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Producers urged to check prevented planting corn eligibility

As a marketing instructor finished commenting that crop insurance alone this spring could bring profit, there was one grain and livestock producer in the crowd that offered some news.

Gary Morris, a southern Iowa producer, attending his first-ever marketing seminar a few weeks ago, said his crop insurance agent informed him that part of the added corn acres he was planning to plant wouldn't be covered at the corn rate.

"If I understood her correctly, she was saying that if I faced a prevented planting situation, and if I didn't have a four-year history of planting that ratio of corn acres, some of those acres would be paid out as if they were soybeans, a much lower rate."

Morris understood his agent correctly, according to industry experts.

Because prevented planting crop insurance eligibility is based on prior planting history, this year's widespread movement to more corn could bring a new twist to the prevented planting insurance issue.

Dave Hall, National Crop Insurance Services spokesman, said producers are urged to contact their agent with concerns.

"It's shaping up to be an unusual year. This gets complicated," Hall said. "To be safe, the producer should check with an agent to be sure they fully understand what the ramifications could be with respect to their crop insurance policy."

Hall added, "You can speak in general terms with prevented planting. But, everybody is different. Depending upon the producer's eligibility, yes, this year could make a difference on what payment they receive."

Producers planning to plant more corn than usual this spring could see less revenue on crop insurance coverage if the switched crop isn't planted on time.

For example, a 1,000 acre producer with a historical insured database of 500 corn/500 soybean acres who this year shifts to more corn, could face some crop revenue issues with prevented planting.

If the acres that historically were planted with soybeans, but this year were switched to corn, didn't get planted, the producer likely would receive a crop insurance prevented planting payment at the soybean rate, not the corn rate.

In the insurance business, this is called running out of corn eligibility.

PREVENTED PLANTING PAYOUTS

Keep in mind that prevented planting payouts will vary with the different crop policies, Jay Jacoby, Rain & Hail LLC claims manager, said.

To figure what a producer would receive if the land was left barren, the regular crop insurance guarantee amount is multiplied by the prevented planting guarantee. A producer can be insured at the base prevented planted guarantee level of 60%, or choose a 65% or 70% level option.

A producer insured at the 75% guaranteed level and 60% prevented planting guarantee, with a soybean average of 50 bushels per acre, could eventually see a prevented planting payout of about $182.00 per acre, Jacoby explained. For corn, with a 150 bushel per acre average, at 75% coverage, the prevented payout would be about $274.00 per acre.

"It's possible this year, if a 1,000 acre producer, under the coverage mentioned, doesn't get those extra corn acres planted, he or she could be expecting a crop insurance check for $137,000, but only get $91,000.00. That's very possible this year," Jacoby said.

Another scenario is a producer who has 1,000 acres with a 50/50 corn/soybean rotation history.

"If the producer doesn't have a history of insuring the 500 acres of soybeans, then those same acres, if intended to be planted to corn this year, might not be eligible for any prevented planting coverage payment," Hall said.

NORMAL CONCERN FOR NEBRASKA

Historically, western Nebraska, the Dakotas, and Michigan producers, have had increased prevented planting issues compared to other states in the Corn Belt. In the valley of the Dakotas, wet conditions prevent producers from getting the crop planted from time to time. In western Nebraska, dry conditions keep producers from getting a crop planted on time. In other major Corn Belt states, producers for the most part have been able to get the crop included in their historical database planted.

MARKET EYES PLANTING DELAYS

With the wet weather talk in the Midwest, combined with a lot of expected acreage shifts to corn, the prevented planting crop insurance scenario is gaining more attention than usual in marketing circles. The trade is already keyed in on the nearby weather forecast for the Midwest, according to Allendale, Inc. Rains forecasted for the western Corn Belt and southern Plains is welcome, while the eastern Corn Belt well saturated.

"Given all the attention to planting intentions for 2007, we were not surprised to hear directly from the CBOT trade floor how with the wet weather forecast in the east, the speculative interest is already talking about corn planting delays," Allendale, Inc. market analysts stated in a daily newsletter.

As a marketing instructor finished commenting that crop insurance alone this spring could bring profit, there was one grain and livestock producer in the crowd that offered some news.

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