Farmers have two choices. Plant late and take a lower crop insurance revenue guarantee. Plant another crop later and take a reduced prevented planting payment.
May 31 is the final plant date for corn in several Corn Belt states where heavy rains, floods and cool temperatures have slowed or prevented planting. The final planting date for prevented planting is a bit later in some states or parts of states.
"Farmers can take prevented planting payments if acres have not been planted by the final planting date due to weather problems," says Gary Schnitkey, a University of Illinois economist. "For a farmer to take a prevented planting payment, prevented planting must be prevalent on similar type of farmland within the area. The prevented planting payment is 60% of the final guarantee, unless the farmer opted for a higher percent level at crop insurance sign-up."
For example, suppose a farmer bought a corn Revenue Protection policy with an 80% coverage level having and 150 bushel Actual Production History yield. The projected corn price in 2013 is $5.65. This policy has a minimum guarantee of $678 per acre (150 bushel APH yield x $5.65 projected price x 0.80 coverage level). The prevented planting payment will be $407 ($678 x 0.60).
Farmers cannot plant another crop during the late planting period (25 days after the final planting date.) After the late planting period, farmers are allowed to plant another insured crop. Doing so usually results in reductions in the prevented planting payment to 35% of the above calculated amount. In double-crop situations, obtaining the entire prevented planting payment may be possible.
Planting after the final planting date
"Farmers can plant after the final planting date; however, the guarantee will be reduced by 1% per day after the final planting date up to 25 days after the final planting date," adds Schnitkey." After 25 days, the guarantee will be 60% of the guarantee."
In the above example, a farmer had a minimum guarantee of $678. Assume this farmer is in a county with a final planting date of June 5. If corn is planted on or before June 5th, the minimum guarantee is $678 per acre. Planting corn on June 6 will result in a guarantee reduction of 1% to $671 per acre ($678 x 0.99). Planting on June 7th results in a 2% reduction, to $664 per acre ($678 x 0.98). After 25 days the guarantee is 60% of the original, or $407 ($678 x 0.60).
Farmers who will not get their crops planted by the final planting date in their area should discuss alternatives with a crop insurance agent," urges Schnitkey. "Prevented planting alternative can be complex, particularly where double-crop soybeans coverage is available."
For another explanation and more examples prepared by Iowa State University economist William Edwards is available on the Iowa State Extension website.