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Crop insurance and wheat failure

Agriculture.com Staff 04/25/2007 @ 3:25pm

Farmers considering planting another crop to replace freeze-damaged wheat may have crop insurance considerations, says a University of Illinois Extension farm financial management specialist.

"Recent freezes have harmed wheat causing some farmers to consider destroying wheat and planting another crop," says Gary Schnitkey in a university report. "For many farmers, planting another crop will have crop insurance implications. Farmers need to contact their crop insurance agents to discuss their specific situations."

Schnitkey has prepared a report about the insurance implications of replanting frozen wheat acres entitled "Crop Insurance Decisions Associated with Wheat Failure."

"The report addresses three topics: Implications when wheat acres are not insured, implications when wheat acres are insured, and considerations with Group Risk Plan (GRP) and Group Risk Income Plan (GRIP) policies," he says.

If a farmer has not insured wheat acres, the wheat can be destroyed and another crop planted, Schnitkey says.

"The following crop may be insured if the farmer has a policy for the following crop and certain criteria are met," he says. "For example, consider a farmer who signed up for a corn policy by the March 15 deadline and the destroyed wheat acres will be planted to corn. In this case, the acres will be insured as corn.

"On the other hand, the acres will not be insured if the farmer does not have a corn policy."

In the case of insured wheat acres, the farmer must contact his or her crop insurance agent before destroying the wheat. The agent will contact the crop insurance company and the company will assign an adjustor who will determine acres of loss.

"If wheat acres are going to be destroyed, it is possible that representative strips will need to be left in the field--except if the policy is GRP or GRIP. These representative strips will be used to determine the wheat yield for calculating crop insurance indemnities at a later date," Schnitkey says.

On destroyed acres, farmers have a choice concerning crop insurance. The farmer can:

  • Elect not to insure the succeeding crop. In this case, the farmer will receive 100% of the payment for wheat and pay 100 percent of the wheat premium
  • Elect to ensure the second crop, given that the farmer has a policy for the succeeding crop. Except for double-crop soybeans, the farmer will receive 35% of the wheat insurance payment and pay 35% of the wheat premium. In addition, the farmer will pay the premium on the succeeding crop. There are other additional considerations addressed in the full report.

"The rules prevent a farmer from receiving 100% of crop insurance payments for two crops in one year, except where double-crop soybeans are prevalent," Schnitkey says. "If soybeans are planted following the destroyed wheat, the farmer can receive 100% of payments for wheat and double-crop soybeans.

"Farmers with double-crop soybeans should work with their crop insurance agents to determine eligibility for 100% payments."

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