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Risk Management with Insurance Tools

RSS By: Jamie Wasemiller, AgWeb.com

Insurance tools have become an integral part of managing your farming operation. Stay current on insurance tools and how to incorporate them with your current risk management strategies to market your grains throughout the year.

Prevent Plant Options for Corn

May 03, 2013

As we are now in the month of May and with the Final Planting Dates for Corn approaching I wanted to go over a few options that are available if Corn is not planted by its Final Planting Date. I have also included some important points to remember about Prevented Planting. For this example let’s use a farmer with a 165 bu APH that purchased an 80% RP policy with this year’s spring price at $5.65. This gives the farmer a revenue trigger level of $746 per acre. 

Take Prevented Planting:

·         Submit a Prevented Planting claim. A Prevented Planting claim will receive 60% of the original guarantee. There is an option to buy up prevented planting coverage to a 65% or 70% level but that needed to be done by the insurance deadline date. No other crops can be planted on these acres other than approved cover crops. Prevented Planting acres will not affect your APH in this instance. 

Example: Take 60% of $746 which will give the producer a prevent plant payment of $447 per acre. 

·         Submit a Prevented Planting claim and plant a second insurable crop on or before the end of the Late Planting Period. If the second crop is planted before the late planting period, coverage for the second crop can replace the coverage for first. No Prevented Planting payment will be paid on the first crop. 

·         Submit a Prevented Planting claim and plant a second insurance crop after the first crops Late Planting Period: If the second crop is planted after the late planting period the second crop can be insured and a payment of 35% of the prevented planting payment will apply to the corn acres. Also, only 35% of the original premium for the policy on those acres will be charged. Keep in mind that depending on when you switch from corn to insured soybeans you may also run into Late Planting Period rules for the soybeans if they are planted after their Final Planting date. In this case the prevented planted acres will receive a yield equal to 60% of the approved yield, which will now be part of the 10-year history. 

Example: In the first example it was determined that the producer would receive a PP payment of $447 per acres. If a second crop is planted there would only be a payment equivalent to 35% of the $447 which would be $156 per acre. 

Plant during the Late Planting Period:

·         The late plating period generally lasts for 25 days starting on the date of the final planting date. Acres planted within this window will receive 1% less coverage per day. Acres planted after the late planting period can still be insured at the prevented planting level which again is 60% of the original guarantee. Remember that the late planted acres will be combined with any acres planted before the late planting window to determine your average guarantee. 

A few other items to remember about Prevent Planting:

·         Prevented Planting acres must be 20 acres or more or 20% of the insurable acres in a unit.

·         A Prevented Planting claim should be reported to the loss adjustor within 72 hours after the decision has been made that the crop cannot be planted.

·         Taking prevented planted could affect a farmers ability to receive the enterprise unit discount.

·         Prevented Planting is not a voluntarily option. If famers surrounding you or in your area was able to get their corn in the ground there is a chance that your Prevented Planting claim will not get approved.

·         To be eligible for a Prevented Planting claim, a farmer must have "planted and harvested" or insured the crop in at least one of the past three years. 

·         Eligible acres (base acres) will be based on the most crop acres you have planted or prevent planted in one of the last 4 years.

·         Prevented Planting payments will be based on the Spring Price only.

·         If corn is prevented from being planted and the remaining eligible acres are for another crop with a higher PP payment the payment received will continue to be based on the lesser amount. If the only remaining eligible acres have a lower PP payment the payment will be based on the lower amount.

·         If another person plants a second crop on any of the PP acreage (first insured crop) after the late planting period (Final Plant date if the late plant period is not applicable) for the PP crop, then the Indemnity will be 35% payment on the first crop. (It makes no difference if the insured of the 1st crop has any interest in the 2nd crop.). 

·         Only one Prevented Planting payment may be received by the insured or any other person (excluding share arrangement) for each acre for the crop year, unless the insured meets the requirement for double cropping. Double cropping must be an insurable practice in the county for the crop.  

Since many producers are already coming off a bad crop yield in 2012 I would suggest that you take the time to do an analysis on the impacts. In the near term it will alter input costs which ultimately will change the breakeven price per acre. It may also have an impact on any hedging already done or how to approach marketing for the rest of the year. In the long term long term it can have an impact on the producers APH especially coming off of a drought year for many.  

If you have any questions about Prevented Planting or want help determining what option is the most beneficial for your operation I can be reached at 707-365-0601 or you can email me at Jamie@GulkeGroup.com.

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