LANSING, MI -- As 2015 draws to a close, the Michigan Wheat Program recognizes the major coverage adjustment for falling numbers by the USDA Risk Management Agency (RMA) as perhaps its top achievement of the year.
“We recently asked our board to look back over our accomplishments for the last four years – which were really the first four years of the Michigan Wheat Program being in existence,” said David Milligan, the Cass City wheat farmer who chairs the nine-member Michigan Wheat Program board. “Although we have launched $1 million in research projects, held large educational events and applied for and received our first grant, about half of our board of directors singled out RMA’s adjustment for falling number coverage in white wheat as the most important accomplishment.”
The Michigan Wheat Program began seeking the change in the USDA Risk Management Agency (RMA) policy shortly after its formation. Wheat growers expressed concerns that they had purchased crop insurance to cover falling number discounts, but when they had a claim, the indemnity they received was not close to the discount incurred on their actual production.
“I heard loud and clear from growers that the coverage they received and the insurance they had understood they had purchased were not the same,” said Jody Pollok-Newsom, executive director of the Michigan Wheat Program. “In some instances I was hearing that the discount growers actually received was more than $1 and the payment received through crop insurance was 25 cents or less. This problem was costing Michigan wheat farmers dearly and a solution was needed.”
The Michigan Wheat Program partnered with several others in working through this complex problem. Initially, RMA reviewed the numbers from Michigan and made slight modifications to the program, but it wasn’t much of an improvement, Milligan said. The board reconsidered its approach.
“We decided to hire the consulting firm, Watts & Associates, which had experience with other crops and crop insurance, to assist us in building a case and get the major adjustment we needed USDA to make,” said Pollok-Newsom.
What followed was significant, statewide- and industry-wide cooperation between millers, elevators and farmers to gather actual settlement sheets, according to Pollok-Newsom. The results included 41,000 observations covering 53 million bushels of wheat.
Thousands of datapoints were submitted to Watts & Associates, allowing the firm to compare the price a farmer received in his indemnity from crop insurance versus price, including the actual falling numbers dock that was received at the point of delivery. The data showed the discrepancy, particularly on white wheat with a falling number of 200 or less. Insufficient data was collected on red wheat, so that was not able to be included in recommendations for changes.
Improved RMA calculations took effect in October 2015
The historical settlement and insurance indemnity data clearly showed the discrepancy for Michigan white wheat growers. The data was not only submitted by the Michigan Wheat Program to USDA-RMA, but also to Senator Debbie Stabenow as part of a request for change. The result was that USDA-RMA made a significant program adjustment that took effect for the 2016 crop that was planted this fall.
Based on the change to the county special provisions, USDA-RMA is now using in Michigan, a farmer uses the actual price received in valuing production for insurance indemnity determination for Michigan white wheat with falling numbers below 200. For falling numbers above 200, the published discounts will still be utilized, but have been adjusted to better match actual historical discount values.
“The change made by RMA is a financial win for Michigan white wheat growers,” said Milligan. “When a farmer purchases crop insurance, he is utilizing a risk management tool and when that tool is broken, it puts a farmer at increased risk. Now that the tool has been fixed, it should give farmers a stronger sense of security.”
The Michigan Wheat Program board is monitoring red wheat and falling numbers, as well as DON/ vomitoxin ratings to ensure the risk management programs are and remain effective for Michigan wheat growers.
The Michigan Wheat Program is funded by nearly 8,000 farmers who grow wheat in 50 of Michigan’s 83 counties. The Michigan Wheat Program board seeks to promote the state’s wheat industry by funding and supporting the strategic priorities of wheat farmers working with input suppliers, seed producers, millers, end users and consumers. Research on wheat production practices and grower education has been an early priority for the organization.
Information about Michigan’s wheat industry is found at www.miwheat.org, or by calling 888-WHEAT01 (888-943-2801).