Editor’s note: The following was written by Gary Schnitkey, Krista Swanson, Nick Paulson and Jim Baltz with the University of Illinois and Carl Zulauf on the Ohio State University’s farmdoc daily website May 3.
Although planting progress can quickly catch up to average levels with favorable weather, planting progress to date lags across the Corn Belt, almost matching the pace in 2019 when many acres did not get planted.
As a result, some farmers in the Corn Belt may not finish planting before the crop insurance “final plant date,” after which a prevented planting payment becomes an option.
Here we review prevented plant decisions. Unless harvest-time bids fall between now and June, planting corn will have higher expected returns than prevented planting payments in early June.
According to USDA’s Crop Progress Reports, 2022 planting progress lags five-year average. Progress in 2022 also lags 2019 progress when many acres were prevented from planting.
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- Illinois: 7% of corn acres were planted on May 1, 2022, well below the five-year average of 43%. Planting progress on May 5, 2019, was 10%.
- Indiana: 6% in 2022 compared to the five-year average of 25% and 3% in 2019.
- Iowa: 9% in 2022 compared to the five-year average of 42% and 36% in 2019.
- Minnesota: 0% in 2022 compared to a 28% five-year average and 6% in 2019.
- North Dakota: 0% in 2022 compared to a 5% five-year average and 3% in 2019.
- Ohio: 3% in 2022 compared to an 8% five-year average and 2% in 2019.
- South Dakota: 3% in 2022 compared to the five-year average of 13% and no planting in 2019.
Again, at this point in the season planting can progress quickly with appropriate fieldwork days. For example, in Illinois the entire corn crop can be planted in about fourteen suitable field days.
Prevented plant payments on corn
Prevented planting payments are available on the COMBO crop insurance policy on each of its three plans: Revenue Protection (RP), Revenue Protection with the Harvest Price Exclusion (RPhpe), and Yield Protection (YP). Prevented planting payments can be accepted once “final planting dates” are reached. Before the final planting date, farmers must make every effort to plant the plant on intended acres.
Final planting dates for grain corn vary across Midwestern states. May 31 is the “final planting date” for Iowa, southern Minnesota and Wisconsin, northeastern Missouri, the extreme southern counties of Illinois, and Kentucky. June 5 is the date for most of Illinois, Indiana, Ohio and Michigan.
Final planting dates for soybeans are different than for corn. June 15 is the final planting date for Iowa, northern Illinois, Michigan and Kentucky. June 20 is the final planting date for the southern two-thirds of Illinois, as well as Indiana and Ohio.
Once the final planting date has been reached, a prevented planting payment for corn can be taken if the corn is not planted for insurable reasons (eg, wet weather). The prevented planting payment will be 55% of the guarantee unless a 5% buy-up option was purchased by March 15th.
The following example uses the standard 55% factor. Take a unit with 200 bushels per acre Trend Adjusted-Actual Production History (TA-APH) yield, this year’s projected price of $ 5.90 per bushel, and an 85% coverage level. In this case, the prevented planting payment will be $ 552 per acre.
This year, projections for planting corn will be more profitable than preventing plant payments in early June. Output from the farmdoc Prevent Planting Module, a FAST series available within download for Microsoft Excel spreadsheet, shows net returns from planting at $ 488 per acre and for planting corn on June 7 at $ 586 / acre.
The net returns from the planting payments are based on an 85% RP policy with a 200 bushel per acre APH yield and a projected price of $ 5.90. Planting corn in early June has an estimated yield of 171 bushels per acre, with an expected cash price of $ 7.10 per bushel. The $ 7.10 cash price is the harvest-time bid in early May.
Planting corn just after the final plant date has higher returns than the prevented plant payment because fall bids are higher than the 2022 projected price of $ 5.90. As long as harvest-time prices are expected to be above the projected price, planting corn will have higher expected returns than prevented planting payments.
But the risks occur when planting corn after the final planting date:
- Yields and prices could be lower enough to prevent the plant from paying a higher expected return than planting corn. Prices could decline over the next month. Yield losses increase as the planting date gets later.
- The crop insurance guarantee is reduced every day after the final planting date, reducing the safety net offered by crop insurance.
- Yields of corn planted after the final plant date will enter the APH yields, as described in the following section.
Taking a prevented planting payment will not affect the APH yield in future years unless a second crop is planted on prevented planting units. In the Midwest, most farmers do not plant a second crop as the second crop is to be planted after the late planting period is over.
For example, an insurable unit with 500 acres and 400 acres is planted to corn. Prevented planting payments are taken on 100 acres, and a second crop is not planted on those 100 acres. The yield used in calculating the APH for this insurable unit will be based on the production from the 400 planted units divided by the 400 planted units.
Each insurable unit will have different units eligible for prevented planting. Knowing how many acres are eligible is key to not being surprised when making planting decisions. Crop insurance agents can assist in determining acres eligible for prevented planting payments.
As a general guideline, the maximum acres eligible for prevented planting payments will equal the maximum acres of corn planted in the last four years that increases the insurable unit, adjusted for acreage, low corn acres planted in 2022. Other planting requirements come into play as well. General Chat Chat Lounge
As a simple example, take a 100-acre insurance unit that has remained the same size for the last four years. If the maximum number of acres in corn is one to four years is 75 acres, then 75 acres is the maximum number of acres on which the prevented planting of corn can be taken. If this farm gets 50 acres of corn planted, then only 25 acres are eligible for a prevented planting payment on corn.
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