Prevented planting options for crop producers
Corn planting progress slowed last week, but farmers were still able to get another 15 percent of the crop planted. That brings the share planted as of May 26 to 86 percent. This is not too far below the 5-year average of 90 percent for this point of the season. Considering that progress was 38 points behind the average pace just two weeks ago, the progress from May 12 to May 26 is pretty amazing.
Corn planting is close to the five-year average, but a lot of acres remain to be planted. If total corn acreage reaches the 97.3 million acres reported in the March Prospective Plantings report, there was still nearly 14 million acres to be seeded as of last Sunday. Weather for this week probably limited planting progress with multiple systems hitting the Midwest especially in the second half of the week.
click image to zoom At least based on planting intentions, farmers still have more than 2 million acres to plant in Iowa and more than 1 million acres in Illinois, Minnesota, North Dakota and Wisconsin. At least some of these areas were hit with heavy rain over the holiday weekend and with moderate rain this week. As a result planting progress will probably still be 93 percent complete or less when the next Crop Progress report is issued next Monday. That would leave us with about 7 million acres or more still to be planted as we head into June. In addition, some of the corn that has been planted has been flooded out and will need to be replanted.
With a lot of corn still to be planted, some farmers may want to consider other options. Since most land is covered by crop insurance, farmers may want to file for a prevented planting payment. Others may want to shift the land from corn to some other crop, such as soybeans, or farmers may just keep planting corn for another couple of weeks. In 2011, corn planting progress stood at 97 percent on June 9th and the June Acreage report showed corn acreage a little higher than the March intentions.
Corn farmers can continue to plant corn in June, even though it may be after the final planting date indicated in the crop insurance policy. For most states and crops there is a late planting period that runs for 25 days after the final planting date. During that late planting period, farmers can still plant corn, but the insurance coverage gets reduced by 1 percent per day. The crop insurance coverage is based on the spring price, which is $5.65 per bushel for corn for 2013. Corn can even be planted after the late planting period ends and the crop will be insured at 60 percent of the original guarantee.
Farmers can opt to get a prevented planting payment. As an example, assume a farmer has purchased an 80 percent coverage policy and has a actual production history (APH) of 170 bushels per acre. The prevented planting guarantee is 60 percent of the production coverage. So in this example the production coverage is $768 per acre ($5.65 * 170 * 0.8). The prevent plant payment would be 60 percent of this – or $461 per acre. In this case the producer needs to leave the land idle or plant a cover crop. He can’t plant an alternate crop for harvest and receive the full prevent planting payment. The prevented planting acres will not affect the APH.
Farmers can shift the land to another crop, and insure the second crop. If this is the choice the producer is not eligible for a prevented planting payment. The second crop must be planted during the late planting period for corn, i.e. within 25 days after the final planting date. If the second crop is planted after the late planting period, the farmer can get a 35 percent prevented planting payment for the corn, but the planted acres receive a yield equal to 60 percent of the approved yield, which will tend to lower the APH in future years.
If the corn crop was planted, but washed out by flooding or some other problem and it is not practical to replant, the farmer can receive a full indemnity crop insurance payment and the land can be left idle or planted to a second crop that is not insured. Or the producer can plant and insure a second crop and receive a 65 percent reduction in the indemnity for the first crop. If the first crop can be replanted, but is not replanted, no insurance payment is available.
USDA will survey producers in early June about actual acreage, but the survey results will probably still need to be adjusted in later reports. The planting data and current weather suggest that actual corn acreage will fall short of the 97.3 million acres reported in March, but the deviation will probably be relatively small. Our current state-by-state analysis puts corn acreage at 95.7 million acres.
click image to zoom Farmers still have time to plant soybeans with planting often continuing through most of June. The five-year average shows about 10 percent of the crop still to be planted in mid-June, three weeks from the 44 percent reported on Tuesday. However, weather conditions will need to improve in early June for acreage to reach the 77.1 million acres reported in the March Prospective Plantings report. If corn acreage does drop below intentions, soybean acreage could turn out to be even higher than intentions.
There is a real chance that spring wheat acreage will fall short of intentions. As of Sunday, a total of more than 3 million acres remained to be planted. Most of that 3 million acres is in North Dakota where only 62 percent of the crop was in the ground as of last Sunday. The final planting date for spring wheat in North Dakota ranges from May 31 in the South to June 6th in the North. The planting window for sunflowers makes this a viable alternative if farmers can’t get the wheat planted.