The 2005 planting season has been unpredictable at best. Reasonably good weather for most of Ohio in early to mid April had most optimistic about spring planting. A bit of concern about dry weather in late April gave way to wet, cold weather for the late April early May time period. Sporadic periods of warm and dry weather in mid May have given much of Ohio planting windows to finally make some progress in getting crops in the ground. But most haven’t escaped without some replanting this spring. The cold wet weather and crusting soils have caused problems for many producers around the state.
What are the insurance ramifications of replanting, late planting or prevented plantings? It depends on the type of crop insurance policy that you carry and the nature of the damage. Let’s examine each of the provisions, some examples and how they might apply to your situation.
Replanting Provisions
If your insured crop is damaged and will not produce at least 90 percent of the guaranteed yield, you can receive a payment equal to your costs for replanting. Your replant payment can be up to 20% of the guaranteed yield (up to 8 bushels for corn and 3 bushels for soybeans) multiplied by the price election chosen in the policy. These replant provisions are applicable for both Average Production History (APH) (which is the old Multiple Peril Crop Insurance (MPCI) policy), and Crop Revenue Coverage (CRC). Replant provisions are not available for catastrophic (CAT) level coverage or the group risk plan (GRP). If you do replant, the production guarantee is still based on the original planting date.
Example 1: Replanting
You have a late frost and your soybean crop is projected to yield only 20 bushels per acre. This is below the 90 percent guaranteed yield (APH policy) for that parcel of 33 bushels per acre (44 bushels APH x 75% coverage level). You decide to replant soybeans, which entitles you to a replant payment. Since 20% of your guaranteed yield is (33 bushels “production guarantee” x 20% = 6.6 bushels) more than 3 bushels, you can receive a maximum payment equal to the indemnity value of only 3 bushels per acre. The payment received then is $15 per acre (3 bushels x $5 per bushel APH price guarantee).
Late Planting Provisions
The last dates to plant crops in Ohio and retain the right to receive full crop insurance production guarantees are June 5th for corn and June 20th for soybeans. Crops planted after these dates are subject to late planting provisions. There is a 25 day late planting period where the production guarantee is reduced 1 percent per day for a maximum reduction of 25%. Premiums do not change on the planted acres.
Example 2: Late planting
You have an APH corn yield of 128 bushels per acre insured at the 75 percent coverage level. The production guarantee is 96 bushels per acre (125 bushels x 75% = 96 bushels). Wet weather prevents you from planting until June 20th. The production guarantee is reduced by 15% (June 6-20, 1% x 15 days). The new guarantee is 81.6 bushels per acre (96 x 85%).
Insured acres not planted until after the end of the late planting period (June 30th for corn and July 15th for soybeans) due to insurable causes will continue to be covered at the 60% level of the original production guarantee. Late planting provisions are a part of APH, CRC and CAT policies.
Prevented Planting Provisions
Prevented planting (PP) is an option for producers who are unable to plant because of an insured cause, including excess moisture. Policy holders (APH and CRC) who are prevented from planting some crop acres until after the final planting date may choose to not plant the crop at all and still receive 60 percent of the original production guarantee, (CAT and GRP policies are not eligible for PP benefits). For an additional premium, PP coverage can be increased to 65 or 70 percent of the original coverage. This choice must be made when the policy is purchased, however.
If a second insurable crop (soybeans, for instance) is planted before the end of the late planting period of the first crop (June 30th for corn in Ohio) coverage for the second crop simply replaces the coverage for the first crop (with late planting production guarantee changes as appropriate for the second crop). If the second crop is planted after this date, the second crop can still be insured and the producer also receives a payment equal to 35% of the PP payment of the first crop.
If the second crop is insured and the producer suffers no loss on this crop, they get the 35% of the PP payment for the original crop and then the remaining 65% of the PP payment of the first crop after harvest. If the second crop suffers a loss, the producer gets the 35% PP payment for the original crop and then the larger of 65% PP payment for the original crop or 100% production guarantee payment for the second crop.
Example 3: Prevented Planting
Due to extreme wet conditions throughout the spring, you have 50 acres of corn left to plant as of July 1st. Your production guarantee is 105 bushels (APH Yield of 140 bushel per acre x 75% coverage level on an APH Policy). You can still plant corn but with a production guarantee of only 63 bushels per acre (105 bushel production guarantee x 60% due to planting after the late planting period) OR
You can plant soybeans, receive 35% of the corn production guarantee of $48.51 (105 bushels x 60% per PP provision x $2.20 per bushel APH price guarantee x 35%) now and either the remaining 65% after harvest or soybean production loss payment, whichever is greater OR
You can take the PP payment of $138.60 per acre (105 bushel production guarantee x 60% per PP provision x $2.20 per bushel APH price guarantee).
Other notes:
Forage crops to be hayed or grazed cannot be planted on PP acres. Cover crops can be planted on PP acres. Check with your crop insurance provider for details.
An important provision to note: Notify your crop insurance agent within 72 hours after the Final Planting Date (FPD) if you are prevented from planting. With the exception of new producers, for an insured crop to be eligible for PP, you are required to have planted the crop at least once during the last four years. Unless you purchased a higher PP coverage option prior to the March 15 sales closing date, PP coverage is 60 percent of your crop insurance policy, minus premium costs, regardless of crop or if the product is a standard multi-peril policy or CRC.
Small land areas do not qualify for late or prevented planting coverage, or fro replanting payments. Affected areas must be greater than 20 acres, or 20% of the insured acreage that was intended to be planted for units over 100 acres. If one portion of the insured acres meets the minimum size criteria, then other smaller areas may be combined with it.
For revenue insurance policies, all indemnity payments are calculated based on guaranteed and actual revenues rather than bushels. The same coverage reductions apply, though.