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Prevented Planting Decisions

Farm & Ranch Life |

Posted on: Jun 06th 2019

Source: University of Minnesota Extension

“To plant or not to plant” is a challenging question for farmers this year who have faced an extremely wet spring. For crop insurance purposes, May 31 is the final planting date for corn and June 10 for soybean in southern Minnesota. The final planting date has already passed for northern Minnesota corn producers (May 25). Growers are allowed to plant a crop within 25 days of the final planting date for reduced insurance coverage. The following examples show how different decisions could play out.

Scenario 1: Choose not to plant and take prevented plant

If you choose to take prevented plant for corn, there is a simple payment rate of $4.00 per bushel multiplied by your APH and your insurance coverage percentage. This equals your revenue guarantee per acre. To calculate your prevented planting payment for corn, the guarantee is multiplied by 55% (unless you paid a higher premium for a more coverage). For soybean, the payment rate is $9.54 per bushel, and the standard prevent plant rate is 60% of the guarantee.

Examples

  • Corn at 85% coverage when your APH is 180 bushels per acre: $4.00 x 180 bushels (APH) x .85 x .55= $336.60 per acre payment less premium.
  • Soybeans at 85% coverage when your APH is 50 bushels per acre: $9.54 x 50 bushels (APH) x .85 x .60=$243.27 per acre payment less premium.

Scenario 2: Plant a crop late

You decide to plant, but what crop will you plant? The yield potential for corn planted after mid-May declines fairly rapidly. For corn planted June 9, yields were reduced by 21-31% in long-term University of Minnesota research. In addition to yield potential losses, insurance coverage declines by 1 percent per day after the final planting date. 

Corn example

If you plant corn on June 9th your coverage level would decrease by 9%. Using the corn example above, the revenue guarantee at 85% coverage would go from $612 an acre to $556.92. The equation follows: 

  • Corn with 85% coverage planted June 9 = $4.00 per bushel x 180 bushels per acre x .85 x .91 = $556.92 per acre

Keep in mind the yield potential would be expected to decrease at least 20%, resulting in an estimated loss of 36 bushels per acre, or an estimated final yield of 144 bushels/acre. If these bushels are sold for $3.80 per bushel cash this fall, gross income would be $547.20 per acre, so the small crop insurance payment would be just under $10 per acre. With later planted corn, higher drying costs and lower test weights would also be expected. Using average southern Minnesota input costs for corn at $722 per acre, this scenario results in a loss of income.

Soybean example

If you decide to plant soybeans on June 15th your coverage would go down by 5%. Using the soybean example again, your coverage would drop from $405 to $385 per acre. 

  • Soybean with 85% coverage planted June 15 = $9.54 per bushel x 50 bushels per acre x 0.85 x 0.95 = $385.18 per acre

What will your actual yield projection be on June 15th? According to long-term Minnesota research, yield potential for soybeans planted June 15 would be around 70% of optimal. Will 35 bushels at $9.00 or a total of $315 per acre pay the bills? An insurance payment of approximately $70 per acre would be expected in this example. With total costs per acre projected at $469 per acre, this scenario would result in an $84 dollar per acre loss.

Other factors

If a farmer chooses the prevented plant option, the yield used in their APH will not be affected unless a second crop is planted. In this case, the yield used for 2019 on the first crop must be reported as 60% of APH on that unit. 

Market Facilitation Program Payments

One more factor to consider is the recent announcement of another year of Market Facilitation Program (MFP) payments. These payments will be made on planted acres and acres cannot be higher than your last four-year planted average. 

The exact details have yet to be stated, but this would encourage a farmer to plant a program crop. The MFP payments are predicted to be made for a fixed amount for planted acres on 20 program crops. The bottom line is that market economics look better for planted corn than soybeans.

Check with your insurance representative

Be sure to check with your crop insurance representative to discuss options and to determine what will fit best with your individual situation. 

Resources

The following spreadsheet examines the impacts on income of planting corn late, switching to soybeans or taking prevented planting decisions. 
You may also be interested in: 
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