FCIC Manager's Report
May 17, 2000
1. Legislative Update
2. Summary of Business 1999/2000 Loss Assessment
(as of 05/04/00)
a. Summary of Business, 1999.
The 1999 book of business and program participation numbers are
complete at this time with only late and corrected claims continuing
to create minor changes in the crop year statistics. To date,
nearly $30.8 billion dollars in liability have been reported
on approximately 196 million acres of crop land representing
1,286,498 crop policies. Indemnities in the amount of nearly
$2.391 billion have been paid out to date. Acreage insured under
additional coverage policies increased by about 23 million acres
with a decrease in CAT acres insured of about 8 million acres.
The 1999 liability represents an increase of more than 10 percent
from 1998. The current 1.04 loss ratio is above the Regional
Offices (RO) estimates for the year which were projected at 0.99.
b. Preliminary Summary of Business,
2000. Although the bulk of spring acreage reports
have yet to be filed, FCIC is expecting the $400 million 2000
crop insurance premium discount incentive to continue to assist
producers in obtaining higher levels of coverage this year.
The current Summary Report for 2000 indicates that only 215,000
crop policies have been reported covering 30 million acres.
Liability is nearly $7 billion and more than $94 million has
been paid out for 2000 crop losses to date.
c. Current Loss Assessment.
RMA is maintaining a strategy of monitoring loss situations closely
as they develop to ensure uniformity between insurance providers
and equal treatment of policyholders. This strategy includes
a continuing emphasis on all parties to the crop insurance program
of the need to assess requests for policy and procedural changes
for their impact on the larger program issues including funding,
actuarial soundness, simplification, and the contractual obligations
between FCIC, insurance providers, and producers. With major
legislation pending, it is essential that RMA and the insurance
providers work in tandem to address any issues that may arise.
Drought continues to appear to be the highest risk for crop
failure in 2000. An active hurricane season is also predicted
for this year.
Regional Drought Conditions
Midwest: April saw drier
than normal conditions across a large area of the Midwest. Parts
of northeastern and southeastern Minnesota, central Iowa, and
most of Missouri had less than 50% of normal precipitation for
the month. RMA continues to monitor planting in this region.
Most of the Corn Belt experiencing drought conditions received
only light amounts of rain during the past week.
South Central and Southeast:
A major storm system April 30 and May 1 produced significant
rainfalls across Oklahoma and the eastern half of Texas. As a
result of these rains and good year-to-date totals, some areas
in East Texas have improved relative to drought indicators, however,
with long-term drought concerns remain.
West: Little or no precipitation
fell across the existing drought and dry regions in the western
states during the past week. Extreme drought remains in western
Texas, New Mexico, and Arizona.
Hawaii: Little precipitation
fell during the week across the Hawaiian Islands and long-term
drought conditions continue to cause adverse agricultural impacts
and the potential for wildfires in parts of the state.
d. The RO's are providing
current condition reports to the Under Secretary for Farm and
Foreign Agricultural Services on a routine basis. The FCIC Board
of Directors has been added to the list of recipients for copies
of this report which provides current details on problem areas
noted by these offices.
3. Crop Insurance Sales
Despite a smaller premium discount for the 2000 crop year,
early national sales indicators show double-digit increases in
the number of policies, insured acres, liability, premium and
additional coverage (see attached). Dry conditions, disaster
payment linkage, and cotton rate reductions are likely contributors
to strong sales.
4. Discontinuance of the Price Discovery for Crop Revenue
Coverage Durum Wheat in Arizona and California for the 2001 Crop
American Agrisurance, Inc. (AmAg) has requested discontinuance
of Crop Revenue Coverage for fall durum wheat in the states of
Arizona and California effective with the 2001 crop year. Due
to the lack of an adequate price discovery methodology they do
not feel they can continue to maintain the offer for fall durum
wheat in the two states. An accurate price discovery methodology
is necessary in order to provide an accurate calculation of the
expected market price at the time of planting and the time of
harvest. AmAg uses the Minneapolis Grain Exchange Durum Wheat
Contract for spring durum wheat to calculate these prices but
have not been able to find such a market for fall durum wheat.
Effective for the 2001 crop year, RMA will remove the availability
of such coverage in Arizona and California.
5. Salmon Feasibility Study Update
As requested by Alaska Senator Ted Stevens, the Risk Management
Agency (RMA) is initiating a feasibility study to research the
possibility of providing an actuarially sound risk management
program for the Alaskan salmon fishing industry. The feasibility
study will focus on the Bristol Bay commercial fisheries in the
southwestern part of the State. It is anticipated that the study
will be completed during fiscal year 2000.
6. Pilot Watermelon Crop Insurance Program -- Suspension
The Risk Management Agency (RMA) initiated the pilot Watermelon
Crop Insurance program for the 1999 crop year. After substantial
reports of program abuse and other problems, RMA suspended the
pilot program for the 2000 crop year and provided public notice
to that effect in the Federal Register on September 13, 1999.
The notice also requested comments regarding the suspension.
After evaluating comments, and pending further research, the
decision to suspend the program was finalized in a decision memorandum
signed by the Agency Administrator on March 24, 2000.
Comments received from producers, growers, packers, industry
and marketing board representatives alleged the pilot program
may have contributed to program abuse, depressed market prices
and was generally not acceptable to producers. RMA received 79
responses during the official comment period. Fifty-two respondents
indicated they do not want a watermelon crop insurance program
of any kind and 27 respondents stated that some sort of risk protection
program was needed. Six respondents were watermelon policyholders
of which three indicated they did not want a program.
The National Watermelon Association and the National Watermelon
Marketing Board (and their constituent regional associations)
are on record as opposed to any RMA watermelon program.
7. Appointment of Assistant Secretary of the Corporation
Effective May 17, 2000, Ms. Damaris Falero-Kendall is appointed
as an Assistant Secretary of the Federal Crop Insurance Corporation
(Corporation), to act, in the absence of the Secretary of the
Corporation, as Secretary, with all the powers and duties ascribed
to that office, and to perform such other duties as may be prescribed
by the Secretary to the Corporation. Ms. Falero-Kendall is presently
serving as a Staff Assistant to the Program Support Staff.
This appointment is made under article V, section 5 of the
Bylaws of the Corporation which authorizes the Manager of the
Corporation to appoint such other officers as may be necessary
for the transaction of the business of the Corporation. Historically,
the Corporation has had an Assistant Secretary to assume the duties
and powers of that office in the absence of the Secretary and
to assure the continuity of service and support provided by that