Economist: Late Wheat Planting Raises Crop Insurance Issues

November 1, 2009 06:00 PM
 

 
Delayed wheat plantings this fall make crop insurance decision critical and several deadlines loom for producers.
 
Farm-level crop insurance policies, including Actual Production History (APH), Crop Revenue Coverage (CRC) and Revenue Assurance (RA) policies, have late planting and prevented planting provisions,” said Gary Schnitkey, University of Illinois professor of farm management. "Group Risk Plan (GRP) and Group Risk Income Plan (GRIP) policies do not have late or prevented planting provisions. Before GRP and GRIP policies provide coverage, wheat must be planted.”
 
For Illinois, the final planting date is either October 20 for Northern Illinois counties or October 31 for Southern Illinois counties.
 
"Reaching the final planting date does not mean that wheat cannot be planted. Rather, guarantees will be reduced once the final planting date is reached. In addition, a farmer can choose to take a prevented planting payment and not plant wheat once the final planting date has been reached,” Schnitkey said.
 
There is a five day late planting period for wheat. The guarantee will be lowered 1 percent per day when wheat is planted during the late planting period. After the end of the late planting period, the guarantee will be 60% of the final guarantee, unless the farmer purchased higher prevented planting coverage.
 
For a higher premium, additional prevented planting coverage of 5% and 10% was available when the farmer signed up for the insurance policy.
 
"For example, a farmer with a CRC policy at the 75% coverage level and a 70 bushel APH yield, the 2010 base price is $5.29 bushel. This farmer is located in a county with an October 31 final planting date. Before the final planting date, this farmer has an initial guarantee of $279 per acre -- 70 bushel APH yield x $5.29 base price x 75% coverage level,” Schnitkey said.
 
This final guarantee could be above the initial guarantee if the harvest price is above the base price. Harvest prices will not be known until next year.
 
If planting does not occur before the final planting date, the guarantee will be reduced as shown below:
 
*    Nov 1: $275 per acre ($279 x (1 - .01))
*    Nov 2: $272 per acre ($279 x (1 - .02))
*    Nov 3: $270 per acre ($279 x (1 - .03))
*    Nov 4: $267 per acre ($279 x (1 - .04))
*    Nov 5: $264 per acre ($279 x (1 - .05))
*    After Nov 5: $167 per acre ($279 x 60%)
 
The $167 guarantee after November 5 assumes that the farmer did not purchase additional prevented planting coverage.
 
"A prevented planting payment can be taken once the final planting date has been reached because of insurable causes. This year's wet weather likely will be categorized as an insurable cause,” Schitkey said.
 
He says that unplanted wheat due to delayed harvest of immature soybeans is not an insurable cause. Wheat plantings must have been prevented because rain and moisture prevented field work.
 
"A farmer must claim a prevented planting payment within 72 hours or 3 days after the end of late planting period. This means that a prevented claim must be filed by October 28 for counties with an October 20 final planting date and by November 8 for counties with an October 31 final planting date,” Schnitkey said.
 
For a prevented planting claim to be received, the famer also must indicate prevented planting acres on the acreage report. If prevented planting acres are not indicated, prevented plantings will not be received.
 
Schnitkey says that prevented planting payments will vary depending on whether a crop is planted in the spring. For the details visit the farmdoc.illinois.edu Web site.
 
If wheat is not planted, many farmers will find prevented planting payments an economical alternative. The negative consequences include APH yields may decline if a crop is planted in the spring and the second crop may not be eligible for crop insurance payments.
 
 
News release provided by University of Illinois.

 

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