allowed more established producers to come in and 
outbid younger producers on land rents. I also understand that the APH 
transfer policy is what led in part to the call for the Sodsaver 
provision in some parts of the country. Did RMA examine their policy 
and how you have impacted land conversion in the countryside?
    Answer. RMA's procedures allow insured producers who add land to 
their existing operation within a county to use the simple average of 
their own actual production history for the crop in that same county to 
establish their insurance yield for the added land. Simple average 
transitional yields (SA T-yields) are available for use by any producer 
with one or more years of experience in the county to establish the 
yield for an added land Actual Production History (APH) database when 
the average of their yield experience in the county is greater than the 
applicable county T-yield published by RMA.
    RMA has implemented Section 11016 of the Agricultural Act of 2014 
(2014 Farm Bill) which provides enhanced benefits for Beginning Farmer 
and Ranchers (BFRs). Benefits include exemption from paying 
administrative fees, an additional ten percentage points of premium 
subsidy, and expanded use of the production history of farming 
operations BFRs were previously involved in the decision making or 
physical activities of a farm or ranch operation, and an increase from 
60 to 80 percent of the applicable T-Yield for Yield Adjustment when 
replacing a low actual yield due to an insured cause of loss.
    The SA T-Yield does not apply to native sod acreage that would fall 
under the Sodsaver provision (native sod). On native sod acreage the 
producer's reduced yield is applied using the T-Yield published in the 
actuarial documents, and the producer of native sod acreage is required 
to use the published T-Yield for the reduction regardless if the 
producer is established or a beginning producer. By reducing the yield 
guarantee, the reduction is carried out uniformly for all producers.
    With the constantly changing market conditions affecting land 
conversions, RMA has taken steps to determine if/how crop insurance 
plays a role in these conversions. RMA enacted procedures to identify 
land that has been converted to cropland from acreage that has never 
been in crop production before (native sod); identify land that has 
been converted to cropland from acreage that has previously been in 
crop production, but has been idle for several years (new breaking); 
and to identify land that has been in USDA programs (such as the 
Conservation Reserve Program) for several years and is being converted 
to cropland acreage upon the expiration of the program contract. In 
addition to identifying the acreage, the yield guarantee for this 
acreage has been reduced for native sod (a maximum yield guarantee of 
65 percent of the T-Yield published in the actuarial documents) and new 
breaking acreage (a maximum yield guarantee of 80 percent of the T-
Yield published in the actuarial documents). As these procedures have 
been in effect for only a few years, the full impact of crop insurance 
on land conversion is not known at this time.
    Various parties have conducted studies regarding land conversion in 
the countryside, including the Economic Research Service; however, no 
study has concluded that the RMA procedures for added land contribute 
to such conversion.

    Question 16. What new technologies is RMA looking at to enhance 
efficiencies in administering the Federal Crop Insurance Program?
    Answer. RMA is enhancing its technology platform on several levels 
to increase efficiencies within the program. It is currently re-
engineering and modernizing some internal processing systems, 
particularly its accounting and reporting systems, to reduce costs, 
increase transparency, and add flexibility to business process 
improvements. Additionally, RMA is taking part in the Department's 
Acreage Crop Reporting Streamlining Initiative (ACRSI) with FSA to 
reduce the producer burden of filing reports to the government. In 
particular, RMA is upgrading the Common Information Management System 
(CIMS) to facilitate real-time data sharing between RMA and FSA used in 
reporting and reconciliation. These changes will also allow Approved 
Insurance Providers (AIPs) quicker access to the producer data to which 
they are entitled to better serve those customers. Finally, RMA has 
developed an educational tool to aid producers in purchasing decisions 
of key farm bill products like SCO and STAX. This tool is currently 
available as a web application and as a mobile app for iOS and Android.

    Question 17. Could new technologies, such as those delivered by 
unmanned aerial systems, help RMA to improve accuracy of field mapping 
and crop loss monitoring, and ultimately save Federal resources?
    Answer. RMA continually evaluates new technologies that may 
increase efficiencies in the Federal Crop Insurance Program. Unmanned 
Aerial Systems (UAS) are one of the new technologies that RMA is 
monitoring. UAS have a host of applications applicable to agriculture, 
and some may be directly applicable to the delivery and servicing of 
crop insurance risk management tools. Currently, there are a wide 
diversity of UAS platforms (the `flight vehicle,' e.g., multirotor, 
helicopter, and fixed-wing unmanned aerial vehicle (UAV)) and a 
diversity of sensor payloads (the camera or remote sensing instrument 
mounted on the UAV). Each UAV/sensor combination has a distinct use-
case as applied to field mapping and crop loss monitoring. In addition, 
RMA is currently following the development of regulations related to 
UAS technology, how early case studies document the benefits of their 
use, and how producer privacy concerns weigh into the application of 
these technologies.

    Question 18. Section 11024 of the 2014 Farm Bill adds the purpose 
of improving the analysis tools regarding crop insurance compliance to 
the existing partnerships program. How will the RMA be reaching out to 
third parties to carry out this new purpose? Will there a specific 
request for proposals? Or are individual entities welcome to approach 
the Agency with their ideas?
    Answer. RMA has not determined how it will implement this 
provision.

    Question 19. I understand that you are working with the barley 
industry on a malting barley policy, which will be of great importance 
to the growers in my district. Will the malting barley policy be 
available for the 2015 crop?
    Answer. No, the new policy will not be available for the 2015 crop. 
A new Malting Barley Revenue policy has been approved by the Federal 
Crop Insurance Corporation Board of Directors. However, the private 
submitter is still in the process of finalizing all the relevant policy 
materials and has advised that they will not have completed their work 
in time to implement the new policy for the 2015 crop year, and have 
therefore requested the policy be implemented for the 2016 crop year.

    Question 20. The RMA fact sheet on Sodsaver implementation 
indicates that producers will have to bring proof that the land to be 
insured was ``previously tilled'' to their approved insurance provider. 
Was the crop insurance industry consulted on the best way to handle the 
certification?
    Answer. Yes, the crop insurance industry was consulted and given 
the opportunity to review the draft procedures developed by RMA for the 
native sod provisions.
Administration--FSA County Office Closings
    Question 21. Are the computer systems in the FSA county offices up 
to the job of handling another round of base and yield updates as well 
as the multiple options that were set up by the final commodity title 
provisions?
    Answer. Yes, the computer systems in the FSA county offices are up 
to the job. FSA incrementally provided information to the farmers and 
software to the FSA County Offices to update base and yield information 
in order to make a final election. All software to support the base 
acre reallocation and yield update has been provided, with election 
capability to be provided later this year.

    Question 22. How does FSA plan to utilize the $120 million that the 
Committee made available for administrative costs? What is the 
breakdown between staffing, computer programming, and other expenses?
    Answer. FSA will use the $100 million that was made available in FY 
2014 and FY 2015 for implementation of Title I programs for cost for 
developing software, hiring temporary employees, training field office 
staff and producer outreach and education. FSA and RMA are working 
collaboratively to develop a plan for implementing ACRSI at which time 
a spending plan for the $20 million ($10M in FY14 & $10M in FY15) will 
be determined.
    Below is the breakout between FY 2014 and FY 2015 of cost by 
category for the $100 million:

------------------------------------------------------------------------
          Item                FY 2014       FY 2015 \1\        Total
------------------------------------------------------------------------
Staffing                      $2,470,000     $27,037,000     $29,507,000
Computer Programming          $8,978,000     $20,370,000     $29,348,000
Other Expenses                $4,437,122     $31,827,390     $36,264,512
                         -----------------------------------------------
  Total                      $15,885,132     $79,234,390     $95,119,522
------------------------------------------------------------------------
\1\ FY 2015 is reduced for sequestration.


    Question 23. Are you planning on utilizing temporary employees to 
get through the initial heavy workload from now until early next 
calendar year? And are there temporary folks still available out in the 
countryside or are you having to train new folks? I have the feeling 
that many of your former temporaries may have taken permanent positions 
from county office staff that retired since the last farm bill.
    Answer. FSA is committed to delivering new farm bill programs and 
policies in an efficient and timely manner. The use of temporary 
employees is critical to achieving successful program implementation 
and FSA plans to have temporary employee resources in the field during 
both FY 2014 and FY 2015. During the last quarter of FY 2014, FSA had 
more than 650 full-time temporary employees on board and approximately 
another 900 intermittent (hourly) temporary employees on the roles and 
available for program and customer support. Many of these same 
employees may be extended into FY 2015, as FSA has made available to 
States, FY 2015 1st and 2nd quarter temporary staffing levels of 830 
FTEs. These initial FY 2015 FTEs will carry FSA through peak farm bill 
workload as the Agency continues to assess temporary staffing needs and 
available resources for FY 2015.

    Question 24. The Administration's FY15 budget submission indicated 
that you were looking at closing 250 FSA field offices. Do you have 
more details to share with the Committee yet on these plans? Are you 
still planning to not close any offices before October 1st of this 
year?
    Answer. No offices will be closed before October 1, 2014. Moreover, 
no office closure plan has been approved at this time and the Agency 
has not developed a list of specific offices to close.

    Question 25. It is my understanding that your budget submission did 
not take into account possible farm bill workload. Has the Farm Service 
Agency done a recent workload analysis that takes into account the 
potential workload for state and county offices with the new crop and 
dairy programs to administer? Can you share with the Committee for the 
record the most recent analysis and what it shows for staffing levels 
by state?
    Answer. The Farm Service Agency has developed a data driven 
workload analysis that included reoccurring activities that the agency 
performs to administer farm and farm loan programs. The new programs as 
a result of the Agricultural Act of 2014 such as the Agricultural Risk 
Coverage/Price Loss Coverage, Dairy- Margin Protection, Livestock 
Disaster, and new portions of the Non Insured Assistance program were 
not implemented at the time FSA's workload analysis was completed. 
Assumptions were made as to the potential workload that could be 
derived as the new programs are implemented and therefore, an updated 
analysis would need to be made once the new programs were implemented. 
Similarly, the Stacked Income Protection Plan (STAX) for cotton has now 
shifted some FSA workload to RMA. The new program workload assumptions 
were not totally inclusive in the recent workload analysis. Since 
further review of new program participation must be conducted to 
adequately determine how they will affect the distribution of staffing 
for states and counties, the workload analysis was only used a guide to 
allocate staffing to the states. Once this review and update is 
completed, the agency will have a more comprehensive analysis that can 
provide a more comparative and qualitative distribution of staffing in 
the future.

    Question 26. Is the same true that your FY15 budget submission also 
did not take into account staffing needs and that's part of the reason 
for the reduction of 815 FTE (Full Time Equivalent) positions? Does the 
Department still feel there is a need for this reduction?
    Answer. The FY 2015 budget submission was developed well before the 
enactment of the 2014 Farm Bill. Certain assumptions regarding staffing 
requirements were made based on the information available at the time; 
however, there was much about the final farm bill that simply was not 
known. The Department believes that there remain opportunities to 
streamline and right-size Farm Service Agency operations. The Farm 
Service Agency has developed a data driven workload analysis that 
includes reoccurring activities that the agency performs to administer 
farm and farm loan programs. This analysis must be revised and updated 
based on the new workload requirements of the 2014 Farm Bill.

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