Disputed federal rangeland insurance discontinued

The USDA’s Risk Management Agency has discontinued a crop insurance program that farmers and ranchers in Teton County say cost them thousands of dollars in premiums, but failed to protect them in the extreme drought years of 2006 and 2007.
Collins-area farmer and rancher Brett DeBruycker is still trying to get the state’s congressional delegation to require the Risk Management Agency to go back and “fix” the underlying problems with the Group Risk Plan Rangeland insurance, but officials with RMA say they don’t think a review and retroactive changes are likely.
John Lockie, a risk management specialist with the RMA office in Billings, said the GRP Rangeland policy was offered as pilot program in 39 counties in central and eastern Montana for the crop years of 2005, 2006, 2007 and 2008. The plan was offered in partnership with private insurance agencies with the federal crop insurance program subsidizing the plan. An estimated 22.5 million out of 45.6 million acres of rangeland in these counties were insured through the program.
The GRP Rangeland offered farmers and ranchers the opportunity to purchase crop insurance on their rangeland so that if drought occurred and they had little or no rangeland production, they could file a loss claim and receive an insurance benefit that could be used to buy hay for their livestock to replace the lost pasture.
The program used statistics gathered by the USDA’s Montana Agricultural Statistics Service to calculate rangeland conditions in each covered county. Since there is no standard measurement of rangeland production, the GRP Rangeland policy based its coverage conditions on dryland hay production, figuring that dryland hay production would echo rangeland production. In other words, if there wasn’t enough rain to grow much dryland hay, there probably wasn’t enough rain to produce grass on rangeland.
As a group risk plan, the “trigger” or base loss level at which the plan would cover farmers and ranchers for their losses was based on dryland hay figures throughout a county, not on the individual dryland hay production of each covered farm and ranch. In the first year of the program, 2005, the trigger was based on tons per acre of production; and in the 2006, 2007 and 2008, the trigger was based on net hay production countywide.
Lockie said the program was based on a similar crop insurance product used in the Midwest, where it worked well. Counties in the Midwest are generally smaller than those in central and eastern Montana, he said, and weather patterns are likely to affect all or none of farmers in a given county. Since this is a “group risk” plan, he said, it is based on production (or loss of production) in a county. In the Midwest, the plan worked as it should have because, in general, all the farmers’ production levels in a given county coverage area were very similar.
Central and eastern Montana, however, proved to be a different situation. Because the counties are so large, it is common for weather to vary widely from one corner of a county to the other. In Teton County, for example, spotty rain showers meant that some dryland hay production was average to good while in other parts of the county dryland hay production was zero in 2005, 2006 and 2007.
Based on the net hay production figures for Teton County from Montana Agricultural Statistics Service, the plan did not pay for any losses in 2006 or 2007 despite the fact that those two years were extremely dry and rangeland production in many areas was awful.
Beginning with the denial of loss claims for the 2006 crop year, Lockie’s agency in Billings started getting calls from producers across the state and in Wyoming, where the program was also offered in select counties. “I totally can commiserate,” Lockie said.
But, even though the RMA was aware of concerns, the federal agency continued to market the plan. Some producers, however, deemed the plan unworkable and did not try to insure through it in 2007 and 2008, Lockie said.
In the wake of these concerns, Lockie said the RMA and a private insurance contractor held a series of meetings on the GRP Rangeland policy in this year in Lewistown, Malta, Glasgow, Miles City and Billings and in Gillette and Cheyenne, Wyo. The RMA listened to comments from farmers and ranchers and crop insurance agents, and after getting an earful, the private insurance companies recommended the RMA “terminate” the program, Lockie said.
For the 2009 crop year, the Risk Management Agency is offering a new insurance plan called the “Pasture, Rangeland and Forage-Rainfall Index” program. This plan will again insure pasture against production losses, but the trigger will not be net countywide dryland hay production. Instead, the trigger will be weather data with the actual figures compared to historic average. The coverage area will no longer be based on counties, but will instead be based on 12-square-mile areas and will be a “group risk” plan within each 12-mile square unit.
Weather data will be recorded in two-month intervals with six index intervals each year. Farmers and ranchers who choose to participate must insure their rangeland in at least two of those six intervals. The smaller geographic units plus the flexibility in insurance levels and the choice of intervals should make this plan much more accurate and a better product for producers, Lockie said. More information on the new plan is available on the RMA Web site. Enrollment in the plan will be open soon and will close at the end of November.
Lockie said he has never seen the RMA go back and adjust a program to change the coverage triggers in the past and he is not hopeful, now that the old plan has been terminated, that RMA will undertake a review. “The likelihood at this point is virtually none,” he said.
For some farmers and ranchers in Teton County, however, the creation of a new program is not encouraging.
In late June, Brett DeBruycker, whose family has large farm and ranch holdings in several areas in Teton County, started a petition drive, asking other farmers and ranchers to sign a letter to U.S. Sens. Jon Tester and Max Baucus and U.S. Rep. Denny Rehberg, asking them to question the RMA about the program’s failures, to require the RMA to make changes in the program before continuing to market it and to review the 2006 and 2007 claim denials that significantly harmed producers insured through the program.
The RMA needs to go back and help producers in the county who bought the insurance in good faith and then did incur losses that should have been indemnified, DeBruycker said. “Ranchers paid a premium for this insurance coverage and we deserve to receive those payments for the 2006 and 2007 losses,” he said.
Now the RMA has come back with a new insurance program, DeBruycker said, but if the federal agency doesn’t repair the rangeland insurance program’s credibility, sign up might be nil. DeBruycker says every farmer and rancher he’s talked with says there is no way they’ll waste more money on a rangeland insurance program that probably won’t help them in a drought situation.
“Their trust in the system is gone,” DeBruycker said. “It won’t matter how good the new program is, unless they go back and pay the past indemnification.”
Part of what bothers DeBruycker and others, like Joe Dellwo, who ranches with his family in the Blackleaf area west of Bynum, is the way the RMA set the loss-payment trigger. They argue that using the MASS statistics for net dryland hay production was faulty, and that better, more accurate hay production figures were available from the USDA’s Farm Service Agency.
Dellwo says his family’s ranch was insured through the GRP Rangeland program in 2006 and 2007. “In 2006, we were shocked that it didn’t pay because it was the worst grass year that we’d ever had up to 2007, which was even worse,” he said. After the 2006 claim was denied, he called Tester’s office and was assured that the matter was being looked into.
After the 2007 denial, he called the Montana Agricultural Statistics Service and talked with Director Peggy Stringer, who told him how her office gathered net dryland hay production records, which RMA used as a proxy for rangeland conditions. The MASS figures for Teton County in 2007 showed the dryland alfalfa yield as 1.1 tons per acre and all-other-dryland hay yield as 1.06 tons/acre.
Dellwo says he next called the Teton County FSA office and asked for certified dryland hay production figures from FSA. Executive Director Sherwin Smith pulled those numbers for Teton County and found that dryland alfalfa and alfalfa mixed forage production in 2007 averaged about .1 ton per acre. In fact, Smith said, for other dryland grass hay programs, his agency documented large production losses in 2007. The Teton County FSA Committee set the 2007 pasture loss figure at 50 percent for 2007, based on clipping studies completed by the local Natural Resources and Conservation Service Office and the Teton County Extension Office.
Dellwo says on his ranch, they didn’t even cut any dryland hay in 2007. “There just was nothing there.” So, he said, after spending thousands of dollars on insurance that didn’t help, his family also had to go out and buy hay or face downsizing the cow herd.
“It’ll take me five years to pay off the hay that we needed to survive,” Dellwo said. “If you want a poster child for why this isn’t working, come to Teton County because this was ground zero last year.”
DeBruycker says portions of Teton County (including the Blackleaf-Bynum area) have been in drought persistently going as far back as 1996, but 2006 and 2007 were particularly bad. “There were many grass species that just flat died during that stretch,” he said.
By the end of 2007, he said, every reservoir on his family’s ranch was bone dry and every spring was either dry or producing at just 10 percent to 20 percent of its capacity.
In 2007, with those dire range conditions, ranchers in Glacier, Toole, Pondera and Teton counties purchased all the extra hay that was produced in central and north-eastern Montana, DeBruycker says. “There was an incredible amount of hay that was brought into this part of the world over the last winter,” he said.
Ranchers who couldn’t afford hay, shipped their cattle straight to auction and heavily culled older and less productive cows, reducing their herds to minimal levels. Ranchers who could found pasture outside of the region and trucked their cattle off-ranch. Locally, DeBruycker said, some of their pastures that would usually have accommodated 100 cow-calf pairs could only carry 25 to 30 pairs. Carrying capacity was a 25 percent to 30 percent of what it is normally, he said.
This grim scenario not only affected the financial viability of local ranches, it hit the ranchers themselves hard emotionally. Guys who used to be jovial and optimistic were somber and apprehensive, he said, adding that the drought “really affected people’s lives.”
Dellwo was so concerned that he asked a representative from Tester’s office to come to Choteau earlier this summer and listen to ranchers who wanted to tell them about the failure of the GRP Rangeland program. He said four or five took time out of their day to meet with the field representative.
For her part, Stringer says her agency’s net production statistics for the county are accurate, but they are based on only on reports from ranchers and farmers who had hay production. Those who didn’t cut any hay, didn’t file any reports.
“The issue is not our data, the issue is the program,” Stringer said. “I don’t understand how you can say hay production is the same as range production and equate the two.”
Another issue is that the Group Risk Plan is “all county or none,” she said. If a few producers got rain showers and produced hay, then the production level was such that the program did not trigger, she said.
“It’s very frustrating for us and I think it’s frustrating for the RMA folks as well,” she said.
Baucus and Tester both urged the RMA to offer a more dependable and accurate crop insurance product to Montana ranchers and the Pasture, Rangeland and Forage-Rainfall Index program is the new program they requested.
In a statement on the issue, Baucus said, “I’m committed to making sure Montana’s producers have the tools they need to thrive in Big Sky Country. I’m pleased the USDA is moving forward with a solution for the coming year. Producers can rest assured, I’m watching this issue closely and will continue to push the USDA to do what’s right for Montana.”