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Keep Good Planting Records This Spring

Contributed by Steve Johnson, Extension Farm Management Field Specialist, sdjohns@iastate.edu.

Johnson_Steve_smSpring will arrive eventually, and as you plant corn, soybeans and other crops, keep accurate records. Farmers need to keep track of the date each field is planted, name of the field, how many acres are planted and the crop planted.

Farmers need to keep accurate planting records to report that information to your local USDA Farm Service Agency (FSA) office, to certify your planted acreage. As they do each year, FSA staff will include the information in your acreage report–FSA form 578—which is kept on file at FSA. The information will be used not only by FSA but also by your crop insurance agent to enter into the Risk Management Agency (RMA) database.

Need to certify planted acreage with FSA for farm program and crop insurance

Reporting of planted acreage information to FSA is commonly referred to as “acreage certification.” Farmers certify their planted acreage each year. For 30 years or so farmers have been certifying their planted acreage each year with FSA, so this requirement is not new. But this spring with the late start on planting and what will end up being a rush to get the crop in the ground, it’s important to remember to keep track of their planted acreage information.

With technology in the tractor cab today, how much does that help farmers keep track of information needed for acreage certification? Some farmers are using digital cards and provide their planting information electronically to their FSA office or to their crop insurance agent. But agriculture generally is in the very early stages of certifying acres electronically. Most farmers are still writing down the number of acres and crop planted and related information by hand, and the data is transferred to FSA form 578 by hand.

July 15 is deadline to report 2013 planted acreage to FSA

You have until July 15 to report your planted acreage information to your FSA office,  and it probably wouldn’t hurt to do this in person, just in case someone on the other end of the conversation has a question, or needs a clarification. A lot of farmers, as soon as they are done planting, want to get their information to FSA as soon as possible. And local FSA offices are going to get pretty busy in the next few weeks—with acreage certification and other farm program activities such as ACRE enrollment and CRP and CSP sign-ups.

Most farmers find it works best to keep records while they are actually planting—so they don’t forget or don’t get fields confused as to which information goes with each field. For each field, some also keep track of fertilizer and herbicide applications, tillage practices used, etc. But you definitely need to keep track of the planting information that both FSA and RMA requires.

Traditionally, the deadline for farmers to certify their planted acreage with FSA was June 30. But last year USDA FSA moved it to July 15 to avoid confusion with the crop insurance reporting deadline. Now both deadlines are July 15.

Since the crop insurance billing date has been moved up to August 15, providing a copy of that acreage report well in advance of the July 15 deadline will assure more timely crop insurance data entry and receipt of your premium notice. The 2013 crop insurance premium is due in September. To avoid a penalty, payment must be received by October 1, which is one month earlier than in the past.

Ag Decision Maker (AgDM) 

An agricultural economics and business website.

Iowa’s early planting dates: April 11 for corn, April 21 for soybeans

Contributed by Steve Johnson, Extension Farm Management Field Specialist, sdjohns@iastate.edu.

Early planting dates in Iowa are April 11 for corn and April 21 for soybeans. Acres planted before these dates are no longer eligible for replant coverage payments should it be necessary to replant. The maximum replant payments each year are equal to 8 bushels of corn and 3 bushels of soybeans. Multiply these bushels times the RMA projected price for that year, which is the February average futures price for December corn and November soybeans used to establish the value of the insurance guarantees that the producer purchases. For 2013 the projected prices are $5.65 per bushel for corn and $12.87 for soybeans, so the maximum replant payments are $45.20 or $38.61 per acre, respectively.

Any acres planted before the early planting dates lose replant coverage, even if the entire farm or insurance unit hasn’t been planted. However, early planting doesn’t affect a farm’s actual production history (APH) yield or revenue insurance guarantee, as long as all other good management practices are followed throughout the growing season. Once the crop is planted, that revenue guarantee is still in effect, and any indemnity payments will depend on the final harvested yield and the harvest price.

More information on important crop insurance dates can be found on the Ag Decision Maker website.

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Crop insurance decisions for 2013

Contributed by Steve Johnson, Extension Farm Management Field Specialist, sdjohns@iastate.edu.

When Iowa farmers are determining on or before March 15 which federal crop insurance program to choose, they tend to use revenue coverage. In 2012, about 92 percent of the state’s insured corn acres and 91 percent of the soybean acres utilized revenue protection (RP). With the experience from the drought of 2012, dry subsoil moisture and uncertain summer weather forecasts; those percentages are not likely to go down in 2013.

For most farmers, the most likely choice may be to choose RP and take the Trend-Adjusted yield option or TA-option. This option was offered in 2012 for the first time as a way of reflecting the longerterm trend toward higher yields.  Each county has updated TA factors for 2013. The TA-option is an annual decision and doesn’t affect the farm’s proven actual production history (APH).

Three interacting factors are at play that determines the final farmer paid premiums and are often overlooked prior to the March 15 deadline for spring planted crops. One factor is that federal crop insurance subsidies are a smaller percentage at higher levels of coverage. Thus, larger percent subsidies are provided at lower levels of coverage. A second factor is that the TA-option in almost all cases creates a larger revenue guarantee. This decision can actually save premium depending on the level of coverage and whether to elect optional or enterprise units.  That third factor is the decision to use enterprise unit coverage which carries more risks by grouping all fields of that particular crop together in the county for determining a potential loss payout. However, with a larger percent federal subsidy the farmer paid premium for enterprise unit coverage is roughly one-half that of optional units.

Let’s take a central Iowa farm insuring corn as an example with an actual proven APH yield of 175.5 bu. per acre. But that same farm that takes the TAoption, can create an adjusted yield of 194.2 bu. per acre. With that in mind, a farmer could choose a lower percentage level of coverage along with the TA-option and still create a larger revenue guarantee due to the higher yield guarantee.

Here’s how that might work. An actual APH of 175.5 bu. per acre at an 85 percent coverage level and a 175.5 bu. per acre and yield guarantee of 149.175 bu. per acre. Taking the TA-option means that farmer could create a larger revenue guarantee and actually move from 85 percent down to 80 percent level of coverage which would guarantee 155.36 bu. per acre. The farmer paid premium could remain the same or lower, depending on the choice of enterprise or optional unit coverage. That’s because the 80 percent level of coverage has a slightly higher percentage federal subsidy than does the 85 percent level.

Of course, that scenario may not be the same for every farm and decisions are made for all crops on all farms being insured in that county. Farmers should talk with their insurance agent about their various choices regarding their 2013 crop insurance decisions.  Remember, those decisions might include adding policies for specific perils such as hail or wind. Purchasing these endorsements are becoming more common, especially if you elect to use enterprise unit coverage or want to manage the deductible not covered by federal crop insurance. 

In summary, expect few changes in crop insurance decisions for 2013. Premium rates are actually going to be lower statewide (about 6 percent for corn and 9 percent for soybeans). The drought of 2012 is not yet affecting premium rates. If you are insuring a new farm or are bringing CRP, pasture or hay ground into row crop production there is a March 15 deadline to report those intensions. May 10 is the deadline for destroying established cover crops. The final crop insurance payment is now due on October 1 instead of November 1, without a penalty attaching.

Early planting dates remain the same in Iowa. That’s April 11 for corn and April 21 for soybeans. Crops planted before those dates are not eligible for replant coverage of roughly $40 to $45 per acre. Those acres are, however, still insured and require that best management practices be used which still might require replanting.

Ag Decision Maker (AgDM)

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Spring cover crops and crop insurance eligibility

Contributed by William Edwards, extension economist, wedwards@iastate.edu

Some livestock producers established a cover crop after they harvested corn this fall to provide extra forage. If they hay or graze the cover crop, will this affect their crop insurance coverage for 2013?

According to program specialists at the Risk Management Agency (RMA) office in St. Paul (which administers programs in Iowa), cover crops such as rye, for example, that were established in 2012 are not insurable themselves, but will not affect the insurability of subsequent crops planted  this year if certain rules are followed. 

The RMA filed a statement for 2013 that allows spring haying, harvesting or grazing of cover crops up to May 10 without affecting the eligibility of the following grain crop for multiple peril crop insurance coverage. The growth of the cover crop must be terminated either mechanically or with herbicide before any subsequent crop can be planted. Planting a grain crop into a living cover crop is not permitted.

The RMA definition of a cover crop is “a crop generally recognized by agricultural experts as agronomically sound for the area for erosion control or other purposes related to conservation or soil improvement.”

For further details check with your local crop insurance agent.

Ag Decision Maker (AgDM)

An agricultural economics and business website.

Fall harvest prices & indemnity payments

Contributed by Steve Johnson, Extension Farm Management Field Specialist, sdjohns@iastate.edu.

The USDA Risk Management Agency (RMA) will release the final fall harvest prices for revenue protection crop insurance policies on November 1st. As of October 15th, those harvest prices are near $7.50 per bushel for corn and $15.38 per bushel for soybeans.

These final harvest price numbers are the final piece of information to finalize potential indemnity payments for Revenue Protection crop insurance coverage. Iowa farmers chose Revenue Protection on 92% of the insured corn acres and 91% of the insured soybean acres in 2012.

Many Iowa farms that suffered significant production losses in 2012 will receive indemnity payments over the next few months reflecting these harvest prices. Both the December corn futures price and the November soybean futures price have increased between the projected price (determined in February) and the harvest price (determined in October) periods. Should a production shortfall occur, that loss would be compensated at the higher harvest price. Farms that chose to insure their crops with a Yield Protection policy may also receive an indemnity payment for yield losses, but the loss will be paid at the February price level.

Many farmers use revenue protection coverage along with pre-harvest marketing strategies and commit a portion of their guaranteed bushels to delivery. This harvest price is critical if any lost production must be replaced at higher market prices for on-farm feeding or to fulfill delivery on a forward cash or hedge-to-arrive grain contract.

Shortfall of contracted bushels

Once farmers realize that they cannot deliver all the bushels they’ve contracted, they should work with the grain merchandiser on a strategy to make up the shortfall in bushels or pay the replacement value of those bushels.

To illustrate how indemnity payments are determined an example of Revenue Protection (RP) coverage for corn is featured.

2012 Revenue Protection (RP) example:

A loss occurs when the bushels of corn produced for the unit fall below the production guarantee as a result of damage from a covered cause loss. This example assumes 175 bushels per acre APH yield, 75-percent coverage level, and basic unit coverage.

175 bushels per acre X .75 = 131.3 bushel guarantee*

100 bushels per acre actually produced

131.3 bushels – 100 bushels = 31.3 per acre loss

31.3 per acre loss X $7.50 per bushel (harvest price determined in October) = $234.75 net indemnity*

* Figures shown on a per acre basis. Guarantees and losses are paid are on a unit basis. See individual policy provisions.

Summary

As long as the farmer did not commit to delivery of more than the 131.3 bushels per acre, he or she should have adequate fund to make up the shortfall in bushels or pay the replacement value of those bushels.

Delaying settlement beyond early November leaves farmers in a speculative position for those bushels that they were unable to deliver. Should the futures price move even higher beyond this time frame, the replacement cost would increase. Regardless, the need to work with the grain merchandiser is critical should you fall short on contracted bushels.

Adapted from USDA RMA’s 2012 COMMODITY INSURANCE FACT SHEET, Corn—Crop Revenue Coverage, January 2012.

Updated information on fall harvest prices will be posted on the AgDM blog and website as it becomes available.

Ag Decision Maker (AgDM)

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Client Corner: How is crop insurance split in a crop-share agreement?

Contributed by William Edwards, extension economist

Question: How is crop insurance split in a crop-share agreement?

Answer: Under a crop share lease each party is responsible for insuring his or her own share of the crop. Every crop insurance policy states the percent interest that the policy holder has in the crop. For a 50/50 share lease, this would be 50%. The premiums, guarantee, and any indemnity payment would be multiplied by this percent. It is not common practice to include this in the lease agreement, because each party makes the decision to insure his/her share of the crop independently. To insure a share of the crop, talk to a crop insurance agent. It does not have to be the same agent for tenant and land owner. For more information on farmland leases, see the Ag Decision Maker Leasing page.

Ag Decision Maker (AgDM)

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Preparing for a Crop Insurance Review of APH Yields

Contributed by Steve Johnson, Extension Farm Management Field Specialist.

A large number of Iowa farmers are likely to make a claim for crop insurance losses as a result of the 2012 drought. A number to keep in mind is a $200,000 claim. At that level or higher for at least one crop in a county a review will be triggered as required by the USDA Risk Management Agency. That $200,000 amount could be due to loss of either production or price, depending on the type of policy purchased.

Those farmers will need to provide actual production history (APH) records, which will include an APH review for 2009, 2010 and 2011 crops as well as the 2012 crop to be harvested.

Prior to 2012, the trigger amount was a loss of greater than $100,000. Even with the dollar amount of indemnity payment doubling, a large number of reviews are anticipated. Reviews will be carried out by insurance company representatives.  Farmers are advised to start collecting documents as soon as possible to help expedite the review. These reviews are normally triggered once a claim has been worked and determined to be over the $200,000 threshold for at least one crop in a county.

This review process typically is done during the harvesting period. The purpose of the review is to validate reported production, which means a variety of documents can be utilized, including settlement sheets, load records, bin measurements, loss papers, livestock feeding records or other approved records that would verify acres and production.

The farmer’s main responsibility is to provide three years of verifiable production evidence for the units of the crop being reviewed. Claims for 2012 will not be paid until this process is completed. This could delay receiving an indemnity payment at a time that many farmers have cash flow constraints resulting from the drought.

Consider the use of these recommendations to prepare for an APH review and for any spot checks or audits in the future:

  • Keep all of your production records for at least three years.
  • Separate production records by crop, practice, type, unit and the crop year in which the production actually occurred.
  • Sort production records by the FSA Form-578 (to identify each crop and separate them by unit and county), settlement sheets and soft records.
  • If your grain is farm-stored, have grain bin measurements taken by a third party representative including 2012 production.
  • If you had the grain weighed before you stored or sold it, provide any scale tickets that contain weight and volume measurements.
  • If scale tickets are used from grain carts, the print on these tickets can become unreadable with time, make photocopies.
  • Do not split truckload tickets and bins between units unless you have soft records for production that is commingled.
  • Print combine monitor records and keep them with your settlement sheets. These records must show location of the field, name of crop, date and pounds or bushels harvested. Also records should provide the unit number that correlates with the field identification.
  • Even if you have only a share of a crop, make sure that you will be able to provide records for the entire crop if necessary.
  • Feed production records should be kept at the time the grain is fed, preferably as a record ledger with dates and amount fed.
  • Keep and file all signed appraisals.
  • If a claim will total $500,000 or more, RMA will be notified and a representative can be chosen to participate in the review.

Note that soft records are primarily used for breaking out production by a unit such as load records and yield monitor records, while hard records would be actual production numbers such as settlement sheets, scale tickets, appraised production, adjuster measured production, or feed production records.

Farmers that anticipate a claim of $200,000 or more for at least one crop in a county should begin work with their crop insurance agent to prepare for the APH review.

Ag Decision Maker (AgDM)

An agricultural economics and business website.

Drought Questions: Crop Insurance Indemnity Payments and Flex Lease Bonus Payments

Contributed by William Edwards, extension economist

Question: How do crop insurance indemnity payments factor into flex lease bonus payments?

Answer: Crop insurance indemnity payments can be included in the gross crop revenue value used to determine the cash rent payable under a flexible lease, if gross revenue is used to set the rent or the bonus portion of the rent. The payments should be net of the farmer paid premiums paid, however. This is true even in years when no payments are received, that is, premiums should be subtracted from the gross revenue before the percentage is applied to calculate the rent or bonus. In this way the landowner is indirectly standing a share of the insurance coverage which is supporting the gross revenue and rent each year. If the acres included in the insurance unit include multiple rented or owned farms, it may not be practical or fair to divide the crop insurance proceeds and premiums among the farms, however. How to handle crop insurance premiums and payments should be discussed at the beginning of the lease period.

For more on Flexible farm leases, see Ag Decision Maker Information File C2-21, Flexible Farm Lease Agreements, Information File C2-21, Flexible Cash Rent Lease Examples, and Management the Financial Risks of Drought-damaged Crops with information on Flexible Farm Leases that Work. Other drought resources from ISU Extension and Outreach are available on the Dealing with Disasters website.

Ag Decision Maker (AgDM)

An agricultural economics and business website.

Drought Questions: Cover Crops and Crop Insurance

Contributed by William Edwards, extension economist

Question: If I chop my corn for silage now, can I establish a cover crop for grazing or haying this fall and next spring? Will this affect my crop insurance coverage next year?

Answer: According to program specialists at the Risk Management Agency office in St. Paul (which administers programs in Iowa), emergency forage crops, such as rye, for example, can be established, grazed and harvested yet this year. These crops would not be insurable, but neither would they affect the insurability of crops next year.

If the crop would reemerge next year, it would continue to be uninsurable, but it could be grazed. The cover crop could not be harvested mechanically, however, and it would need to be destroyed either mechanically or with herbicide before any of it reached the heading or budding stage to allow the corn or soybeans following to be insurable.

Double cropping is not an approved practice in Iowa for crop insurance purposes. The reasoning is that the first harvested crop depletes much of the soil moisture, and the practice is not wide enough used to develop sound premium rates. Hence, the forage crop and the following grain crop could not both be harvested in the same year. 

The only exception would be if the corn or soybean crop following the cover crop was insured with a group crop insurance policy such as GRIP or GRP. However, these policies require that all the producer’s acres of that crop in the same county be insured under the group plan, and guarantees and indemnities are based on county average yields rather than farm level yields.

For further questions check with your local crop insurance agent.

Ag Decision Maker (AgDM)

An agricultural economics and business website.

Drought Economics: Frequently Asked Questions

Have questions regarding crop insurance, valuing corn silage, or the ACRE Program? Chad Hart, ISU extension and outreach economist has compiled answers to address many of the  questions that have come to ISU Extension and Outreach in the last several weeks concerning the 2012 drought. The PDF publication is available through the ISU Extension and Outreach Frequently Asked Questions page. More resources are also available for crops, livestock, home & yard, and financial concerns.

Ag Decision Maker (AgDM)

An agricultural economics and business website.