This week a long awaited $19 billion disaster aid bill left Congress and is waiting on President Donald Trump’s desk for a signature. There is a lot of confusion about how the bill’s language impacts prevent plant payments and coverage. Long story short, some farmers will receive higher prevent plant payments from the bill, but it’s not likely to be widespread unless Agriculture Secretary Sonny Perdue broadens the language.
According to USDA's Risk Management Agency (RMA), “The amount of prevented planting coverage is calculated as a percent of the insurance guarantee the insured would have had for a timely planted crop. For example, suppose a producer’s insurance guarantee is $100 an acre. If the producer insures a crop with a 60% prevented planting coverage factor, the prevented planting payment would be $60 (or 60% of the guarantee). The prevented planting factor varies by crop, based on an estimate of pre-planting costs.”
The prevented planting coverage factor for corn is 55% and the factor for soybeans is 60%. The portion of the disaster aid bill that has farmers and economists mudding up the waters over prevented plant is increased funding for USDA’s Wildfires and Hurricanes Indemnity Program (WHIP). Through WHIP, eligible acres include both planted and prevented planting acreage (subject to certain restrictions) are eligible for a payment. According to Pro Farmer’s Jim Wiesemeyer, WHIP nets out any crop insurance indemnities. So, any indemnities from prevented planting are netted out too.
“Importantly, the WHIP expected revenue is also reduced using the factors above,” he explains. “In other words, WHIP is not going to create a windfall that covers the gap between the total value of a farmer's crop and the prevented planting payment/indemnity. Further, there are VERY specific rules that a producer must follow in planting a second crop (which will directly impact the prevented planting payment/indemnity).”
This week rumors swirled throughout farm country that Secretary Perdue would either use the disaster aid bill to help farmers sidelined by Mother Nature or would make prevent plant acres eligible for a Market Facilitation Program (MFP) payment.
Pro Farmer asked a congressional contact about the matter and this is the response:
“The statutory language seems clear that [prevent plant] and other losses must stem from a loss specified in the supplemental. Now, I suppose the Secretary [Sonny Perdue] could try and stretch the definition of some of these losses (i.e, wildfire, hurricane, flood, etc.) to include excess moisture in fields that prevents planting. But I don’t know if he plans to do that and I have seen no indication to date that he does, although some say that that is the intent. And if the Secretary does decide to stretch payments to losses that are more attenuated than those specified, I would anticipate far greater eligibility. How far will the $3 billion go in meeting all of the demand?.”
Additionally, the source told Wiesemeyer that he continues to “hear the Secretary say that he MIGHT pay on PP acres under MFP, but he has said nothing definitive on this point.”
The source said farmers electing prevent plant replying on a supplemental payment on the prevent plant acres that cover 90% of losses is “deeply” concerning.
“I’ll just conclude by saying that I have heard folks say there will be MFP on PP and that the supplemental PP provisions will be applied more broadly,” the source said. “But, I have seen no evidence of this and it worries me for growers who are going to rely on this hearsay.”