Is Prevent Plant the Most Profitable Option in 2019?

May 13, 2019 03:11 PM
 
If your planting is dramatically delayed and your weather forecast doesn’t look great, you may be considering the prevent planting option. You’re not alone.

As of May 12, 30% of the U.S. corn crop is in the ground. That compares to a five-year average of 66% by mid-May. For soybeans, 9% has been planted, which is significantly behind the five-year average of 29%.

If your planting is dramatically delayed and your weather forecast doesn’t look great, you may be considering the prevent planting option. You’re not alone. Here's an overview of the final planting dates for corn and soybeans. (Click maps to enlarge.)

 

2019 final corn planting dates

 

2019 soybean final planting dates

“Guys are a lot more willing this year to take the corn prevent plant option and just be done,” says Jamie Wasemiller, Gulke Group senior market analyst and crop insurance expert. “I’m getting calls from farmers all across the country—this is definitely a more widespread issue than in the past. The next three weeks of prices will have a big impact on what the farmer decides to do. If prices stay where they are at, you’ll probably see a lot of guys want to prevent plant their corn.”

That may be the most profitable choice, Wasemiller says. He provides these examples.

Assume the following:

  • Corn yields are 180 bu. per acre APH
  • Soybean yields are 55 bu. per acre APH
  • Insurance coverage level is 80% for both crops (corn spring price: $4.00; soybean spring price: $9.54)
  • Soybean production costs are $190 per acre (excluding rent in this analysis)
  • Soybean fall cash price: $7.91

Based on this scenario, the corn prevent planting payment would be $317 per acre. The prevent planting payment for soybeans would be $252 per acre.

Scenario 1: Corn Prevented Planting Payment Versus Planting Soybeans

How does the return of taking a prevent planting claim for corn compare to planting soybeans? 

For planting soybeans to have higher returns than prevented planting corn, soybean revenues must exceed the corn prevent planting payment of $317 per acre, plus the soybean production costs of $190 per acre. In other words, soybean revenue must exceed $507 per acre, Wasemiller says.

With the current harvest-time bid of $7.91 per bu. for soybeans, soybean yields will need to exceed 64 bu. per acre for planting soybeans to be more profitable than taking the corn prevent planting payment ($507 / $7.91 = 64).


Scenario 2: Soybean Prevented Planting Payments Versus Planting Soybeans

For planting soybeans to have higher returns than taking the prevent planting payment, soybean revenues must exceed the soybean prevented planting payment of $252 per acre plus soybean costs of $190 per acre, for a total revenue of $442 per acre. 

At a $7.91 soybean price, soybean yields would have to exceed 55 bu. per acre for planting soybeans to be more profitable than taking the soybean prevent planting payment.

 

Call Your Crop Insurance Agent

Wasemiller encourages farmers to do these calculations with their own numbers. Obviously, swings in the fall market prices will dramatically change these outcomes.

“Contact your crop insurance company to find out which of your acres are eligible,” he says. “Coverage depends on production practice and crop. You want to know all the rules before you make your decision.”

Also, ask what your neighbors plan to do. "Don’t be that lone wolf in your area taking prevent plant,” he says. “Adjusters and underwriters are getting a little more picky about quickly approving prevent plant acres."

If the majority of people in your area are getting their acres in, Wasemiller says, it may be best to have an adjustor come out to help determine if you land is eligible for a prevent plant claim. 
 
Have a question for Jamie? Contact him at 707-365-0601 or Jamie@GulkeGroup.com. 

 

Read More

Planting Delayed? Here Are Your Prevent Plant Options

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Comments

 
Spell Check

CornCountry
SE IL, IL
5/14/2019 05:34 PM
 

  If you happen to be one of the fortunate folks in SE Missouri who miraculously have a May 10 PP date, which is seriously questionable considering the length of your growing season. The counties across the river, east, west and north are almost a month later. That makes a big difference in being able to use that option.

 
 
Bill
London Oh, OH
5/14/2019 07:37 PM
 

  You just cant say at this date 5/13/19, “Hmm, I think a Prevented Planting payment would be a profitable viable option this year.” From the RMA Prevented Planting Standards Loss Handbook, Para 23-2 says: Factors such as existence of insurance, level of insurance coverage, or the financial position of the producer should not be considered when evaluating whether a producer was prevented from planting. There must be an insurable cause of loss such as excess moisture or other weather related causes to be eligible for payment. Weather data for your area will be documented and verified. If your neighbors were all able to plant before the end of the planting period but you hesitated because you thought it would be more profitable not to plant. You may be out of luck. Just saying.

 
 
Jeff
Dexter, MO
5/13/2019 10:25 PM
 

  Glad to see that someone wrote an entire article on what I have been posting for weeks. Hopefully more people will read it than reads post. Take advantage. If it is more profitable than planting why would you not take the opportunity to give your ground much needed rest and help deplete the large supply issue. I think it would be interesting to see how the government would try to manipulate the numbers if there weren’t any.

 
 

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