Prevented Planting FAQ for 2019

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

Steve JohnsonQuestion: When is prevented planting available?

Answer: Prevented planting must be due to an insured cause of loss that is general in the surrounding area and that prevents other producers from planting acreage with similar characteristics. Failure to plant when other producers in the area were planting will result in denial of the prevented planting claim.

There’s also a 20/20 Rule – a minimum of 20 acres or 20 percent of the unit must be affected. Total acres   of planted and prevented planted cannot exceed the total cropland acres. Prevented planting claims must be filed with your crop insurance agent by June 28   for corn and July 13 for soybeans. Prevented planting acres must be reported on the FSA Form 578 acreage report. That deadline to file that form in Iowa is July 15, 2019.

Question: When is prevented planting not available?

Answer: On ground that is insured through a New Breaking Written Agreement; Conservation Program Reserve land that is in its first year out of CRP; on ground where a pasture or forage crop is in place during the time of planting; when other producers in the area   are able to plant; and on county-based crop insurance area policies such as AYP and ARPI.

Question: How much do I get paid for prevented planting

Flooded field

Answer: When spring conditions prevent a crop from being planted, payment equals 55 percent of the initial revenue guarantee on corn and 60 percent on soybeans.

  • An example payment for corn would look like the following: 190 bushels APH x 80% x $4.00/ bu = $608 initial revenue guarantee x 55% = $334.40/acre PP payment.
  • For soybeans, an example is: 55 bushels APH x 80% x $9.54/bu = $419.76 initial revenue guarantee x 60% = $251.86/acre PP payment.
  • Note that payments for prevented planting use the projected price (new crop futures price average in February).

Question: How are eligible acres for prevented planting determined?

Answer: The insurance company considers each of the insured’s crops in each county. They look at the maximum number of acres reported for insurance and certified in any of the four most recent crop years. The acres must have been planted in one of the last three crop years.

Question: What happens if you are prevented from planting and there are not enough eligible acres for the crop being claimed?

Answer: When the insured runs out of acreage eligibility for one crop, the remaining prevented planting acres will be “rolled” to another crop, such as corn to soybeans.

Question: What happens to my APH – actual production history – if I take prevented planting?

Answer: The insured farmer who receives prevented planting on a crop does not have to report the actual yield for the year. Generally, prevented planting will not impact the APH yield in future years, unless a second crop is planted on prevented planting acres.

Question: What happens if the first crop is prevented planting, but the second crop is planted?

Answer: If the second crop is planted, it MUST be insured if there was insurance for that crop elected on or before March 15, 2019. The second crop must have been planted AFTER June 25 for corn and July 10 for soybeans. If the insured farmer plants a second crop they will still receive 35 percent of the indemnity for the prevented planting crop and pay only 35 percent of the premium.

Planting a second crop on prevented planting ground affects the following year’s APH:

  • First crop – you receive 60 percent of the approved yield (190 bu/A APH X 60% = 114 bu/A).
  • Second crop – actual yields are used for APH.

Question: What will crop insurance adjusters need to do for prevented planting claims?

Answer: Visually inspect all prevented planting acres to determine:

  • Acres are within five percent of what was on the acreage report.
  • Whether the acres are left idle, or whether a cover crop or second crop has been planted.
  • What the cause of loss was, and if it is general to the area.
  • Determine eligible acres.
  • Roll acres to other crops if insured is short of eligible acres for reported prevented planting crop.

Question: What are the deadlines for filing prevented planting in Iowa?

Answer: These dates vary by state, but tend to be three days after the last day of the late planting period.

  • In Iowa, the deadline for filing prevented planting with your crop insurance agent is June 28 for corn and July 13 for soybeans.
  • Acreage reporting deadline is July 15.
  • Prevented planting acres listed on your acreage report (FSA Form 578) should match the information provided to your crop insurance agent in order to qualify for a full indemnity payment.
  • Work with your crop insurance agent well in advance of these dates regarding a prevented planting claim and whether a cover crop or a second crop will be planted.

Question: If I have to leave some of my acres unplanted (prevented planting), will they still count toward my eligibility for enterprise units?

Answer: Only planted acres are considered when determining eligibility for enterprise units. (To qualify for enterprise units on crop insurance policy, at least the smaller of 20 acres or 20 percent of planted acres must be in two or more different township sections.) For example, a farm with 200 acres each in two sections would normally qualify for enterprise units. However, if fewer than 20 acres are planted in one of the sections, the farm would no longer qualify. Possible increases in crop insurance premiums due to a change in unit designation should be considered when deciding whether or not to file a prevented planting claim on some acres.

Question: If I take prevented planting on some of my fields and plant a cover crop, when can I harvest or graze the cover crop?

Answer: If you plant any kind of cover crop and expect to receive a crop insurance indemnity payment for prevented planting, you cannot harvest or graze those acres until after Nov. 1.

ISU resources for more information

More details can be found in the ISU Extension and Outreach Ag Decision Maker publication, Delayed and Prevented Planting Provisions. An electronic decision spreadsheet is also available to help analyze alternative actions. Producers should communicate with their crop insurance agent before making decisions about replanting or abandoning acres.

More resources on Recovering from Disasters are also available from ISU Extension and Outreach.

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Despite Weather Issues, Yield Estimates Better Than Expected (8/10/17)

Chad Hart, ISU Extension Grain Marketing Economist, provides a summary of the latest USDA reports.

Chad Hart imageThe first official tour of the nation’s fields this summer resulted in better crop yield and production estimates than the market was expecting. The national corn yield estimate came in at 169.5 bushels per acre, down 1.2 bushels from trend, but that was still a couple of bushels above trade expectations. If realized that points to a 14.15 billion bushel corn crop, which would be the 3rd largest ever, continuing a string of large corn crops. The soybean yield estimate was 49.4 bushels per acre. That is 1.4 bushels above trend and sets up this year’s crop to exceed last year’s. So bushels and bins would continue to overflow with these estimates.

On the demand side, news was mixed. Soybean export projections were raised 75 million bushels, but domestic soybean crush was lowered by 10 million. Corn feed usage and exports were reduced by 25 million bushels each. Combined, the corn adjustments shrank 2017/18 ending stock projections by 52 million, but stocks are still projected above 2.25 billion bushels. For soybeans, ending stock projections rose by 15 million bushels, to 475 million. For prices, USDA held their price range for corn, leaving the midpoint at $3.30 per bushel. While for soybeans, the price range tightened a bit, losing a bit more than the high end than the low, with the midpoint now at $9.30 per bushel.

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Pricing drought damaged silage

Contributed by William Edwards, extension economist

Corn that has suffered severe drought damage is sometimes harvested as silage instead of as grain. It can still have significant feed value if harvested at the right stage. See the article “Alternatives for Drought-damaged Corn—Grain Crop or Forage” for harvesting recommendations. Any damaged acres that are covered by crop insurance should be viewed by an adjuster and released by the insurance company before harvesting takes place.

Grain producers may be willing to sell to the corn standing in the field, to be harvested by the livestock producer or a custom operator. The buyer and the seller must agree on a selling price.  The seller would need to receive a price that would give at least as good a return as could be received from harvesting the corn as grain. The buyer would need to pay a price that would not exceed the feeding value of the corn.  Within that range the price can be negotiated.

One ton of normal, mature standing corn silage at 60% to 70% moisture can be valued at about 10 times the price of a bushel of corn. For a $3.50 corn price, a ton of silage would be worth about $35 per ton. However, drought stressed corn may have only 5 bushels of grain per ton of silage instead of the normal 6 to 7 bushels. A value of about 9 times the price of corn would more appropriate. For silage with little grain content, a factor of 8 times the price of corn can be used.

If the crop is sold after being harvested and transported, those costs must be added to that value, typically $5 to $10 per ton, depending on whether it is done by a custom operator or the buyer, and the distance it is hauled. A buyer would only consider the variable costs for harvesting and hauling, whereas a custom operator would need to recover fixed costs, as well.

More information on valuing forage in the field, including an electronic spreadsheet for estimating a value for corn silage, for both the buyer and the seller, is available from Ag Decision Maker.

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Acreage Shifts and Crop Flows (6/30/17)

Chad Hart, ISU Extension Grain Marketing Economist, provides a summary of the latest USDA reports.

The Acreage and Grain Stocks reports were released June 30th. And for the most part, the numbers were within the range of expectations.  The corn numbers ran a bit higher than the trade expectations, but the soybean numbers were a bit below. For corn, national acreage was estimated at 90.9 million acres. That is roughly 900,000 acres more than farmers indicated in March. Producers in Iowa, Nebraska, Kansas, North Dakota, Michigan, and Colorado increased corn plantings, raising corn acreage by at least 100,000 acres in each state when compared to the March projections. Meanwhile, producers in Illinois, Indiana, and South Dakota reduced corn area by at least 100,000 acres in each state. For soybeans, national acreage was estimated at 89.5 million acres, just 31,000 acres more than the March intentions. While farmers in Illinois, North Dakota, and Missouri increased soybean plantings significantly when compared to intentions, farmers in Iowa, Indiana, Kansas, and Louisiana offset those gains. Overall, the trade expected more soybeans and less corn. And the bigger surprise is likely the smaller soybean acreage number.

National stocks for both crops were up 11 percent compared to last year, but that was to be expected given the record production for both crops last fall. The key feature in the stocks report to me was the disappearance rates  For corn, quarterly disappearance was up 9 percent, while for soybeans it was up 18 percent.  So crop usage remains robust and has continued to chew through the large supplies.  Combined, these reports provided a little positive news for the crop markets.

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Consider Use of a Basis Contract to Market Corn

Steven D. Johnson, Ph.D., Farm Management Specialist, Iowa State University Extension and Outreach, shared marketing tools and tips for the 2016 crop.

Johnson_Steve_smKeep an eye on your local basis to see if you should continue to store or price some of your corn. Farmers who have unpriced corn might consider using a basis contract to market at least a portion of those bushels. An attractive basis in late December and the need for cash will be the main drivers for farmers to move some of those stored bushels. Most of the cash price movement in late fall and early winter months typically comes from better basis being offered as farmers slow grain movement. In addition, two 3-day weekends in late December increase the odds of potential “quick ship” bids to meet processor demands for additional bushels.

Seasonal futures price trends indicate corn futures prices don’t typically rally in the fall and winter months. That’s because most everything is known about the Northern Hemisphere feed grain crops by then, and that’s where nearly 85% of the world production takes place. However, most farmers will be reluctant to give up ownership of bushels at sub-$3.50 per bushel cash corn prices.

Farmers need to pay attention to the costs of ownership

Chart of storage costs, on farm vs. commerical
Cost of 2016 Corn Ownership

Compare the cost of storing corn at a commercial elevator to your own on-farm storage costs. The ISU Extension and Outreach Iowa Commodity Challenge website can show you how. It uses the following 2016 crop assumptions: cash corn is valued at $3.11 per bushel at a central Iowa elevator when about 50% of the Iowa harvest was complete. Interest is accruing on stored grain at a rate of 5% or 1.75% if the USDA marketing loan is used. On-farm storage is 1 cent per bushel per month while commercial storage is 16 cents for the first 90 days and 2.8 cents per bushel for each month thereafter. Note the cash prices (dotted line) are below the typical cost of corn ownership as of late November.

Cost of 2016 Corn Ownership

Once you store corn, imagine how much cash prices will need to improve each month to justify storage. Commercial storage could easily be 3 to 4 times more expensive per bushel than on-farm storage costs. The cash price received for commercially stored bushels will also reflect the basis offered at that commercial storage facility. If history is any indication, the likelihood of selling those cash corn bushels above the cost of storage probably means a significant futures price rally is needed (more likely in the spring months)and improvement in the basis.

How does a basis contract actually work?

Most grain merchandisers offer a marketing tool called a basis contract. A farmer delivers cash corn and eliminates storage costs and basis risks. The merchandiser buys a corn futures contract (goes long) in a deferred month on behalf of the farmer. The merchandiser will likely charge a small service fee of 1 to 2 cents per bushel subtracted when the basis contract is settled, likely in the spring.

Upon delivery of the cash bushels, a farmer can collect 70% to 80% of the corn’s value. The merchandiser holds the remaining 20% to 30% balance of the cash value to make potential margin calls should futures prices decline. Any excess funds minus the 1- to 2-cent service fee are returned to the farmer upon settling the basis contract.

Eliminating storage costs and basis risk

The farmer needs to convey to the merchandiser a date and price at which the farmer wishes to have this long futures position lifted. Consider being “long” the May 2017 or July 2017 corn futures contracts when using a basis contract to increase the chance of benefiting from a spring futures price rally.

Discuss risks and rewards with your merchandiser when you’re initiating cash sales and basis contracts. Be sure you understand the risk of being “long” futures and the flow of cash funds involved in the transaction. The farmer isn’t able to take advantage of the carry offered in the futures markets with a basis contract. However, there are several advantages a basis contract provides. Those include providing cash to help pay expenses and meet your farm operation’s cash flow needs, elimination of storage costs and basis risk, and minimizing the concern for on-farm stored corn quality.

Take the Iowa Commodity Challenge and learn new marketing skills

The website featuring the Iowa Commodity Challenge has related crop marketing information including 14 videos and a 65-page Marketing Tools Workbook.

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