Fargo, North Dakota, USA
June 9, 2014
This is the third year of the past four that wet soil conditions have forced many producers to make a decision to seed or not seed a crop when it is well beyond the optimal planting time.
"The question is whether to plant the crop and accept the risk of lower yields and reduced crop insurance coverage or to collect a prevented-planting crop insurance indemnity payment and idle the ground," says Andrew Swenson, farm and family financial specialist with the North Dakota State University Extension Service.
The final planting date for full crop insurance coverage varies by crop and geographic location. For example, canola varies from May 15 in the southwestern part of the state to June 5 in the northeastern area of the state. For wheat, durum and barley, it is May 31, except for the northern one-third of the state, where it is June 5. It is June 10 for soybeans, dry edible beans and flax.
"After these dates, farmers with insurance can evaluate prevented-planting for that particular crop," Swenson says.
There is an excel spreadsheet at
http://www.ag.ndsu.edu/farmmanagement/prevented-planting to help with the prevented-planting decision. The program uses partial budgeting to compare the economics of prevented-planting with growing the same crop, for which a prevented-planting payment could be received, or some other crop.
The prevented-planting indemnity is offset partially by the direct costs, such cover crop seed, chemicals and fuel, to maintain the land that will not be used for crop production in 2014.
This is compared with the income that could be obtained from growing the crop after the additional direct costs of production have been subtracted.
Two critical assumptions are the expected yield and market price if one seeds later. The risk of lower yields and quality is elevated. The analysis also considers crop insurance indemnities, which may be received if a producer plants the crop late and yields suffer.
"Fortunately, the crop insurance coverage level only diminishes 1 percent per day for the first several days after the date when producers can choose prevented-planting," Swenson says. "Therefore, if a producer still can plant a few days late, he or she still can have a fairly strong safety net and have the upside revenue potential if yields and market prices are better than expected."
There are other considerations in the prevented-planting decision. Planting will use up soil moisture and lessen the possibility the ground will be too wet for seeding next year. Another reason to plant may be to satisfy a forward sales contract. However, late planting may result in lower yields and lower the actual production history, which is used to calculate future crop insurance guarantees.
"If soil conditions do not allow seeding by the prevented-planting date, each producer should analyze the prevented-planting option and consult an insurance agent if unsure whether the acreage qualifies, what the payment rates may be and other details," Swenson says.
Topics
Species
