UNIVERSITY ECONOMISTS REVIEW PREVENTED PLANT DECISIONS FOR 2022
May 5, 2022
Blog by Gary Schnitkey, Krista Swanson, Nick Paulson, Jim Baltz, Department of Agricultural and Consumer Economics, University of Illinois and Carl Zulauf, Department of Agricultural, Environmental and Development Economics, Ohio State University
Although planting progress can quickly catch up to average levels with favorable weather, planting progress to date lags across the Corn Belt, almost matching the pace in 2019 when many acres did not get planted.
As a result, some farmers in the Corn Belt may not finish planting before reaching the crop insurance "final plant date", after which taking a prevented planting payment becomes an option. Here we review prevented plant decisions. Unless harvest-time bids fall between now and June, planting corn will have higher expected returns than taking prevented planting payments in early June.
According to USDA's Crop Progress Reports, 2022 planting progress lags five-year average progress (see Figure 1). Progress in 2022 also lags 2019 progress when many acres were prevented from planting.
• Illinois: 7% of corn acres were planted on May 1, 2022, well below the five-year average of 43%. Planting progress on May 5, 2019, was 10%.
• Indiana: 6% in 2022 compared to the five-year average of 25% and 3% in 2019.
• Iowa: 9% in 2022 compared to the five-year average of 42% and 36% in 2019.
• Minnesota: 0% in 2022 compared to a 28% five-year average and 6% in 2019.
• North Dakota: 0% in 2022 compared to a 5% five-year average and 3% in 2019.
• Ohio: 3% in 2022 compared to an 8% five-year average and 2% in 2019.
• South Dakota: 3% in 2022 compared to the five-year average of 13% and no planting in 2019.
Again, at this point in the season planting can progress quickly with suitable fieldwork days. For example, in Illinois the entire corn crop can be planted in about fourteen suitable field days (see farmdoc daily, April 21, 2022).
Prevented Planting Payments on Corn
Prevented planting payments are available on the COMBO crop insurance policy on each of its three plans: Revenue Protection (RP), Revenue Protection with the harvest price exclusion (RPhpe), and Yield Protection (YP). Prevented planting payments do not exist for the Area Risk Protection Insurance policy.
In addition, use of the Supplemental Coverage (SCO) and/or Enhanced Coverage Options (ECO) do not increase prevented plant payments. With SCO and ECO, prevented planting payments are based on the underlying COMBO product.
Prevented planting payments can be claimed once "final planting dates" are reached. Before the final planting date, farmers must make all efforts to plant corn on intended acres. Final planting dates for grain corn vary across Midwestern states (see Figure 2). May 31 is the "final planting date" for Iowa, southern Minnesota and Wisconsin, northeastern Missouri, the extreme southern counties of Illinois, and Kentucky. June 5 is the date for most of Illinois, Indiana, Ohio, and Michigan.
Once the final planting date has been reached, a prevented planting payment for corn can be taken if corn is not planted for insurable causes (e.g., wet weather). the prevented planting payment will be 55% of the guarantee unless a 5% buy-up option was purchased by March 15.
The following example uses the standard 55% factor. Take a unit with a 200 bushels per acre Trend Adjusted - Actual Production History (TA-APH) yield, this year's projected price of $5.90 per bushel, and an 85% coverage level. In this case, the prevented planting payment will be $552 per acre (200 TA-APH yield x $5.90 projected price x 85% coverage level x .55 prevented payment factor).
To view the complete report, click here.