crop insurance today vol 39 no 2 may 2006 · vol. 39, no. 2 may 2006 crop intosurance day 12 18 4...
TRANSCRIPT
PUBLICATION OF
NATIONAL CROP CROPINSURANCE
SERVICES® INSURANCE
VOL. 39, NO. 2
MAY 2006 TODAY NCIS
Regional/StateCommittees
A Better Way...A Better Way...
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• Our automated claims service…from electronic signatures to direct deposit of claims checks
The ultimate goal? Better service to our agents and policyholders.
Standing Strong in Crop Insurance® rcis.com
Rural Community Insurance Agency, Inc., D/B/A Rural Community Insurance Services, California license #0B89358, Anoka, Minnesota. RCIS is an equal opportunity provider. © 2006 Rural Community Insurance Agency, Inc. All rights reserved.
TODAYPRESIDENT’S MESSAGE
We Stand PREPARED
Laurie Langstraat, Editor
TODAY IS PROVIDED AS A SERVICE OF NATIONAL CROP INSURANCE SERVICES®
TO EDUCATE READERS ABOUT THE RISK MANAGEMENT TOOLS PRODUCERS USE
TO PROTECT THEMSELVES FROM THE RISKS ASSOCIATED WITH PRODUCTION AGRICULTURE.
TODAY is published quarterly–February, May, August, and November by
National Crop Insurance Services 8900 Indian Creek Parkway, Suite 600
Overland Park, Kansas 66210
If you move, or if your address is incorrect,
please send old address label clipped from recent issue
along with your new or corrected address to
Laurie Langstraat, Editor, at the above address.
NCIS Website: http://www.ag-risk.org
NCIS® EXECUTIVE COMMITTEE Steve Harms, Vice Chairman
Steve Rutledge, Second Vice Chairman
NCIS® MANAGEMENT Robert W. Parkerson, President
Thomas P. Zacharias, Executive Vice PresidentP. John Owen, General Counsel
James M. Crist, ControllerLaurence M. Crane, Vice President
Dave Hall, Vice PresidentFrank F. Schnapp, Vice President
Creative Layout and Design by Graphic Arts of Topeka, Inc., Kansas
Winner of The Golden ARC Award
Printed on recycled paper.
Bob Parkerson, NCIS
It’s springtime in the U.S. and many farmers are well on their way to finishing their spring planting. It will be interesting to see what Mother Nature throws our way this year, considering the Kansas City area set a record temperature of 92° on April 13th—the last record of 88° was set back in the Dust Bowl era of 1936. We hope for bumper crops across the country but know that probably won’t be the case nation-wide. Whatever does happen, the Crop Insurance Industry stands ready to protect producers who wisely chose to purchase an insurance policy.
As we prepare for another growing season, I’d like to tell you about a few things that are happening within the Industry that you should be aware of:
The first is an upcoming Program Integrity Conference on May 22 & 23. This conference will center on the Industry’s ability to reduce fraud, waste and abuse and how best to handle these issues in a growing and complex program. Several groups have been invited to participate and will be represented at the conference and include: the Risk Management Agency; the National Association of Insurance Commissioners; the Office of Inspector General; the Federal Bureau of Investigation; Tarleton State University; and, the International Association of Special Investigative Units.
Secondly, the NCIS Board of Directors has instructed NCIS staff and committees to conduct a review of several programs including the Group Risk Plan (GRP), the Group Risk Income Plan (GRIP), Adjusted Gross Revenue (AGR) and AGR-Lite to determine if some can be consolidated and/or eliminated. Recently, NCIS formed a workgroup of Industry members that met to discuss many of the concerns associated with these programs. Other meetings are scheduled to work through some solutions that could be implemented to make the programs viable.
Thirdly, it is the intention of NCIS and its members to develop a performance-based discount program that would reward farmers with good insurance or production experience. We feel this program will not only benefit and reward good farmers, but also will create incentives to help reduce fraud, waste and abuse and further promote the integrity of the crop insurance program. A committee of SRA holders with actuarial and analytical expertise will be convened shortly to help us work on this initiative. All discussions are in the preliminary stages and we’ll share more information with you when it becomes available.
I would like to take a moment to thank the FCIC Board of Directors, and its Chairman, Keith Collins, for its recent efforts to work with the stakeholders of the
Continued on page 21
CROP INSURANCE TODAY 1
®
VOL. 39, NO. 2
MAY 2006
CROP INSURANCE
TODAY
12
18
4
Table of Contents 4 A Profile of the Crop-Hail Program
8 Bryant Receives First Industry Leadership Award
10 NCIS Outstanding Service Award
12 Reorganization Changes
Chapter 12 Bankruptcy
16 NCIS Regional/State Committees
An Integral Part of the Industry
18 Asian Soybean Rust
A Historic Perspective & Current Assessment
21 Sieben Joins NCIS Staff
24 NCIS Industry Awards
ON THE COVER Representatives from many of the 18 NCIS Regional/State
Committees were on hand in March for orientation and training. You can read more about the important role of these
committees in the article beginning on page 16.
Left to Right: Russell Hefner, Farmers Mutual Hail Ins. Co. of Iowa, Kansas/Oklahoma Committee; Dave Bousselot, Pro Ag Insurance Group, Iowa Committee; Ron Spanier,
Heartland Crop Insurance, Minnesota Committee; Curt Lewsader, Great American Insurance Co., Southeast Committee; Guri Bhangoo, Rain and Hail L.L.C.,
California/Nevada Committee; Dennis Biewer, Great American Insurance Co., North Dakota Committee; Shirley Ford, ARMtech Insurance Services, Gulf States Committee; Tom Wilson, American Farm Bureau Ins. Services, Montana Committee; Dave Meylor, Rural Community Insurance Services, Illinois/Wisconsin Committee; Dock Ayers, Rural
Community Insurance Services, East Committee; Charles Rother, Farmers Crop Insurance Alliance, Nebraska Committee; Jim Maroon, Great American Insurance Co.,
South Dakota Committee; Rob Young, NAU Country, Kentucky/Tennessee Committee; Gary Schaneman, Great American Insurance Co., Colorado/Wyoming Committee; and,
Ray Farmer, Great American Insurance Co., Southwest Committee.
TODAY CROP INSURANCE
PUBLICATION OF NATIONAL CROP
INSURANCE SERVICES
VOL. 39, NO. 2
MAY 2006
NCIS Regional/State
Committees
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Providing the best agricultural
products and services.
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TODAYcrop insurance
A PROFILEof the Crop-Hail
Program By Frank Schnapp and Therese Stom, NCIS
Insurance for hail damage to crops has been available to farmers in the United States for well over a century. In 1915, after recognizing a need for standardized procedures for settling claims, the crop insurance industry created an organization to conduct
research to help establish industry-wide loss adjustment procedures. Several decades later, in 1947, a second service organization was created to conduct ratemaking on behalf of the crop insurance indus
try. These two organizations merged in 1989 to form National Crop Insurance
Services (NCIS). Among the responsibilities of NCIS is the col
lection and processing of Crop-Hail data from its member companies. NCIS maintains an extensive database of Crop-Hail experience, starting with
1948, which is used to prepare Final Average Loss Costs and to carry out other
research. The following review of the Crop-Hail program is based on information from the NCIS Statistical Summary reports and includes all of the experience reported to NCIS in the United States through the 2005
crop year for all crops and all policy forms.
4 MAY 06
Countrywide Results Chart 1 presents the premium volume
for the Crop-Hail program in the United States reported by member and non-member companies over the period from 1948 through 2005. After reaching its peak volume in 1996, Crop-Hail premiums shrank for several years following the introduction of federally subsidized crop revenue policies. In recent years premiums have been relatively stable, with countrywide premiums hovering around $400 million each year from 2001 through 2005.
Chart 2 shows the industry’s average loss costs and average rates over time. The average loss cost is defined as 100 times the indemnity payments divided by the liabilities, while the average rate is 100 times the premium divided by the liabilities. The chart also shows the cumulative average loss costs and cumulative average rates. These are included in order to smooth out the variability of the results and to highlight the long-term trends. The chart shows that loss costs are much more volatile than rates, as should be expected. However, the chart also shows that the cumulative average loss cost has been reasonably stable over the entire period, with a current value of about $2.50. The annual average rates, in comparison, have declined significantly since 1948, starting from an amount in excess of $5.00 to a current average rate of around $3.00.
Industry-wide loss ratios for the Crop-Hail program are presented in Chart 3. Loss ratios are defined as the ratio of indemnity payments to premium, and are equivalent to the ratio of the average loss costs to the average rates from Chart 2. The gradual increase in the cumulative loss ratios in recent years reflects the narrowing gap between the loss costs and rates shown in Chart 2. However, countrywide loss ratios have been below 60 percent in each of the past three years.
Regional Premiums Chart 4 provides a breakdown of each
year’s premium into six regions. The assignment of states to regions is indicated on the map following the chart. The chart confirms that the Midwest has been, and
CROP INSURANCE TODAY 5
6 MAY 06
Regions continues to be, the dominant region for Crop-Hail business. In addition, premium in the Southeast region has declined visibly over the most recent five-year period while the Southwest region has grown in volume. The decrease in the Southeast region can be traced to a reduction in premium for North Carolina tobacco (not shown).
Major Crops by Region Chart 5 shows a breakdown of the
1948-2005 premiums by major crop within each region. On a countrywide basis, soybeans generated the greatest amount premium over the period, followed by corn, wheat, tobacco, cotton, “other,” barley, and fruit. The primary crops in the “other” category are milo, oats, potatoes, and sunflowers. For the Great Lakes and Midwest regions, soybeans, corn, and wheat generated more than 80 percent of the premium. The dominant crops in the Southeast region are tobacco and cotton; while cotton, wheat, and corn are the major crops in the Southwest. In the Western region, the major crops are wheat, barley, “other,” fruit, and corn. Tobacco, followed by fruit and “other,” are the major crops in the Northeast.
Deductible Usage— Countrywide and by Region
Chart 6 provides a breakout of the countrywide premium based on the size of the deductible. The amount of premium written at no deductible (which includes the Basic form) and at the five percent deductible has decreased over time, while the premium for deductibles of 10 percent or higher has increased. Companion Plan business is also down to some extent.
A very different picture appears when individual regions are considered. As shown in Chart 7, the vast majority of the premiums written in the Great Lakes region are purchased with no deductible.
The Midwest region shows a more varied result. Since the Midwest is the dominant region for Crop-Hail business, it is not surprising that its results, included in Chart
8, are similar to the countrywide results in Chart 6. The Midwest is also the only region with a substantial amount of Companion Plan business.
Chart 9 shows the results for the Southeast region. This chart highlights the dramatic decline in premium for the region over the past five years, mostly due to declining volume for North Carolina tobacco. Virtually all of the business is written with a deductible of 10 percent or less.
In the Southwest, premiums have risen substantially over the period, as indicated in Chart 10. Almost all of the increase is coming from Texas. Most of the premiums are written with deductibles of 10 percent and 20 percent, with a smaller amount written with no deductible. The amount of premium written at the 20 percent deductible has risen much faster than the other deductibles over the last five years.
Premiums in the Western region rose through 2003 and have fallen slowly since. Most of the business is written either with no deductible or a 10 percent deductible.
Summary Following a period of contraction sub
sequent to the introduction of federally subsidized crop revenue programs in the mid 1990’s, the premium volume of the Crop-Hail program has now stabilized at around $400 million. The most notable change in the past five years has been the decline in premium for tobacco in North Carolina; however, this change has not had a major impact on the program as a whole. On a regional basis, the use of higher deductibles has been increasing as a share of the total premium volume in the Southwest and Western regions. In comparison, the mix of business across deductibles has been reasonably stable in the Midwest and Great Lakes regions. On a countrywide basis, average rates have declined significantly since 1948 but have remained relatively stable in recent years. Even though loss ratios continue to be volatile, the industry has experienced good results for the past three years.
CROP INSURANCE TODAY 7
TODAYcrop insurance
Bryant ReceivesFIRST INDUSTRY LEADERSHIP AWARD
Bob Parkerson (left), President of NCIS, and Ben Latham (right), Chairman of the NCIS Board of Directors, presented the Industry Leadership Award to Buckles Bryant (center) at the Crop Insurance Industry Annual Convention in February.
Buckles Bryant, National Claims Manager for ARMtech Insurance Services, was the recipient of the NCIS Industry Leadership Award, presented at the 2006 Crop Insurance Industry Annual Convention. This is a new award established to formally recognize individuals who are directly involved in the crop insurance industry and who consistently serve the industry by providing outstanding leadership.
“This award is a testament to Buckles work ethic, leadership and integrity,” said Sam Scheef, President of ARMtech. “NCIS represents every company in this industry. Buckles receipt of this national Industry Leadership Award from his peers exemplifies his commitment to his job, his industry, and ultimately, the American farmer. We are very proud of him and thankful to have him on ARMtech’s team.”
As the National Claims Manager, Bryant
8 MAY 06
is responsible for supervision and training of 13 area claims supervisors and almost 300 adjusters that work for ARMtech throughout the country. He has been with the company since October of 1999. Prior to ARMtech he farmed and ranched in Idalou, Tex., where he still resides. He previously worked as a crop insurance adjuster for ten years while maintaining his cow/calf operation and farming cotton.
Bryant, who was told he was going to Florida for the 2006 Annual Industry Convention but not why, was ‘shocked’ when he learned he was to receive the award.
“I love my job and am honored to receive such recognition. I am grateful to Ted (Etheredge) and Christie (Bracey) for nominating me,” said Bryant.
According to Christie Bracey, Vice President—Operations for ARMtech,
“Buckles has been active in the NCIS Southwest Regional/State Committee since accepting the National Claims Manager position at ARMtech. He encourages ARMtech’s claims staff to be active and support NCIS state and regional committees as well as industry functions in their area. I feel Buckles is very deserving of this award because of his work ethic and his proud representation of ARMtech.”
During his acceptance speech, Bryant thanked NCIS for the award and complimented their leadership on a productive working relationship. He has had the privilege of serving as the chair of the Southwest Regional/State Committee and is currently serving on the MPCI Policy, Procedure and Loss Adjustment Committee with NCIS. This committee reviews recommendations submitted through the regional/state committee process.
When asked what this award means to him, Bryant replied, “To be recognized as an industry leader for doing what I really love is amazing and I am truly thankful.”
Criteria for the Industry Leadership Award are: strong personal and business ethics; demonstrated service above and beyond to the crop insurance industry; and, represents themselves, their company and the crop insurance industry well.
Bryant and his wife, Janet, have been married for almost 26 years and have three children. Byron is 22 and will receive a Masters Degree from Texas A&M University in May, Brendi is 20 and a junior at Texas Tech University; and Bo is 16 and a junior at Idalou High School where he plays football.
TODAYcrop insurance
OutstandingSERVICE AWARD
To underscore the crop insurance industry’s commitment of reaching out in credible and successful ways to limited resource and socially disadvantaged farmers, NCIS created the Outstanding Service Award to present to an individual who has demonstrated a genuine commitment of outstanding service and outreach to these groups of producers.
This year, the NCIS Board of Directors voted unanimously to present the award to Steve Tate of Steve Tate Insurance in Meridianville, Ala.
“We are proud to consider Steve a long time friend and advocate of the crop insurance program as well as a Rain and Hail agent,” said Steve Harms, President and Chairman of the Board of Rain and Hail L.L.C. “Steve shows great pride in his job and has always strived to provide a fair and honest program to his southern farming peers. He is an extremely knowledgeable and dedicated individual who has contributed a great deal to the success and livelihood of Southern agriculture,” said Harms.
Steve Tate is not only a crop insurance agent that writes policies in three different states, he is also the managing partner in a 5,500 acre farm that he owns with his brothers and cousin. Tate works out of an office on the farm, but most of his policies are written while at his customer’s farm office or home.
“I respect their time. I might have to travel 60 miles one way for an appointment, but customer convenience is important to me. The only way to differentiate
your business is through knowledge and service,” said Tate.
Tate also seeks out the farmers that may be harder to find.
“We have a lot of land around here that is becoming part of the urban sprawl,” he said. “While this is not a truly agrarian economy like in the Midwest, agriculture is still important here. We have everything from large commercial farms to small family-owned operations.”
Writing some of his business can be very time consuming.
“We have a lot of shared leases which means companion policies. They take some time to write. I’m willing to spend that time when others might not be.”
In addition to his farming operation and crop insurance agency, Tate’s one of those farmers that likes to give back to his community.
“We operate a pumpkin patch in late September and October,” said Tate. “And we do farm education for preschool through second grade students.” An average day will have 300 – 500 kids come through the doors. “I suppose if I ever kicked this farming habit, I might be able to expand my crop insurance business,” laughed Tate.
While attending Auburn University, Tate met Waymon Moore, a long-time Rain & Hail employee.
“He told me if I ever got hungry
Bob Parkerson (left), President of NCIS, and Ben Latham (right), Chairman of the NCIS Board of Directors, presented the Outstanding Service Award to Steve Tate (center) at the Crop Insurance Industry Annual Convention in February.
10 MAY 06
enough and needed a job to call him. Sure enough, I did,” Tate said.
Tate began adjusting for Rain & Hail in 1982 and didn’t quit until the farming operation expanded enough that he just couldn’t spare the time away from it to do part-time adjusting. A few years later, the local crop insurance agency dissolved. Tate understood the business and knew some people in the industry. He decided to get his insurance license and sold eight policies that first year. He has since grown that business into over 200 policies.
“It may not sound like a lot when compared to some of the other mega agents in the country, but it works well for me,” he said.
The business is “physically challenging due to the proverbial crop insurance deadlines,” Tate said. “But I really enjoy the relationships I’ve built in this business,” he said.
Customers seem to be his best source of advertising.
“I’ve never made a cold call,” he said. “Many creditors require crop insurance for collateral but the crop insurance product sells itself. I just have to provide the service and knowledge.”
“The Crop Insurance program was built and continues to grow and flourish due to hard-working and dedicated agents and producers such as Steve Tate,” Harms said. “He has been involved in the program from the beginning and still today, prides himself on providing service and support to all of his southern farming peers. We at Rain and Hail hold a great admiration and respect for Steve who throughout his life and career has given so much to American agriculture.”
The majority of his crop insurance work is done in a relatively short amount of time.
“It seems like we only have a few short
weeks to service the policies and take care of any changes producers might make. Sometimes that can be frustrating,” Tate said.
Tate is the president of the Madison County Farmers Federation and sits on the Board of Trustees of the Farm Federation. He’s also very active in local organizations.
“I have to miss a lot of the national meetings of the organizations I belong to because they are usually held during my busy season,” he said.
In fact, the date that Steve was presented this award at the crop insurance industry annual convention was the same date the CRC base prices for cotton were released.
“We flew into Naples one day and out the next. As much as I was honored by the award, I just couldn’t stay away from the office for long.”
Tate and his wife, Jackie, have two daughters, Kristen and Kasey.
CROP INSURANCE TODAY 11
∂ ∂∂ ∂
TODAYcrop insurance
Chapter 12 of the Bankruptcy Code was specifically enacted in 1986 to help agricultural producers reorganize their business operations during the 1980’s major agricultural crisis. To qualify to file under a Chapter 12 agricultural producers had a number of crite
ria to be met in order to qualify. These criteria are discussed later in the article.
During the period 1986–2004, 440 Chapter 12 bankruptcies were filed in the State of Colorado. The number of Chapter 11 and
CHAPTER12Bankruptcy
Table 1 Total Business Bankruptcy Filings for the 10th District1 and U.S. and Chapter 11 and 12 for Colorado by year—1985–2004.
Colorado 10th District U.S.
Total Filings Chapter 12 Chapter 11 Total Filings Total Filings 2004 28,169 4 104 205,821 1,597,462 2003 25,956 8 78 218,050 1,660,245 2002 21,359 9 113 208,749 1,577,651 2001 18,800 3 105 86,805 1,492,129 2000 15,558 13 78 70,454 1,253,444 1999 16,165 14 81 71,184 1,319,465 1998 18,262 15 63 77,578 1,442,549 1997 19,146 20 99 76,584 1,404,145 1996 16,403 18 109 63,118 1,178,555 1995 13,705 15 109 49,781 926,601 1994 12,878 13 107 450,018 832,829 1993 13,881 20 152 47,220 875,202 1992 16,079 31 228 53,793 971,517 1991 17,071 26 229 56,602 943,987 1990a 16,671 23 231 54,233 782,960 1989b 18,279 52 306 52,351 442,993 1988b 17,028 70 406 49,896 594,567 1987b 14,668 86 442 47,780 561,278 1986b 10,469 c 433 36,277 477,856 1985b 7,012 c 255 25,509 364,536 Total 440 3,705
1 The tenth district includes the states of Colorado, Kansas, New Mexico, Utah, Wyoming and part of Oklahoma. a Filings reported on a calendar year basis. b Fiscal year reporting July 1-June 30. c Chapter 12 was enacted in late 1986.
By Dr. Norm Dalsted, Colorado State University
Reorganization Changes
12 MAY 06
12 filings are listed by year for Colorado 1985–2004 in Table 1. Since Chapter 12 sunseted initially in 1994 and was reinstated by Congress for short periods of time during the following years some qualified producers had to file as a Chapter 11 rather than a Chapter 12. Chapter 11 has a different set of criteria and management of a Chapter 11 is somewhat different than a Chapter 12.
As part of the legislation signed into law by President George W. Bush on October, 2005, Chapter 12 along with Chapter 7 (liquidation), Chapter 11 and Chapter 13 (wage earner reorganization) resulted in some significant changes. First and foremost Chapter 12 became a permanent bankruptcy chapter. The focus of this article is to provide an outline and discussion of the many changes made to the bankruptcy code related to Chapter 12.
BACKGROUND
The following excerpt from Family Farmer Bankruptcy— Chapter 12, Public Information Series of the Bankruptcy Judges Division, May 1995 provides the background underlying the initial focus, purpose, and qualifying criteria for filers electing a Chapter 12 reorganization. In tailoring chapter 12 to meet the economic realities of family farming, this law has eliminated many of the barriers that family farmers had faced when seeking to
CROP INSURANCE TODAY 13
reorganize successfully under either Chapter 11 or 13 of the Bankruptcy Code. For example, Chapter 12 is more streamlined, less complicated, and less expensive than chapter 11, which is better suited to the large corporate reorganization. In addition, few family farmers find chapter 13 to be advantageous, because it was designed for wage earners who have smaller debts than those facing family farmers.1 In Chapter 12, Congress sought to combine the features of the Bankruptcy Code which can provide a framework for successful family farm reorganizations. At the time of the enactment of chapter 12, Congress could not be sure whether Chapter 12 relief for the family farmer would be required indefinitely. Accordingly, the law (which first provided that no Chapter 12 cases could be filed after September 30, 1993) currently provides that no cases may be filed under Chapter 12 after September 30, 1998.
The Bankruptcy Code provides that only a family farmer with “regular annual income” may file a petition for relief under Chapter 12 (11 U.S.C. 101(18), 109(f)). The purpose of this requirement is to ensure that the debtor’s annual income is sufficiently stable and regular to permit the debtor to make payments under a Chapter 12 plan. However, allowance is made under Chapter 12 for situations in which family farmers may have income that is seasonal in nature. Relief under this chapter is voluntary; thus, only the debtor may file a petition under Chapter 12.
Under the Bankruptcy Code, those eligible to file as “family farmers” fall into two categories: 1) an individual or individual and spouse; and, 2) a corporation or partnership. Those falling into the first category must meet each of the following four criteria as of the date the petition is filed in order to qualify for relief under Chapter 12:
1. The individual or husband and wife must be engaged in a farming operation;
2. The total debts (secured and unsecured) of that farming operation must not exceed $1.5 million;
14 MAY 06
3. Not less than 80 percent of the total debts which are fixed in amount must be related to the farming operation; and,
4. More than 50 percent of the gross income of the individual or the husband and wife for the receding tax year must have come from the farming operation.
In order for a corporation or partnership to fall within the second category of debtors eligible to file as “family farmers,” the corporation or partnership must meet each of the following criteria as of the date of the filing of the petition:
1. More than one-half of the outstanding stock or equity in the corporation or partnership must be owned by one family or by one family and its relatives;
2. The family or the family and its relatives must conduct the farming operation;
3. More than 80 percent of the value of the corporate or partnership assets must be related to the farming operation;
4. The total indebtedness of the corporation or partnership must not exceed $1.5 million;
5. Not less than 80 percent of the corporation’s or partnership’s total debts which are fixed in amount must come from the farming operation owned or operated by the corporation or partnership; and,
6. If the corporation issues stock, the stock cannot be publicly traded.
CHAPTER 7 Chapter 7 of the Bankruptcy Code is
designed to liquidate all debts and as a result the filer would be able to start over free of debt (certain debts such as student loans, taxes, maintenance, and child support are not discharged). The purpose of this chapter is to provide an equitable distribution of the debtor’s available non-exempt property to both individuals and businesses who have filed a claim. The new law as it pertains to Chapter 7 has a number of new
qualifying rules a filer must meet. Although for an estimated 75 percent of new filers, the qualifying criteria should not affect their ability to file under this chapter. Two major criteria that are important are:
1. The debtors attorney must determine if the income of the filer over the previous six months is less than, equal to or greater than the state median income. If greater than, the filer must file a Chapter 13. If “less than” there is no challenge to the Chapter 7; and,
2. Filers must receive 1.5 hours of credit counseling prior to filing bankruptcy. Time requirements pertaining to Chapter 7 bankruptcy were also changed.
As a consequence of the changes in the Chapter 7 rules, a significant increase in filings was observed prior to the new laws taking effect. The numbers of Chapter 7 cases filed in the Tenth Federal District has increased significantly. Chapter 7 filings in Colorado for example, were 3,487 in August, 5,057 in September, and 14,106 in October, 2005. This compares to 2,313, 2,115, and 2,094 for the August, September and October respectively in 2004. Filers no doubt were concerned about the changes and whether they would remain eligible for Chapter 7. Credit card companies and other related creditors were obviously successful in getting changes implemented. The discharge of debt, particularly given the new qualifying criteria for Chapter 7, offers them some relief in debt recovery.
CHAPTER 11 Chapter 11 of the Bankruptcy Code is
available to both individuals and corporate business debtors. Over 3,700 Chapter 11 bankruptcy cases were filed in the Tenth District over the last 20 years (1985–2004). No doubt a number of these cases were farmers and ranchers, although there are no statistics to identify the number of agricultural related Chapter 11 bankruptcies.
The purpose of Chapter 11 is much in the same view as a Chapter 12—to provide a mechanism by which a business can reorganize financially. One major differ
ence is that all creditors must approve the reorganization plan submitted to the Bankruptcy Court, including the unsecured creditors, except in rare cases.
CHAPTER 13 Chapter 13 often is referred to as the
wage earners reorganization option. Chapter 13 is available to individuals with regular income and whose debts do not exceed specific amounts. The reorganization under this chapter is to provide a schedule of payments (based on debtors expected future earnings) to creditors so that they are paid in part or whole, including a provision for interest on unpaid debts.
CHAPTER 12 For production agriculture, making
Chapter 12 a permanent part of the bankruptcy code is a welcome outcome. From a legal standpoint, a Chapter 12 is more easily administered as there are set deadlines for the various steps in the Chapter 12 bankruptcy process. A Chapter 12 trustee oversees the process and is instrumental in Chapter 12 being approved by the Bankruptcy court. Once a Chapter 12 is approved, the trustee is responsible for ensuring creditors are paid according to the reorganization plan. Of course the Chapter 12 filer must ensure the payments are made to the trustee in timely fashion. Failure to do so could result in the Chapter 12 being dismissed or converted to a Chapter 7.
Mr. William Bass, Chapter 12 Trustee for Colorado and Wyoming, has served in this capacity since the Chapter 12 Bankruptcy code was initiated. Mr. Bass reports that, of the Chapter 12 filed and approved by the Federal Bankruptcy Court, some 60 percent of these cases are successful. Success means that the filers meet the requirements of their reorganization plan and the case is dismissed three to five years after the reorganization plan is approved. Under a Chapter 12 the filer continues to operate their businesses without the trustee being involved in the management of the busi
ness. In the case of a Chapter 11 the court approved trustee is more involved in the business in a regular basis. Therefore, facilitating a Chapter 12 might be considered more flexible by a filer than a Chapter 11. A Chapter 11 is more complicated and expensive than a Chapter 12.
In the introduction of this article, the major criteria to qualify a filer to utilize a Chapter 12 bankruptcy under the 1986 law were listed. Under the new law there are three major changes and one addition related to the criteria. The changes (enhancements) are:
if not resolved. Chapter 12 may likewise face objections by several creditors; however, the Federal Bankruptcy Court has the authority to approve the plan with the possibility of stipulations to address the objection. There is no voting in a Chapter 12 nor to deny an objection. This option is not available under a Chapter 11.
Chapter 12 is well purposed in that the bankruptcy code is designated to meet the needs of those qualified agricultural producers who may need to reorganize. Chapter 12’s reorganization
1986 2005
Maximum Debt $1.5 million $3.237 million 80 percent of debts 50 percent of debts ag-related ag-related
Income 50 percent of income from 50 percent of income agricultural sources from agricultural
sources, with the option of using year two and three to meet the income criteria
Capital Gains Capital gains tax is in effect Capital gains can become part of the unsecured claims
Inflation No adjustment Dollar requirements adjusted for inflation every third year
The first two changes, debt level and income criteria, will make it possible for more agricultural producers to qualify under the Chapter 12 bankruptcy code. The debt limitation in the original code did prevent some agricultural producers from utilizing Chapter 12, when they would likely have filed their case as a Chapter 11. The success rates of Chapter 11 as a reorganization option is notably less for agricultural producers—less than 10 percent. One of the key differences between a Chapter 12 and 11 is all creditors in a Chapter 11 must approve of the plan. If one of the major creditors votes no then the plan stalls until the objection is resolved or the plan fails to go forward
success is certainly a positive outcome for production agriculture. Creditors, as well as agricultural producers, both benefit from this bankruptcy code. Unsecured creditors are also ensured to receive some percentage of the debt returned to them. Under the new Chapter 12 criteria capital gains taxes could end up as an unsecured claim in the plan. This feature potentially offers significant tax relief to some future Chapter 12 files.
Editor’s Note: Dr. Dalsted is a professor in the Department of Agricultural and Resource Economics at Colorado State University.
CROP INSURANCE TODAY 15
TODAYcrop insurance
NCIS Regional/StateCommittees:
AN INTEGRAL PARTOF THE INDUSTRY
By Dr. Laurence M. Crane, NCIS
The NCIS Regional/State Crop Insurance Committees are an integral part of the crop insurance industry. They are critical to the communication flow within the industry and are organized for the purpose of identifying issues that need attention and making recommendations to the Board of Directors. These committees are authorized by the NCIS Bylaws and function within approved guidelines. To ensure that the committees understand their role, function properly, and are effective in accomplishing their responsibilities, the chairman participate in an annual training session.
The primary objective of the chairman training session is to help the chairman of the NCIS Regional/State Crop Insurance
Committees succeed, by preparing them for their official responsibilities as chairman of an NCIS committee. Specific instruction is provided on: • legal issues, including anti-trust con
siderations; • NCIS organizational structure; • ensuring program integrity. • making recommendations to the NCIS
Board of Directors;
• operating in accordance with the NCIS Bylaws;
• planning and conducting effective meetings and loss school activities;
• parliamentary procedure; and, • understanding the range of products and
services offered by NCIS. After the training, the participants better
understand the role of the NCIS Regional/State Crop Insurance Committees,
P. John Owen, NCIS Legal Counsel, leads a discussion on issues the Chairmen must be aware of from a legal viewpoint.
16 MAY 06
what is expected of them as chairman, and are prepared to successfully fulfill their official duties. “The meeting was excellent,” a new Chairman for 2006 commented. “I can certainly see why it is a must for anyone that has been elected as chairman of their state committee. I look forward to working closely with my NCIS liaison during my term as chairman.”
There are 18 committees, organized along geographical borders that are the eyes and ears of NCIS at the local level. They meet periodically to discuss developments in agriculture and insurance. RMA employees are invited and encouraged to attend committee meetings. Attendance by individual agents and adjusters is not permitted. Other guests, educators, and non-NCIS members may be invited to participate in committee activities as conditions warrant. An NCIS staff person is assigned as a liaison to each committee and functions as a resource to the committee. The liaison is the immediate point of contact between the committee and NCIS. The liaison is to be kept informed of all committee activities. These committees exist primarily to:
1. Recommend coverage and language changes to the Crop-Hail and MPCI policy forms, applications, endorsements and miscellaneous forms.
2. Recommend new or revised Crop-Hail or MPCI loss adjustment procedures and forms.
3. Advise NCIS on public acceptance of crop insurance programs offered by the affiliated companies.
4. Promote communication and cooperation within the crop insurance industry, with the exception of pricing and producer commissions.
5. Promote and participate in risk management education activities.
New chairmen fully understand that the committee and its individual members are not authorized to agree to policy on behalf of NCIS nor any member company. Where policy or procedure changes are recommended by the committee, those
recommendations are to be treated as recommendations until they are reviewed by the appropriate NCIS standing committee(s) and approved by the NCIS Board of Directors.
It is a personal and professional honor
to be elected chairman of an NCIS Regional/State Crop Insurance Committee. The expectations and responsibilities are great, but so are the rewards for being selected by one’s peers to serve in this important leadership capacity.
CROP INSURANCE TODAY 17
2006 NCIS Regional/State
Committee Chairmen California/Nevada—Guri Bhangoo, Rain & Hail L.L.C.
Colorado/Wyoming—Robby Hasz, RCIS
East—Dock Ayers, RCIS
Gulf States—Shirley Ford, ARMtech
Illinois/Wisconsin—David Meylor, RCIS
Indiana/Ohio/Michigan—John Ross, Farmers Mutual Hail Ins. Co. of Iowa
Iowa—Dave Bousselot, Producers Ag Insurance Group
Kansas/Oklahoma—Pat Koster, RCIS
Kentucky/Tennessee—Rob Young, NAU Country Insurance
Minnesota—Jim Ron Spanier, Heartland
Missouri—Greg Souder, Great American Insurance
Montana—Tom Wilson, American Farm Bureau
Nebraska—Charles Rother, Farmers Crop Insurance Alliance
North Dakota—Dennis Biewer, Great American Insurance
Northwest—Steve Wedel, Rain & Hail
South Dakota—Jim Maroon, NAU Country Insurance
Southeast—Curt Lewsader, Great American Insurance
Southwest—Ray Farmer, Great American Insurance
TODAYcrop insurance
ASIAN SOYBEAN RUST
&Current AssessmentA Historic Perspective
By Dr. William F. Moore, Mississippi State University
It took Asian Soybean Rust (ASR) 102 years to reach the continental United States after it was first reported in Japan in 1902. The first reported occurrence of ASR in Hawaii in 1994, in Africa in 1996, in Paraguay in 2001, and in Brazil and Argentina in 2002 increased concern that it would soon be in the continental U.S. This significantly increased emphasis on research on all aspects of ASR with particular emphasis on ways yields could be maximized in its presence.
Concern about possible introduction of ASR into the soybean production areas of the U.S. is not recent. Research on ASR was begun in 1972 in a containment facility at Fort Detrick, Maryland. Research from that effort has provided and continues to provide significant information on multiple aspects of ASR, including pathogen variability, pathogen development, pathogen-host interactions, and host range studies. More recent studies by various governmental agencies have been directed on the effectiveness of various fungicides in preventing losses, application technologies, and seeking potential sources of resistance.
The reaction to this potential problem by all involved has been unprecedented. Federal and state agencies, researchers and extension specialists, northern and southern soybean producers, and the various
18 MAY 06
agriculture industries have very productively worked together in implementing plans, procedures, and management products and practices to lessen the potential impact on soybean production by ASR. Following its introduction by Hurricane Ivan and the occurrence of ASR on late maturing soybeans in the fall of 2004, the Environmental Protection Agency (EPA) reacted quickly to grant emergency use permits for several fungicides for use in preventing losses from ASR. Funding was made available by the USDA and the producer check-off program to establish and monitor an early planted network of sentinel plots throughout the soybean production states in 2005. Unlike areas of South America where the production of inoculum occurs year round, in the continental U.S. it is not endemic in major soybean production states and will have to be blown in from overwintering sites further south. The inoculum potential should be low during the early soybean production season annually and increase as environmental conditions favor disease development.
The last occurrence of a disease which resulted in a major loss in production in a widely planted field crop was Southern Corn leaf blight in 1970. Southern Corn leaf blight had previously been of common occurrence and was not considered to be a disease that caused major widespread yield losses. In May of 1970, in a three county area, with limited corn acreage in Southeast
Mississippi and Southwest Alabama, it was obvious that a very different, far more aggressive form of the pathogen was destroying corn. Field observations at pollination by the late Dr. Maurice Futrell, USDA Plant Pathologist, credited the occurrence of the problem to male sterility in fields of blends of male sterile and male fertile plants. In 1970, approximately 70-90 percent (depending on the state) of the corn in the U.S. carried a trait for male sterility called Texas male sterility or T-cytoplasm. This was used in the production of hybrids by seed companies in making crosses to reduce the time-consuming and costly hand-detasseling method. By September of 1970, Southern Corn leaf blight caused by the new race of the pathogen had spread throughout the corn producing states and into Canada, resulting in an estimated loss of one billion dollars. This all appeared to begin in a small southern area, and under extended optimum conditions the pathogen flourished, increased and spread rapidly. Prior to 1970, this form of Corn blight was not know to occur, there was no prior alert to promote research and planned management techniques, and the results were devastating. The problem, however, for future corn production was quickly alleviated by a switch to other methods of making crosses. Now, the approximately 73 million acres of soybeans grown in the U.S. are produced in roughly the same area as the U.S. corn crop. One-hundred percent of the soybean crop
is susceptible to ASR. Will an epidemic of ASR occur and cause widespread losses as did Corn blight in 1970? It is possible, but in my opinion, not probable. Corn blight occurred by surprise; we were not prepared. ASR has been expected for years; much of the research on loss prevention with the products and technologies available has been done and proven in other countries and areas where ASR is endemic. Perhaps just as important, if not more so, is the widespread knowledge among all involved (scientists, industry, and the nation’s soybean producers) on all aspects of ASR, from its development requirements to effective loss prevention methods. The alert system through the nation’s sentinel network and the use of information technologies can quickly result in implementation of effective, proven loss prevention technologies in production fields. Published predictions on potential losses from ASR, made prior to 2005, were before the availability of the strobilurin and triazole chemistries that have since been granted emergency use labels.
Risk, however, is a factor in effectively preventing losses from ASR, just as with any other aspect of production agriculture. Wind-blown inoculum into soybean production areas in early- to mid-season under extended wet optimum conditions is a worst-case scenario. Production fields remain wet and there is too much acreage to be effectively protected by the limited number of aerial applicators.
Why was ASR not a problem in most of the soybean producing areas of the U.S. in 2005? For most of the early part of the growing season, the direction of air currents across known infected areas in Florida did not move in the direction of major soybean production areas in the South. It was not until tropical storm Arlene (on June 11) moved up the border of Mississippi and Alabama that it was suspected that urediniospores were brought into southern production areas. The first
CROP INSURANCE TODAY 19
observed occurrence of ASR occurred in sentinel plots in Alabama and Mississippi on June 28th and July 13th respectively. Movement of urediniospores by wind in mid-July across these and other known infected areas could have been responsible for later infections occurring in Alabama, Georgia, South Carolina, and North Carolina. Those production areas were wetter than areas to the west, such as those in Mississippi, which were having a drought and unfavorably high daytime temperatures. Foliage wetness from dew at night when temperatures were more favorable for infection did not last long enough to support infection.
Areas of known infection in overwintering areas have increased since the 2005
growing season. The pathogen can be wind blown not only from Florida, but also from Northern Mexico, where it is now known to occur. We are lucky; it has to be blown in from overwintering sites to the south, unlike Brazil which has high levels of the pathogen year round. Our neighbors to the far south have learned to produce
good yields in spite of ASR. We are in a better position of doing the same.
Editor’s Note: Dr. Moore is an Extension Plant Pathologist, Emeritus, in the Department of Plant and Soil Sciences at Mississippi State University. Photos courtesy of Alan Henn and Ben Spinks.
20 MAY 06
In the previous issue of TODAY, NCIS Research Agronomist, Dr. Mark Zarnstorff, assessed the soybean rust situation and the 2005 soybean growing season. In this issue, Dr. William F. Moore provides a historic perspective, as well as a further assessment of soybean rust for the major U.S. soybean growing areas.
As this issue of TODAY was being prepared, the Risk Management Agency (RMA) provided a press release on its web-site concerning soybean rust and the 2006 season. Below are selected excerpts from that release:
Washington, Apr 11, 2006—USDA’s Risk Management Agency (RMA) today reminded insured producers that Asian soybean rust remains a concern for the 2006 crop year in parts of the country. While crop loss due to soybean rust is a covered loss under the Federal crop insurance program, farmers must use good farming practices by seeking and following recommendations of agricultural experts to control soybean rust. RMA further recommends that insured producers document the advice received and actions taken to combat this disease.
Under the terms of the Common Crop Insurance Policy, a good farming practice is one that agricultural experts agree will allow the crop to make normal progress toward maturity and produce at least the yield used to determine the production guarantee.
Failure to purchase and apply adequate control measures due to economic reasons is not an insurable cause of loss. Producers must be knowledgeable of any pending outbreaks and the control methods recommended by local agricultural experts, such as extension agents and certified crop consultants, used in their area to combat the disease.
Insured producers should follow developments as to the identification and spread of Asian soybean rust disease and continue to stay informed and updated concerning appropriate treatments that may apply to their situation. Producers can find the latest information on the spread of Asian soybean rust from local experts and from USDA’s website at http://www.usda.gov/soybeanrust and track the movement of the infestation at http://www.sbrusa.net.
Information about Asian soybean rust control measures may be obtained from crop consultants and plant pathologists in agriculture departments of State governments, universities, and USDA’s cooperative State Research, Education and Extension Service who are familiar with the risks of exposure to this disease. RMA’s efforts to help producers better manage soybean rust
also included funding and support of state and commodity based risk management education. Funds for this initiative were provided through RMA’s Commodity Partnerships for Risk Management Education Program. NCIS participated in this RMA-sponsored program and partnered with the University of Arkansas, University of Kentucky, University of Tennessee, Mississippi State University, and Louisiana State University. A workshop was held in each state, focusing on the latest information from state extension plant pathologists, as well as discussions of risk management and the role of crop insurance in protecting farmers from soybean rust. If you are interested in information that was distributed at these meetings, please contact Mark Zarnstorff or Tom Zacharias at NCIS at 913-685-2767 or via email at [email protected] or [email protected].
SOYBEANRust
TODAYcrop insurance
Continued from President’s page
crop insurance program. The Board has As you can see, the Industry and staff of Industry and he’ll need every bit of it as he invited representatives from the Industry NCIS are very busy with several major ini jumps in with the other staff to start tackling and several agent and producer groups to tiatives set out to ultimately make this these issues. We know Mike will prove to meet with them and discuss the successes Industry and the product it delivers better be yet another valuable staff member of of the program as well as the areas that for the American farmer. There isn’t a short- NCIS and your association. might need some improvement. This is a age of work and activity going on around major step forward to improving commu here. And to that end, I’d like to welcome nication throughout the entire Industry Mike Sieben to the staff of NCIS. Mike has and I applaud them for it. many years of experience working in the
SIEBEN Joins NCIS Staff crop insurance career as a crop hail adjuster for Farm Bureau Mutual of Kansas and a field representative for Insurance Company of North America and Continental Insurance Company. After Mike was hired by Farm Bureau Mutual on a full
Kansas and seven other states. In 2002, Mike rejoined Farm Bureau Mutual to head up the newly merged companies of Farm Bureau Mutual of Iowa, Farm Bureau Mutual of Nebraska and Farm Bureau Mutual of Kansas. In addition, Mike has served on several industry committees for NCIS, the Crop Insurance Research Bureau (CIRB), and the Conference Committee for the National Association of Mutual Insurance Companies (NAMIC).
Mike was born and raised in Winchester, KS and is a graduate of Kansas State University. He and his wife, Cheryl, have two sons, Shane, and his wife Tori, and Scott. Please join us in welcoming Mike to NCIS!
NCIS is pleased to announce the addition of Mike Sieben to the staff of NCIS. Mike began his employment on April 10 in the Loss Adjustment and Insurance Products department as Senior Project Director.
Mike comes to NCIS with an extensive crop insurance background. He began his
time basis, he became the MPCI Claims Manager and was then promoted to the Crop Insurance Manager. He remained in that position until the MPCI and Crop Hail business was transferred to American Farm Bureau Insurance Services (AFBIS), where he managed the regional office and was responsible for MPCI and Crop Hail for
CROP INSURANCE TODAY 21
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Dennis Strang, 61, passed away at his home on March 28 following a seven-year courageous battle with cancer. Dennis was born November 26, 1944, in Cedar Rapids, Iowa. He grew up toiling on the family’s Fairfax, Iowa, farm and learning a work ethic that defined his life. Dennis attended Prairie High School in Cedar Rapids, and earned a biology degree from The University of Iowa in 1967. He married Janice Oliver in 1965. The family settled in Sigourney, Iowa, where Dennis taught high school biology for 19 years. He earned a masters degree in biological science at Syracuse University in 1970.
Dennis spent summers as a crop insurance adjuster for National Farmer’s Union (NFU) beginning in 1972. In 1985, he left teaching to work full-time as a crop insurance field supervisor for NFU in Illinois and became claims manager in 1987. When NFU closed in 1988, he worked as a field supervisor at Farm Bureau before joining the Rain & Hail L.L.C. Omaha, Neb., office in 1989. There he steadily earned respect and responsibility before retiring as the Great Plains Division Manager in May 2005.
Anyone who met Dennis immediately picked up on his easy wit, dry sense of humor, and amazing intelligence. Those who were fortunate enough to get to know and work with him quickly identified his dedication, integrity, kindness, honesty and loyalty. And they knew of his passions—mainly family, the Iowa Hawkeyes, running, history, traveling, and a good beer. Dennis started running in 1977 and went 20 years without missing a day. He completed in more than 50 marathons.
Dennis is survived by his wife, Janice; son Jon Strang and wife Jackie of Johnston, Iowa; daughter Michelle Moore and husband Jeff of Overland Park, Kan.; and, grandchildren Antonio Rodriguez, Haley Strang, T.J. Strang, and Emily Moore.
Memorials can be made to the United Way of the Midlands Foundation, 1805 Harney Street, Omaha, NE 68102.
DENNIS STRANG
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TODAYOBITUARIES
JOHN E. LUND II
Longtime crop adjuster, John E. (Jack) Lund II, 65, of panies throughout hisGarden City, Kan., died Thursday, March 2, 2006, at St. career; The Hartford, CNA,Catherine Hospital in Garden City. American Agrisurance, IGF,
Jack was born March 29, 1940 to John E. and Rita and most recently Farmers Lund. He was a 1962 graduate of Yale University and later Mutual Hail Insurance graduated from Columbia School of Law. He had a love Company of Iowa. for the crop insurance business. Jack began his career in He was member of the the Crop-Hail business as an adjuster and became inter- St. Mary the Virgin Episcopal Church, New York, NY. ested in the MPCI business when private companies entered the business in 1980. He worked for several com-
INDUSTRY NCISAWARDS Under the direction of its Board of The newest award established is the The two winners will be presented with
Directors, National Crop Insurance Industry Leadership Award. This award, their awards at the crop insurance industry Services has developed two national targeted primarily to members of the NCIS annual convention held in February of awards to be given to individuals who regional/state crop insurance committees, each year. achieve excellence in the criteria set out by was created to formally recognize individ- All nominations must be submitted in the awards. uals who are directly involved in the crop writing to NCIS by October 15, 2006, for
The first award is the Outstanding insurance industry and who consistently awards to be given at the 2007 Annual Service Award. This award, primarily for serve the industry by providing outstanding Convention. For nomination information agents, has actually been in existence since leadership. Company employees at both and forms to be submitted, please go to 2001 and has been awarded to several the field and management level are eligible the NCIS website at www.ag-risk.org to excellent individuals. The purpose of this to be nominated. download. If you have any questions award is to promote exceptional service The criteria for both awards are: regarding the criteria or whom is eligible industry-wide, and encourage outstanding 1. Strong personal and business ethics. for either award, please contact Laurie outreach efforts to all farmers, especially 2. Demonstrated service above and Langstraat at NCIS at [email protected] or limited-resource farmers, by highlighting beyond to the crop insurance industry. 913-685-2767. an individual who has demonstrated 3. Represents themselves, their company, exceptional service. and the crop insurance industry well.
24 MAY 06
CROP INSURANCE TODAY 25
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