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June 5, 2003

Spring storms bring about flood of crop insurance issues

WEST LAFAYETTE, Ind. – Indiana farmers deciding whether to replant flooded fields or abandon all attempts at seeding waterlogged acres should consider crop insurance implications before climbing aboard their tractors, said a Purdue University agricultural economist.

Producers who insured their 2003 soybean crop can plant through June 20 without reductions in coverage. The planting deadline for full coverage on corn is today (Thursday, 6/5).

"A farmer with both corn and soybeans insured can switch from corn to beans and not have to worry about their insurance coverage," said George Patrick, an economist who specializes in farm risk management and agricultural tax law. "It's when they report crop acreage that they'll need to report what they actually planted this year, rather than what they may have intended to plant.

"Until June 20 they will qualify for the full yield guarantee on a soybean crop. They could continue to plant corn after June 5, but for each day that planting is delayed beyond June 5 their yield guarantee level is reduced by 1 percent per day."

Nearly 7 million acres of Indiana's more than 12 million acres of field crops in 2002 were covered by Federal Crop Insurance Corp.-backed policies. Corn and soybeans comprised 96.6 percent of the insured acreage.

Farmers had to purchase insurance by March 15 to cover their 2003 spring crops. Those who did so should review the policies with their insurance agent, especially if recent storms damaged young crops or have hindered planting efforts, Patrick said.

A smorgasbord of crop insurance policies exists, he said. So, too, do coverage levels and rules for late planting, replanting and "prevented planting" – when a farmer is unable to do any planting in a field.

"There are about six different kinds of crop insurance available," Patrick said. "The two county-based insurances – the Group Risk Plan and the Group Risk Income Plan – don't have any prevented planting or delayed planting options associated with them. If an individual has only catastrophic coverage, it does not have any replant option. But if a farmer has the Actual Production History, Crop Revenue Coverage, Income Protection or Revenue Assurance insurance, all of those plans have both the prevented planting and replant option coverages."

Yield guarantee levels are based on a farmer's production history for the previous four years. For example, a producer with 75 percent coverage and an average yield of 120 bushels per acre is insured at a yield guarantee level of 90 bushels per acre. However, if the same farmer is growing corn and planting is delayed until June 15, the yield guarantee level would be reduced from 90 bushels per acre to 81 bushels per acre.

Farmers making prevented planting claims usually can expect payments equaling 60 percent of their yield guarantee levels, Patrick said. For a corn grower with a yield guarantee level of 90 bushels an acre, the payment would be for 54 bushels per acre.

Prices for insured crops range from $2.20 a bushel for corn and $5.30 a bushel for soybeans under the Actual Production History plan, to $2.42 a bushel for corn and $5.26 a bushel for soybeans under the Crop Revenue Coverage, Revenue Assurance and Income Protection plans.

"A producer cannot plant the insured crop in the late planting period or plant another crop and still qualify for the prevented planting," Patrick said.

Coverage also depends on how a farmer's cropland is designated within a policy, Patrick said.

"They need to be aware of their insurance unit," he said. "This can vary a great deal, depending on an individual farmer's circumstances. If they own all of their land, that may be treated as one unit for insurance purposes. If they own land and cash rent from a number of landlords, this may be treated as one unit. If they've got the records to separate them out, it may be that each cash-rented group of fields will be treated as a separate unit for insurance purposes."

Additional information about crop insurance can be found in the Purdue Agricultural Economics Report, located online. The September 2001 issue includes an overview, titled "Crop and Revenue Insurance Alternatives." The December 2001 issue contains the article "Protecting Farm Revenues with Pre-harvest Pricing and Insurance."

Farmers can evaluate crop insurance options and calculate per-acre premiums at the iFARM Web site. The Web site is a collaborative effort of the University of Illinois and Purdue.

The iFARM site should come in handy for farmers with fall-planted crops, such as winter wheat.

"Crop insurance for fall-planted crops must be purchased by Sept. 15," Patrick said.

Writer: Steve Leer, (765) 494-8415, sleer@purdue.edu

Source: George Patrick, (765) 494-4241, gpatrick@purdue.edu

Ag Communications: (765) 494-2722; Beth Forbes, bforbes@aes.purdue.edu; http://www.agriculture.purdue.edu/AgComm/public/agnews/

Related Web site:
Purdue University Department of Agricultural Economics


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