Agony of prevented planting
As the final planting date for federal crop insurance on corn approaches many areas of a waterlogged Corn Belt, farmers are wrestling with a decision that gives even ag economists a headache.
In some areas, such as Nebraska, the final planting date (May 25) has passed, but for Iowa and most of Illinois it’s next week, May 31. And in Indiana and soggy Ohio, it’s June 5.
There’s a bit of wiggle room. You have up to 72 hours after the planting date to notify your crop insurance agent. Or you can decide to not collect prevented planting and for 25 days after the planting date you can still plant and get some coverage of the crop. But you lose 1% of your guarantee for each day past the planting date. If you opt for the prevented planting payment, you would normally be paid 60% of the production guarantee.
In some areas of the country, especially the eastern Corn Belt and North Dakota, farmers will have little choice but to try to collect prevented planting insurance.
“In North Dakota, this whole state, not just the Red River Valley, is experiencing major wetness, from western North Dakota, that’s usually praying for rain, to the valley,” says Aaron Krauter, the state’s Farm Service Agency executive director.
It’s not a new problem there. In 2009 the state had 1.9 million acres of crops that didn’t get planted. In 2010 it was 1.7 million acres. This year Krauter expects as much as 4 million acres of all crops to remain unplanted. Corn, 49% planted last week, was the favored crop, but still behind the five year average of 77%. Only 6% of the state’s durum wheat is in the ground, compared to a normal 71%.
“It’s never been this way in North Dakota,” he says. “The joke right now is, ‘Do you have an uncle named Noah?’”
In other wet spots in the Corn Belt, where planting might be a late choice if weather cooperates, it’s not an easy one. Some experts say the numbers already favor just taking a prevented planting payment. Others aren’t so certain, given the way crop insurance decisions can affect other government programs like SURE (Supplemental Revenue Assistance Payments Program).
At the University of Illinois, economist Gary Schnitkey has crunched the numbers and found a slight advantage to prevented planting. In an analysis published this week, Schnitkey projects a prevented planting net return for corn with 150 bu.A APH at $382 an acre if it’s insured at the 75% level. He assumes you’ll spend $15 an acre to control weeds and pay $9 an acre, still meeting the requirements for an enterprise unit. If you plant, he assumes a yield at this late date of 120 bushels an acre and a price of $6.40 a bushel, which gives you a net of only $373 an acre after expenses for a late-planted crop. If you have a higher level of coverage, the advantage to taking prevented planting is even greater.