Minding Ag's Business

Insurance Tilts Toward Planting

Late planting already is generating buzz about what crop insurance will and won't cover, especially around the saturated Prairie Pothole region of the upper Midwest. It's worth reviewing the rules because in some instances, eligibility for prevented planting will be determined on a case by case basis, the Risk Management Agency tells DTN.

Unless you farm around river bottoms, prevented planting coverage is a crop insurance feature rarely triggered outside the Dakotas or northwestern Minnesota. Since 2006, RMA officials have consciously been tilting underwriting rules to give growers more incentive to get a crop seeded rather than collect claims. They want to disqualify land they think is too risky to insure.

One big incentive is that since 2011, anyone with a revenue policy who claimed prevented planting sacrificed their harvest-price adjustment. "That alone should be an incentive to plant," says Kansas State University economist Art Barnaby. In 2012, for example, the price of corn soared 32% between spring planting and harvest.

In 2012, an even more stringent prevented planting rule went into effect for five prairie pothole states--Minnesota, Iowa, North Dakota, South Dakota and Montana. The Risk Management Agency ruled that growers in those five states must plant and take a crop to harvest at least once every three years to be eligible for prevented planting the following year. (Some insurance company executives had complained privately that some insured fields "had perch swimming on them.")

In addition to that one-in-three rule, the acreage must also be "insurable." Acreage that under normal weather patterns is normally wet through the crop insurance final and late planting period--and that normally has cattails and perennial weeds and grasses growing on it--would not qualify. That could potentially disqualify some Dakota cropland that was planted thanks to 2012's extreme drought.

What officials said they wanted to correct were repeated claims on wetlands RMA considers farmable only under abnormally dry conditions. In crop years 2006-08, for example, RMA records show crop insurance paid more than $400 million of claims on acreage with “normal” weather patterns in the Dakotas and Minnesota.

“We have documented cases of policy holders not able to plant wetlands for up to 17 consecutive years and collecting an indemnity,” another agency official said in a background interview with DTN. In fact, approximately 1,300 growers had made prevented planting claims for at least 10 consecutive years, and another 2,200 for at least five years.

Also since 2011, farmers no longer had the option of substituting a higher value crop when they ran out of base acres on a prevented planting claim. The idea is not to pay people for corn if they were washed out on wheat or soybeans. (For one DTN reader, that’s a payment difference that's meant $157/acre some years--$379 on missing corn acres, but $222 for wheat).

Meanwhile, a farmer near Wahpeton, N.D., finds it hard to believe that 2012 plantings won't count in qualifying some fields for insurance this year. However, he tells me he is scrambling to plant as much as possible.

"It does not take long to get it in once we get started," he says. "I have taken 50% of my wheat acres out of my plan due to lateness and will switch those to soybeans. On the corn, I am staying with the same acres and maturity dates. I will shorten them up or reduce acres after May 15." In the past, prevented planting might have been in his vocabulary.

RMA admits the prevented planting rules are complex, so growers should check with their insurance companies to make sure their fields are eligible. If you want to read the exact regulations, go to www.rma.usda/gov/regs/533/2010/fad-110.html

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Jarrod Bennett
5/14/2013 | 8:01 AM CDT
Thanks for the article Marcia. This looks to be a good weather week in the southern corn belt and really hoping in the next 10 days for a wrap up of the corn planting. I REALLY don't like filing PP... RMA changing the rules to prevent policies from capturing higher harvest prices on PP has made it somewhat easier for me to convince growers to plant in lieu of filing PP.