Enclosure Page 2

FCIC Interpretation of Procedure

Risk Management Agency Interpretation of FCIC Provisions:

Subject: Request dated September 25, 2020, to the Risk Management Agency for an interpretation 

regarding whether sections 49(a), (d), & (e) of the 2018 Whole-Farm Revenue Protection (WFRP) 

Pilot Policy and subparagraph 71(d)(i) of the 2018 WFRP Pilot Handbook considers only the amount 

of revenue from the physical expansion of the farm operation is limited to the expected revenue from 

the second crop.

The relevant policy provisions provided by the requestor are sections 49(a), (d), & (e):

49. Expanded Operations

(a) If you can show us your farm operation has physically expanded during the insurance 

period or lag year by adding production capacity to your farm operation (e.g., by adding 

land or an addition of a greenhouse), increasing use of existing production capacity (e.g., 

by double-cropping existing land or beginning production on high density orchards), or 

making physical alterations to existing production capacity (e.g., by adding irrigation to 

existing land or beginning production on certified organic acreage) we may at our

discretion approve your farm operation as an expanding operation (we will not consider 

crop rotation or planting a higher value commodity without changes to your existing 

production capacity to be physical expansion. For example; if you planted more of your

existing land to a high value commodity during the insurance period than in previous 

years, but did not otherwise change the production capacity of your farm operation, we 

will not approve your farm operation as an expanding operation). If so:

(1) You must provide verifiable records that we agree are sufficient to determine the 

amount of revenue an expansion can be expected to generate during the insurance 

period;

(2) We will determine the amount of revenue from the expansion approved for the 

purpose of determining your expanding operation factor; and

(3) If more than one expansion is applicable to your farm operation, we will determine 

the amount of revenue approved for each expansion separately.

...

(d) If we have approved your farm operation as an expanding operation, your expanding 

operation factor will be calculated by:

(1) Adding the amount of revenue from the physical expansion of your farm operation 

during the insurance period, as determined by us, to your Average Allowable 

Revenue;

(2) Adding to paragraph (1) the amount of revenue from any expansions that occurred in 

your lag year, as determined by us; and

(3) Dividing the result of paragraph (2) by your Average Allowable Revenue to 

determine your expanding operation factor, not to exceed 1.35.

(e) Your expanded operation adjusted revenue will be your average allowable revenue 

multiplied by your expanding operation factor.
Enclosure Page 3

FCIC Interpretation of Procedure

The relevant handbook procedure provided by the requestor is subparagraph 71(3)(d)(i):

71 Revenue

...

(3) Expanded operation average revenue will be calculated for all applicants/insureds when 

the insured provides documentation indicating their operation is physically expanding 

either by adding production capacity to their farm operation (i.e., by adding land or an

addition of a greenhouse), increasing the use of existing production capacity (e.g., by 

double-cropping existing land or beginning production on high density orchards), or 

making physical alterations to existing production capacity (e.g., by adding irrigation to 

existing land or beginning production on certified organic acreage) and is approved by the 

AIP. If so:

...

(d) The expanded operation adjusted revenue will be calculated using the following 

tables for:

(i) An expansion that will occur in the current year:

Step Action

1 Determine the Average Allowable Revenue for the Whole-Farm 

History Period. Refer to subparagraph 71(1).

Example: Insured A has the following allowable revenue: $130,500 

for 2011; $149,500 for 2012; $112,000 for 2013; $139,600 

for 2014; and $160,360 for 2015.

2011 = $130,500

2012 = $149,500

2013 = $112,000

2014 = $139,600

2015 = $160,360

Total = $691,960 ÷ 5 years = $138,392 average allowable 

revenue

2 Add the amount of revenue from the physical expansion of the farm 

operation that will or has occurred during the current policy year, as 

determined by the AIP, to the Average Allowable Revenue.

Example: For the current policy year, the insured has added 50 acres 

to the farm operation with an additional $10,000 of 

expected revenue determined by the AIP.

$138,392

+ $10,000

$148,392

3 Divide the result of step 2 by the result of step 1. Round the result to 

two decimal places, not to exceed 1.35, to determine the Expanding 

Operation Factor.

Example: $148,392 ÷ $138,392 = 1.07 (expanding operation factor)
Enclosure Page 4

FCIC Interpretation of Procedure

Step Action

4 Multiply the result of step 1 by the result of step 3 to determine the 

Expanded Operation Adjusted Revenue.

Example: $138,392 X 1.07 = $148,079

...

Interpretation Submitted by Requestor(s)

The requestors’ interpretation is an insured may establish a farm operation is physically expanding by 

documenting an increase in the use of production capacity through the double-cropping of existing 

land, as set forth in section 49(a) of the WFRP Policy and subparagraph 71(3) of the WFRP 

Handbook. On the other hand, section 49(a) of the policy states: “we will not consider crop rotation or 

planting a higher value commodity without changes to your existing production capacity to be 

physical expansion. For example; if you planted more of your existing land to a high value 

commodity during the insurance period than in previous years but did not otherwise change the 

production capacity of your farm operation, we will not approve your farm operation as an expanding 

operation.” Thus, adding acreage through implementation of a double-cropping practice constitutes a 

physical expansion of the farm operation, while the rotation from a lower value commodity to a higher 

value commodity does not.

In the event a farm operation is approved as an expanding operation, the methodology for computing 

the expanding operation factor is set forth in section 49(d) of the policy and subparagraph 71(3)(d) of 

the handbook. This factor is calculated by adding “the amount of revenue from the physical expansion 

of the farm operation” to the Average Allowable Revenue and then dividing the sum by the Average 

Allowable Revenue (with the result rounded to two decimal places and capped at 1.35).

Under the scenario outlined above, the physical expansion of the farm operation is based on the 

addition of a double-cropping practice. Thus, the “the amount of revenue from the physical expansion 

of the farm operation” would be limited to the expected revenue from the second crop. The expected 

revenue from the first crop would not be considered for purposes of calculating the expansion factor.

Federal Crop Insurance Corporation Determination

FCIC agrees with the requestors’ interpretation that when a farm operation is determined to be 

physically expanding by utilizing a double-cropping practice on existing acreage within the farm 

operation, only the expected revenue from the second commodity is considered for the purposes of 

calculating the expansion factor. FCIC also agrees that section 49(a) of the policy does not consider 

the expected revenue of a higher value commodity planted on existing acreage within the farm 

operation as a physical expansion of the farm operation and must not be considered when calculating 

an expansion factor.

In accordance with section 33(a)(1) of the WFRP Pilot Policy, this FCIC interpretation is generally 

applicable and binding in any mediation or arbitration. In accordance with section 33(a)(1), any 

appeal of this interpretation must be in accordance with 7 C.F.R. part 11.