Farm operators in many portions of the upper Midwest, including southern Minnesota and northern Iowa, are dealing with very wet field conditions and delayed crop planting. Unless conditions improve soon, some producers could be forced to consider not planting a portion of their crops in 2019. As we approach June 1, producers in the affected areas will be evaluating their crop insurance coverage for late planting or prevented planting options, as compared to the yield and profit potential for late-planted corn and soybeans.
In order to receive full crop insurance coverage for 2019, the final planting date for corn is May 31 in the southern two-thirds of Minnesota, all of Iowa, and all but the northern few counties in Wisconsin; as well as a few counties in both southeast South Dakota and North Dakota. The late planting period for corn is 25 days, which would be from June 1-25, with a reduction in the insurance coverage level of one percent for each day that corn planting is delayed past May 31. In northern Minnesota and extreme northern Wisconsin, as well as many counties in North and South Dakota, the final date for corn planting with full insurance coverage is May 25, with the late planting date extending to June 19. Following the late planting period, the maximum crop insurance coverage is 55 percent of the insurance guarantee, which is the same as the insurance compensation for prevented planted crop acres.
For soybeans, the final planting date is June 10 in Minnesota, eastern North and South Dakota, and the northern two-thirds of Wisconsin, with the late planting period extending 25 days until July 5. The final soybean planting date is June 15 in Iowa and the southern one-third of Wisconsin, with the late planting period lasting until July 10. As with corn, there is a reduction of one percent per day in the maximum insurance coverage during the late planting period, with 60 percent maximum insurance coverage after that period.
Once the crop insurance final planting date for corn or soybeans has been reached, farm operators can opt to take the prevented planting insurance coverage (if they have that coverage option) rather than planting the crop. A large majority of producers in the upper Midwest carry Revenue Protection crop insurance with prevented planting coverage on their corn and soybeans. If they choose the prevented planting coverage, they will receive 55 percent of their original crop insurance guarantee for corn and 60 percent for soybeans on a specific farm unit. Every farm situation is different when it comes to making a decision on whether to utilize the prevented planting option, so it is important for producers to make individualized decisions for each farm unit.
Crop producers will have different yield potential, crop expenses, land costs, etc. on various farm units, as well as differences in their level of crop insurance coverage and revue guarantees on various farms. All of these factors become important when evaluating prevented planting crop insurance decisions. It is also important to note that the guaranteed payments for prevented planting with corn and soybeans are considerably less in 2018, as compared to several years ago. The decision your neighbor makes regarding prevented planting may not necessarily be the best decision on your farm, depending on the situation and the factors involved.
Producers should contact their crop insurance agent for more details on final planting dates and prevented planting options with various crop insurance policies, before making a final decision on prevented planting. The prevented plated acres need to be reported to their crop insurance agent. The U.S. Department of Agriculture’s Risk Management Agency has some very good crop insurance fact sheets and planting date maps available on their web site (www.rma.usda.gov/aboutrma/fields/mn_rso/).
Late and prevented planting crop insurance options
Assuming that producers have an eligible Revenue Protection or Yield Protection crop insurance policy, they would have the following options with regards to delayed or prevented planting later than the established final planting dates:
• Plant the insured crop during the late planting period, which is typically 25 days following the established final planting date for a given crop. For example, a final planting date of May 31 for corn results in a late planting period from June 1-25. The crop insurance coverage is reduced by 1 percent for each day after the final planting date for the next 25 days. For crops planted after the final dates for the late planting period (June 25 for corn), crop insurance coverage is set at a maximum of 55 percent of the original insurance guarantee.
• Plant another crop (second crop) after the final planting date.For example, soybeans could be planted on intended corn acres after May 31. In that case, there would be no prevented planting coverage payment eligibility for the corn acres, and the soybeans would be treated as insurable soybean acres. If the soybeans are planted after the final planting date (June 10), they would be considered “late planted,” with a 1 percent per day reduction in the revenue guarantee for 25 days.
• File a prevented planting crop insurance claim on the qualifying original unplanted acres after the final planting date.The producer will receive a prevented planting payment per eligible acre equal to the original revenue guarantee times 55 percent for corn and 60 percent for soybeans. The original revenue guarantee is the actual production history yield times the crop insurance base price ($4.00 per bushel for corn and $9.54 per bushel for soybeans) times the level of RP coverage level. (Following are examples with 80 percent RP coverage on corn and 85 percent RP coverage on soybeans: Corn — 190 bu./acre times $4.00 per bushel times 80 percent equals $608.00 times 55 percent equals a prevented planting payment of $334.40. Soybeans — 55 bu./acre times $9.54 per bushel times 85 percent equals $474.98 times 60 percent equals a prevented planting payment of $267.60.)
Please refer to the accompanying table for further examples.
• A producer who files a prevented planting insurance claim after the final planting date cannot plant another crop on those acres during the 25-day late planting period, or they will lose their prevented planting insurance payment. After the late planting period (June 25 for corn and July 5 or 10 for soybeans), a producer has the following options on those acres: Leave the unplanted acres idle and control the weeds; plant an approved cover crop on the prevented planted acres, with no reduction in the prevented planting insurance payment. (The cover crop cannot be harvested in 2019. Haying and grazing of those acres is permitted after Nov. 1.); or plant another crop (second crop) after the late planting period has ended, with the intent of harvesting that crop for forage. In this case, the prevented planting payment is reduced to 35 percent of the original prevented planted payment. This may be an option for dairy and beef producers who are short of feed and hay supplies. (Example: $609 per acre original guarantee times 55 percent equals $334.40 per acre times 35 percent equals an adjusted prevented planting payment of $117.04 per acre.)
Minimum acreage for prevented planting
To qualify for prevented planting insurance coverage and payments, affected areas must be the lower of 20 acres, or 20 percent of the total eligible insured acreage in a farm unit. Very small areas of land do not qualify for prevented planting coverage, which could affect smaller land tracts with optional unit insurance coverage. Meeting the 20 percent threshold will likely be easier with enterprise units than with optional units. However, there is lot of variation from farm-to-farm, so producers need to check with their crop insurance agent. (Example: 500 acres of corn: 400 acres (80 percent) planted with full crop insurance coverage; prevented planting is paid on the remaining 100 acres (20 percent) at 55 percent of the crop insurance guarantee per acre.)
Eligible acres for prevented planting
The maximum acreage eligible for prevented planting coverage is limited to the number of acres in the insurable farm unit. Furthermore, the maximum eligible acres for a crop is the highest number of acres planted to that crop on that insurable farm unit in the past four years — regardless of the planned crop acreage for 2019. (Example: If the total acres in a farm unit is 100 acres, but the highest corn acreage in the past four years was 60 acres, the maximum corn acres eligible for prevented planting coverage on that farm unit would be 60 acres.)
Economics of the prevented planting decision
Every producer and every farm unit is in a different situation as it relates to the economics of the prevented planting crop insurance decision. This is why it is important for farm operators to work with their crop insurance agent to analyze the economics of planting a crop late, vs. filing a prevented planting claim on a various farm unit. One of the biggest differences when analyzing the economics for corn acres is probably whether or not any fertilizer has yet been applied. Iowa State University has developed a very good spreadsheet to evaluate late and prevented planting crop decisions, which is available at www.extension.iastate.edu/agdm/cdcostsreturns.html.
Prevented planting notification — Crop insurance policy holders are required to notify their insurance agent within 72 hours after the final planting date if they plan to file a prevented planting insurance claim. The same 72-hour deadline is in place during the 25-day late planting period, if a producer decides to discontinue planting, and proceed with a prevented planting claim.
Minimum planting with enterprise units — A producer filing a prevented planting claim, who originally signed up with enterprise units, must have planted the lower of 20 acres or 20 percent of the insured crop acres in at least two sections of land to be eligible for the lower insurance premiums with enterprise units. Otherwise, the farm unit will still receive the appropriate prevented planting payment on that farm unit, but will be charged the insurance premiums for the higher of basic or optional units. (This would be the situation if no acres were planted.)
No Harvest Price option — There is no Harvest Price option with prevented plating insurance coverage, so even if the harvest price is higher than the crop base price, the amount of the prevented planting payment will not be increased. Prevented planting payments are made on the base price.
Impact of prevented planting on future APH yields — Generally, prevented planted acres will not impact the future APH yields, unless a second crop is planted, as only the planted acres are used to determine the crop year yield on a farm unit. If a second crop is planted, the prevented planted acres will be assigned a yield equal to 60 percent times the APH on the farm unit. If no insured crop acres are planted on a farm unit, that crop year will not be considered in the future APH calculation.
Every producer’s situation is different regarding late and prevented planting options. As a result, the best option will vary considerably from farm-to-farm, based on differences in yield potential and insurance coverage. The choice that a producer makes could result in a difference of thousands of dollars in the potential insurance coverage available. This is why it is extremely critical for producers to consult with their crop insurance agent before finalizing late and prevented planting crop decisions.
I have prepared an information sheet,“Late and Prevented Planting Options for 2019”, which contains details on prevented planting requirements and considerations, as well as tables comparing the potential results for options of late planting or prevented planting with normal production for corn and soybeans. To receive a copy of the prevented planting information sheet, send an e-mail to firstname.lastname@example.org.
Kent Thiesse is a government farm programs analyst and a vice president at MinnStar Bank in Lake Crystal, Minn. He may be reached at (507) 726-2137 or email@example.com.