Johnson says farmers throughout Iowa and the Midwest have questions about their crop insurance coverage options and he offers three basic steps for farmers who are pondering their next steps in relation to crop insurance:
- Communicate with your crop insurance agent first, and then the federal crop insurance adjuster.
- Get an adjuster to your farm as soon as possible.
- Weigh the risk and revenue, primarily in taking prevented planting on acres that were never planted, or 1st crop/2nd crop for acres that were meant for corn, but can now be planted to soybeans.
Most of the questions for Johnson are from farmers wondering what their best financial decision will be when weighing the prevented planting option versus 1st crop/2nd crop option. If a farmer takes the prevented option, they will qualify for 60% of their insurance guarantee on prevented planting acres. You also need to file FSA form 576, which is a prevented planting form.
In replant situations, damaged crops can be covered in different situations, says Iowa State University Extension Economist William Edwards. "First, a minimum of 20 acres or 20% of a unit, whichever is smaller and those acres don't have to be contiguous.Second, the projected yield as estimated by an insurance adjuster must be less than 90 percent of the guarantee."
In the Edwards' example, a farm with a proven yield of 160 bu/acre with 75% coverage, has a 120 bu/acre guarantee and the farm would need to average less than 108 bu/acre to be eligible.
"With corn, June 25th
is the last date for the late planting period in Iowa (other state deadlines will vary, click here for the Risk Management Agency Web site
.). The clock's ticking and farmers have a week to get corn in. That's the issue. You have 72 hours after June 25th
to claim prevented planting. That means farmers need to notify their crop insurance agent, have an adjustor come out, and the adjustor will determine the next step for coverage."
Step 1: Communication. If ever there was a year to over communicate with your agent and your adjuster, 2008 is it, he says.
"If you don't notify your crop insurance agent, you're on your own. This is the year to over communicate with your crop insurance agent." Johnson recommends documenting conversations with your crop insurance company.
Step 2: Meet with an adjuster. Johnson says meeting with an adjuster is the primary way to ensure farmers will be covered under their policy.
"There is a lot of activity right now. Because the federal program is so complicated when it comes to replant and prevented plant," says Tommy Jones, a spokesman for John Deere Risk Management. "Our advice is to not do anything without talking to their agent who should then have an adjuster contact them. There are times when an adjuster can release over the phone but in most cases they will need to come out and inspect the field."
Step 3: Balance between PP or 1st/2nd crop. It's difficult to make a blanket statement about what option a farmer should take, Johnson says since every situation is different.
"The issue is, ‘OK, I planted corn there, I can't replant it, there's no way.' In that case, I've got to have that adjuster out and release those acres. If they say, we're going to zero out that 1st crop, that way I can collect 100% of my revenue guarantee minus the premium. If the adjuster releases those acres, the insured still must notify their agent if they decide not to insure the second crop. Not providing notice means the second crop is insured and a premium will be collected in October.
"Growers could elect tocollect 35% of their corn revenue guarantee, and then insure their 2nd crop," he says. Or they can collect 100% of theirrevenue guarantee and not plant. But if the agent is not contacted with their decision in that case, the farmer is automatically insuring this 2nd crop. "The issue becomes maximizing my indemnity payment. With crop revenue coverage, it's triggered off of $5.40/bu. corn, that's the spring base price determined in February by the average December corn future price. If the fall price is higher than this spring base price, then another indemnity check could follow."