On January 5th, USDA’s Risk Management Agency (RMA) announced the availability of a new crop insurance endorsement to assist Midwest corn farmers on a pilot basis in select counties who wish to utilize the practice of split nitrogen fertilizer application by insuring against the risk of prolonged bad weather preventing the application of the second tranche of fertilizer on some or all of the insured corn acres planted during the growing season. Such a failure would reduce the yield potential for the crop in question. Split application is one of the 4 ‘R’s’ of efficient nitrogen use, applying the supplement at the right time for the crop to use it when it is needed most. The 4 ‘R’s’ also help to reduce nitrogen loss to the environment.
Dubbed the Post Application Coverage Endorsement (or PACE), the product will be available for producers of non-irrigated corn in parts of 11 Midwest states, as long as those farmers also purchase underlying yield or revenue protection policies by the spring-planted crops sales closing date of March 15, 2022. An indemnity would be paid out if the farmer is unable to apply the full amount of the intended second tranche of fertilizer during the V3-V10 stages of plant growth. Under the endorsement, the farmer must apply between 20 and 75 percent of the intended fertilizer in the pre-planting period. Coverage levels between 75 and 90 percent will be available under the pilot program, and the premium rate will be announced prior to the sales closing date.
A list of the 172 counties in Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin in which PACE will be available for the 2022/23 crop year can be found at the RMA website.
This crop insurance product was developed by the Illinois Corn Growers, National Corn Growers Association (NCGA), Ag-Analytics Technology Company, the Meridian Institute, and others, and submitted to the Board of the Federal Crop Insurance Corporation (FCIC) under provisions of the Federal Crop Insurance Act (Section 508(h)). The product was developed in an effort to provide farmers with some financial protection against the risk that adopting split nitrogen application, as opposed to the conventional practice of applying all nitrogen fertilizer prior to planting their corn crop, might lead to a reduced yield if bad weather prevents timely application of the second component of fertilizer. It was approved by the Board in August 2021 but not announced publicly until this month to give crop insurance companies and agents operating in the pilot counties sufficient time to learn about the new product.
Recent research indicates that adoption of split nitrogen application by farmers leads to reduction of nitrate (NO3) leaching into groundwater, nitrous oxide (N2O) emissions, and methane (NH4) volatilization, contributing to water pollution including the expansion of hypoxic zones in coastal waters such as the Gulf of Mexico, as well as climate change. Nitrous oxide and methane are both considered to be greenhouse gasses. A 2021 article in the European Journal of Agronomy found that split fertilizer application can increase profit between 15 and 20 percent under dry weather conditions and between 1 and 15 percent in wet weather conditions, especially if adopting that practice allows for downward adjustment of fertilizer amounts applied per acre as compared to conventional application rates.. Under the trials conducted for this article, nitrate leaching was reduced by about 20 percent under most weather conditions, and reduced methane volatilization by between 24 and 54 percent except under very wet conditions.
Nitrous oxide accounts for just over one-third of all direct greenhouse gas emissions from agriculture in developed countries such as the United States and Canada. In addition, in its 2015 report to Congress, the Mississippi River/Gulf of Mexico Watershed Nutrient Task Force estimated that 41 percent of total nitrogen transported in the Mississippi River system to the Gulf of Mexico originated from fertilizer applied by farmers, as well as 27 percent of phosphorus. Thus, reductions in fertilizer application levels enabled by wider adoption of split application practices by U.S. farmers would be beneficial to society in terms of both mitigating climate change and improving water quality.
Given recent increases in nitrogen fertilizer prices, wider adoption of this practice could be beneficial to individual farmers as well. As of December 2021, the fertilizer price index had increased by 164 percent as compared to the index level in December 2020. Even though split application would require farmers to make an additional pass through the field to apply the second tranche, costing perhaps $15-$20 per acre, this practice would allow farmers to better tailor their total nitrogen applied to existing crop and field conditions later in the growing season, perhaps resulting in overall reduced nitrogen levels per acre, thus creating input cost savings. Farmers interested in exploring this option should check out this split nitrogen application decision tool created by scientists at the University of Nebraska, at the High Plains Regional Climate Center.
A farmer’s choice to go with split application also helps him or her manage input cost risk by allowing the opportunity to price fertilizer several times rather than just once. The risk of not being able to get the second tranche applied on a timely basis due to bad weather would be mitigated by purchasing the PACE product, if the farmer is operating in one or more of the counties covered by the pilot. If the pilot is successful over the next few years, it is certainly conceivable that it could be expanded to cover all corn grown nationwide, and then potentially to other grain crops that utilize nitrogen fertilizer
