Source: POLITICO'S MORNING AGRICULTURE, 9/20/18

USDA has changed its formula to determine how much in insurance payments farmers can collect when dealing with scarce rain. The Risk Management Agency adjusted the Pasture, Rangeland, Forage program to make insurance payments more "actuarially sound" and to prevent inaccurate payments. But some Western ranchers say they will now receive less compensation and are worried they won't be able to fully cope with long-running droughts, reports Pro Ag's Liz Crampton.

How it works: The new formula in effect reduces county base rates, which determine how much coverage per acre a rancher can purchase. The rates are based on a statistical calculation that utilizes rental rates, hay costs and grazing fees. Payments are triggered when rainfall is less than expected during a two-month period. The change will apply to the 2019 growing season.

At this point, it's hard to predict how the new formula will affect payments. But ranchers in some states anticipate trouble. Jay Whetten, president of the Arizona Cattle Growers' Association, said he's seen estimates that ranchers could see up to a 40 percent reduction in coverage. On the other hand, it's possible that some ranchers in other regions see an increase.

The change was made to more accurately factor in hay prices, which USDA realized had resulted in an overvaluation of actual production potential, an RMA spokesman said. "RMA routinely evaluates the pricing methodology underpinning crop insurance products to ensure it balances tax dollars with the needs of producers for an effective farm safety net," the spokesman said in a statement. "The federal crop insurance program is not intended to make producers whole; rather, to provide options to help them mitigate risks and reduce their liability exposure."

Congress steps in: Twenty members of Congress, led by Reps. Martha McSally (R-Ariz.) and Tom O'Halleran (D-Ariz.), wrote to USDA Secretary Sonny Perdue on Tuesday asking to halt the changes. The bipartisan group estimated that as many as 32,000 ranchers could be put at "great financial risk."