June 1 , 2009
Adverse planting conditions this spring has resulted in many crop insurance questions related to replant, prevented planting, and late planting provisions in crop insurance contracts. The following provides information on these questions.
GRP and GRIP
GRP and GRIP do not have replant, prevented planting or late planting provisions. For GRP and GRIP coverage to occur, a crop must be planted. Acres that are not planting will not be eligible for GRP or GRIP crop insurance payments.
The following information on replant, prevented planting, and late planting is not applicable to GRP and GRIP. It is applicable to APH, CRC, IP, and RA policies.
Farmers can receive payments for replanting a crop the first time. Farmers should consult with their crop insurance agent before replanting a crop. Not contacting a crop insurance company may result in the replant payment not being made. Replant provisions are meant to cover the costs of replanting. Farmers will have to provide receipts and estimated costs of field operations to receive payment.
For CRC and RA, the maximum replant payment for corn is $32.32 per acre (8 x the base price ($4.04 in 2009)) and for soybeans is $26.40 per acre (3 x the base price ($8.80 in 2009)). Expenses associated with replanting usually exceed these minimums
A minimum number of acres must be replanted before replant payments can be received. The minimum number of acres is 20 acres or 20 percent of the acres in the unit, whichever is lower.
Prevented planting payments
Farmers can take prevented planting payments once the final planting date has been reached (The final planting date is not what it may seem to imply as a crop can still be planted after the final planting date). For corn, the final planting date is June 5 for all counties except for the seven, southern most counties in Illinois. For these seven counties, the final planting date is May 31. In most cases, taking prevent planting means that a farmer will receive 60% of the final guarantee as a prevented planting payment if a crop is not planted on those acres.
A farmer can plant on acres that a prevented planting payment was taken after 25 days have passed from the final planting date. If another crop is planted, the prevented planting payment will be reduced to 35% of the payment given that a crop was not planted.
More information on prevented planting is provided in the attached fact sheet entitled “Crop Insurance: Final Planting Dates, Late Planting Period, and Prevented Planting”.
Prevented planting and units
Prevented planting does not have to be taken on all acres in an insurable unit. However, there is a minimum number of acres on which prevented planting can be received (20 acres or 20 percent of the acres in the unit, whichever is lower).
Take as an example a unit with 400 acres. This unit has 250 acres of corn planted and 150 acres on which nothing is planted. Once the final planting date has been reached, prevented planting can be taken on 150 acres. The remaining 250 planted acres will have the corn policy in place. Potential insurance payments on the 250 planted acres will be influenced by production from those 250 acres. There will be a guarantee based on 250 planted acres. The prevented planting payment on the other 150 acres will not impact the payment on the 250 planted acres.
APH yields and prevented planting
Generally, prevented planting will not impact the APH yield in future years, unless a second crop is planted on prevented planting acres.
Take as an example an insurable unit that has 500 acres and 400 acres are planted to corn. Prevented planting acres are taken on 100 acres and a second crop is not planted on those 100 acres. In this case, the yield used in calculating the APH will be based on production from the 400 planted acres divided by 400 planted acres.
On the other hand, if the 100 acres were planted to a second crop (e.g., soybeans) after 25 days from the final planting date, the 100 prevented planted acres will be assigned a per acre yield of 60 percent of the APH yield for the unit, unless the second crop is a double-crop. The 60 percent of the APH for the prevented planted acres will be added to the production from the 400 acres to give production for the unit. Production for the unit then will be divided by 500 acres to arrive at the yield for the year.
Sometimes a unit will have all acres in that unit prevented planted. Again there will be a difference in treatment depending on whether a second crop is planted. If a crop is not planted, zero planted acres will be assigned to the unit and a yield for that crop will not enter into the APH yield calculation. If a second crop is planted, the yield is 60 percent of the APH yield.
Late planting happens when a crop is planted after the final planting date. Under late planting, the guarantee will be reduced by 1 percent per day after the final planting date up to 25 days after the final planting date. After 25 days, the guarantee will be 60 percent of the guarantee.
When examining decisions after the final planting date, it is useful to divide the analysis into two situations: 1) when a crop has not been planted and 2) when a crop has been planted and the crop is marginal. Each situation is handled below.
Crop has not been planted
For most Illinois farmers, the case will be corn has not been planted and the final planting data has been reached. In this case, the farmer has three choices:
- Plant corn,
- Take a prevented planting payment and do not plant a crop, or
- Take 35% of the maximum prevented planting payment and plant another crop, most likely soybeans.
A paper entitled “Crop Insurance/Cropping Decisions When No Crop has Been Planted” gives more detail concerning these three options.
A FAST tool (Microsoft Excel spreadsheet) called 'Late Planting Evaluator' will can be used to evaluate the potential costs and returns of these three alternatives. Download the tool
A marginal stand of a crop exists
In this case, there are three options:
- Do nothing,
- Replant the crop, or
- Consider the corn crop failed and plant an alternative second crop.
The paper entitled “Crop Insurance/Cropping Decisions for Corn with Questionable Stands” covers these three alternatives.
Submitted by: Gary Schnitkey , Department of Agricultural and Consumer Economics, University of Illinois