Paul D. Mitchell, Agricultural and Applied Economics, UW-Madison
Assumptions:
You bought corn and soybean crop insurance with a yield history of 160 bu/ac for the corn and 40 bu/ac for the soybeans. With 75% Revenue Protection on both crops, your yield guarantees are 120 bu/ac for the corn and 30 bu/ac for the soybeans. Revenue guarantees are 120 bu/ac x $5.65/bu = $678.00/ac and 30 bu/ac x $12.87/bu = $386.10/ac. The final planting dates in your county are May 31 for corn, June 5 corn silage, and June 10 for soybeans (June 15 in southern WI). By May 31, you planted 250 acres of corn and by June 10, you planted 150 acres of soybeans, leaving 100 acres unplanted. You trigger Prevented Plant since at least 20 acres or 20% of the insured acres are affected.
What are Your Options?
1) Plant corn, corn silage, or soybeans late with a reduced guarantee
- Corn: guarantee reduced 1% per day for each day after May 31.
- Corn silage: guarantee reduced 1% per day for each day after June 5.
- Soybeans: guarantee reduced 1% per day for each day after June 10 (June 15 in southern WI)
Example:
Suppose you planted all 100 remaining acres to soybeans on June 17 (7 days late). Your guarantee on these 100 soybean acres would be (100% –7%) = 93% x $386.10/ac =$359.07/ac x 100 acres = $35,907. The guarantee on the 150 soybean acres planted on time is unchanged.
2) Take the full Prevented Plant (PP) indemnity equal to 60% of your guarantee.
- Corn: full PP indemnity = 60% x $678.00/ac = $406.80/ac x 100 acres = $40,680.
- Soybean: full PP indemnity = 60% x $386.10/ac = $231.66/ac x 100 acres = $23,166.On these acres, you can plant a forage/cover crop (including alfalfa), but you cannot harvest or graze the forage/cover crop until after November 1.
3) Take a reduced Prevented Plant (PP) indemnity equal to 35% of your full Prevented Plant indemnity.
- Corn: partial PP indemnity = 35% x $406.80/ac = $142.38/ac x 100 acres = $14,238.
- Soybean: partial PP indemnity = 35% x $231.66/ac = $81.08/ac x 100 acres = $8,108. On these acres, you can plant any forage/cover crop you want and harvest as you want.
4) Leave the acres uninsured–you pay no premiums for these 100 acres, will receive no indemnities, but face no restrictions on planting and harvesting/grazing the forage or cover crops.
Comments
1) Acreage Limits: When you choose Prevented Plant acres to claim for a crop, your planted acres plus Prevented Plant acres for this crop cannot exceed the maximum acres planted of that crop in any of the last 4 years. In this example, the farmer has already planted 250 corn acres. If the farmer had planted at least 350 corn acres in any of the last 4 years, he could claim up to 100 acres for corn Prevented Plant indemnities. If instead the maximum the farmer had planted was 300 corn acres and 200 soybean acres in any of the last 4 years, he could only claim 50 acres for corn Prevented Plant indemnities and would have to claim 50 acres as soybean Prevented Plant indemnities.
2) Alfalfa Establishment: Growers can establish alfalfa with or without a nurse crop on prevented plant acres (options 2 and 3). If alfalfa is planted by July 1, you can insure its 2014 production with a 2014 Forage Production policy if the stand is adequate on May 24, 2014. If alfalfa is planted August 1-24, 2013, you can insure against winter kill with a 2014 Forage Seeding policy written agreement.
3) Yield History Impacts: Late planted crops (option 1) use actual yields for future yield history calculations. Acres claimed for reduced Prevented Plant (option 3) use 60% of the yield history from planted acres for future yield history calculations. Acres claimed for full Prevented Plant (option 2) and uninsured acres (option 4) generate no yield history.