Corn and soybean yields have been better than expected for many farmers in Iowa for 2023, but for many farmers who were caught in the drought areas, reduced yields plus the reduced Fall harvest insurance price for both corn and soybeans may trigger crop insurance payments.
A farmer who uses the cash accounting method may elect to postpone reporting insurance proceeds on damaged crops from the year of damage to the following year if 50% or more of the crop is normally sold the year following production. This is determined on a crop-by-crop basis.
Wind is a covered event in Multi-Peril Crop Insurance and farmers whose insured crop acres have been affected by the Derecho may be eligible for indemnity payments.
Affected farmers should file a Notice of Loss (NOL) with their crop insurance agent within 72 hours of the initial time of discovery of damage or loss and follow up in writing within 15 days. When filing a timely NOL is not feasible, a delayed NOL may be accepted.
The NOL allows the Approved Insurance Provider (AIP) to contact the policyholder and make a determination in a case-by-case basis whether an indemnity will be paid. That decision will depend both on field conditions and farmer’s decisions:
A. If the AIP determines that field conditions will prevent farmers from ever being able to mechanically harvest the crop, that production will be considered a full loss.
B. Otherwise, the farmer can choose to: 1. Settle the case based on appraised production; or 2. Take the crop to harvest.
If a farmer chooses to harvest the crop (even if they chose option 1 in the first place), the producer must accept the highest of harvested production or appraised production for claims purposes. Farmers who choose option 1 first and then decide to harvest the crop must file a revised claim.
Practical Guidance for Farmers
Iowa corn field damaged by the August 10, 2020 derecho, photo by Meaghan Anderson, ISU Extension and Outreach field agronomist
Contact your crop insurance agent as soon as possible, and file a NOL.
If you want an immediate release of the field for another use, you can request the use of Representative Sample Areas or RSAs by the AIP. These are areas of a field that the AIP authorizes to leave untouched for later appraisal when an accurate appraisal cannot be made at the present time. Appraisals from the RSAs of the unharvested crop acreage are later used to settle the claim.
You can salvage any remaining crop for use as silage, but your indemnity payment might be affected depending on how the crop is insured: a. Forcorn insured for Grain, once the AIP releases the field for another use, you can harvest for silage without penalty. b. For corn insured for Silage, if you agree to settle in appraised production, but you still attempt to harvest for silage, you must accept the higher of the appraised or the harvested production for claim purposes.
You can hay or graze a second crop without penalty if the ground has been released for another use by the AIP, it is not practical to replant the insured crop, and the second crop will not be insured. This might be of interest to farmers who use cover crops.
The only case in which you are required to physically destroy your crop production is when grain production is mature and no local buyers are willing to purchase it (typically due to molds and toxins in the mature grain), and it is not economical to ship it to other buyers. This is the case of a crop with Zero Market Value (ZMV), and destruction should take place whether the grain has been harvested or is still in the field.
A Claims Advisory from the Risk Management Agency on August 21, 2020 indicated that the damaged crop in the released field for another use is not required to be harvested (even for RSAs appraisals).
If you or someone you know are in need of assistance with stress and disaster management, call or visit online the Iowa Concern Hotline. Trained staff will assist you 24/7 and free of charge when you dial 1-800-447-1985 or go on-line.
Crop Insurance and Farm Finances
An estimated 87% of corn and 90% of soybean acres planted in 2020 are protected by crop insurance purchased by farmers in the spring. Crop insurance is an effective risk management tool, but is not designed to make farmers whole in the event of loss or damage to their crops. Just like with auto insurance, all policies have a deductible.
About 95% of those insured acres are under the Revenue Protection policy. The most comprehensive revenue protection policy has a 15% deductible that can easily amount to more than $100 per acre for corn and $55 per acre for soybean.
For a farmer planting 400 acres of corn and 200 acres of soybean affected by the storm, it means about $55,000 dollars in deductible that will not be available to pay for groceries, fuel, medical bills, principal and interest from existing loans, or inputs for the 2021 season. In many cases, since profit margins are currently so thin, even an 85% coverage level will not suffice to cover all production costs, particularly if the land is cash rented.
Finally, unless the AIP releases all acres in a unit, indemnity payments from crop insurance will not arrive until all crops are harvested and production records are submitted, late in the year. This will put additional strain on the working capital of Iowa farms, 28% of which started the season with vulnerable liquidity levels.
The information provided is for reference purposes only and does not change the terms of the crop insurance policy. Talk to your crop insurance agent about specific questions related to your crop insurance coverage.
Contributed by Steve Johnson, retired Extension Farm Management Field Specialist
The decision to purchase
Supplemental Coverage Option (SCO) crop insurance in 2020 must be confirmed
with your crop insurance agent on or before March 15, 2020. This deadline for
making crop insurance changes for spring planted crops now becomes the same
deadline for electing and enrolling annually in the ARC/PLC program at your
local USDA Farm Service Agency (FSA) office.
The SCO product is
available to producers who elect and will enroll in the Price Loss Coverage
(PLC) commodity crop program on a farm in 2020. With the ongoing
election/enrollment in the ARC/PLC program this winter, the expectation of many
experts is that most farmers will choose the PLC program on their corn base
acres. However, the ARC-County (ARC-CO) program will be the choice for most
soybean base acres.
The SCO band of coverage
is based on the county revenue given that the underlying COMBO crop insurance
product, likely Revenue Protection (RP) is also purchased. SCO provides a
protection in a band at an 86% maximum level down to the coverage level
selected for RP. An example would be a farmer who selects a 75% coverage level
for RP and adds the SCO product. Thus, SCO could provide county-based revenue
coverage from the 86% to the 75% level, or 11% total SCO.
To trigger an indemnity
claim the actual county revenue must fall below 86% of the county revenue
guarantee before SCO would trigger a payment. As a result, the RP-SCO
combination provides mixed coverage: Farm-level coverage is provided from the
RP product downward (65%, 70%, 75%, 80% and 85% levels) while county-level
coverage provides between 86% and the coverage level of the RP product.
The primary disadvantage
of the RP-SCO combination is that the county-level coverage may not match
losses on a farm. Sometimes a farm may have a large revenue loss while SCO will
not trigger a payment. It’s also possible that the farm does not have a loss
while the county-based SCO product triggers a payment. Note that if an SCO
indemnity payment is made, the farmer will not receive it until the June
following harvest when USDA’s Risk Management Agency (RMA) releases the final
county yields.
The primary advantage of
purchasing an RP-SCO combination product is a lower overall farmer-paid premium.
However, consider if your county yields are typically less variable than your
farm’s yields. This could result in fewer indemnity claims for a county-based
product than for that farm-level product at the same coverage level. SCO has a
government subsidy rate of 65% which is higher than the rate for RP at the 85%
coverage levels using enterprise units. This 65% subsidy rate is higher than
all subsidy levels for basic and optional units when the coverage level is
above 50%.
Farmers who typically purchase
RP at high coverage levels (80% and 85%) will likely find a slightly lower
farmer-paid premium by adding SCO. But consider a couple cautions before you
add the SCO product in 2020. First, make sure your farm’s yields are reflecting
your county’s yields. Second, if an SCO indemnity payment is triggered, don’t
expect to receive those proceeds until the June following harvest.
Be aware of the time constraints that both FSA county office staff and crop insurance agents will have as this March 15, 2020 deadline approaches. Prepare now to elect and enroll in the ARC/PLC programs for your farms and perhaps update your PLC yields that will be effective for the 2020 crop. Then discuss with your agent the crop insurance changes you’ll be making in 2020 including the possibility of adding the SCO product if you will be enrolling in the PLC program for that crop.
On May 24, 2019, ISU Extension and Outreach field agronomists, Rebecca Vittetoe and Virgil Schmitt, along with farm management specialist, Ryan Drollette recorded a webinar on delayed and prevented planting. The following are links to resources for 2019 delayed and prevented planting decisions.
Contributed by Steve Johnson, Extension Farm Management Field Specialist, sdjohns@iastate.edu
Question: 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
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 November 1 (September 1 for 2019 crop only).
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.
