Heavy rains across the Midwest and Plaines States led to record delays in planting in 2019. According to the U.S. Department of Agriculture, farmers are expected to harvest the smallest corn crop in four years as a result.1
Subsidized by the U.S. government, federal crop insurance is there to protect farmers against revenue losses due to natural disaster or inclement weather. Farmers who either were unable to plant crop, or planted significantly less crop due to weather delays, will want to file a preventative claim on their federal crop insurance.
Federal crop insurance will typically pay farmers up to 60% of their anticipated liability, based on their 10-year average crop yield. Farmers with a long history on one piece of land will often have a higher 10-year average yield, while a new farmers’ average yield will typically be weaker.
There are a number of things to consider before filing a preventative or yield federal crop insurance claim. Use the following questions as a road map. Remember: each state will have slightly different rules on crop eligibility.
- Cost benefit analysis: Should I file a preventative claim?
For farmers still able to plant late in the season, the decision becomes a cost-benefit analysis. If the farmer plants more than 60% of their 10-year average, they stand the chance to potentially make more than a preventative claim would reimburse them. In this case, farmers may take the gamble if there is a good chance they could earn more than their federal crop insurance guarantee. If the crop fails to yield more than 60%, farmers can file for a yield claim at the end of the season.
Another factor in the cost benefit analysis: This year’s low yield is sure to lead to soaring retail crop prices. Farmers that were able to plant even less than 60% of their 10-year average may have done so in anticipation of higher yields. - If a Preventative Plant claim is filed, can crop still be planted?
No. Crops planted during the federal crop insurance designated time frame must be declared as such to be insured for the season. Farmers can only file preventative claim when nothing was planted. - Can a Preventative Plant claim be filed after planting?
Farmers who were unable to yield all that they did plant, because crops were partially damaged due to weather, can file a yield protection claim post-harvest. This claim works similar to the Preventative Plant claim, but is filed after the harvest. - What’s not covered under a Preventative Plant or yield protection claim?
Not every crop is eligible for federal crop insurance. While each state will have slightly different rules on crop eligibility, generally the following are eligible for federal crop insurance: corn, soybeans, oats, wheat, popcorn, barley, potatoes, dry beans, sweet corn, forages, grain sorghum and green peas. Hemp is not yet eligible for the federal crop insurance program.
Federal crop insurance covers most of these crops for drought, excessive moisture, hail, wind, frost/freeze, tornado, lightning, flood, insect infestation, plant disease, excessive temperature during pollination, wildlife damage, fire and earthquake. It does not cover losses resulting from poor farming practices. - Cash ranch claims: Who calls the shots – the farmer or the landlord?
Filling a Preventative Plant or yield claim gets more complicated when the farmer is a tenant. While the tenant farmer is the one insured on the property, the landlord will often have an opinion as to whether the farmer should plant or file a Preventative Plant claim. Landlords may urge farmers to plant if they don’t watch their land lay fallow. Other times, the landlord will want to play it safe and ask the farmer to file a preventative claim rather than risk planting when returns are uncertain.
Depending on the agreement, tenant farmers are often contracted to pay their landlord for each crop season, whether the land is harvested or not. Tenant farmers will want to take the specifics of their tenant agreement into consideration before determining whether or not to fill a preventative or yield claim.
Additional Crop Insurance Considerations
In addition to federal crop insurance, there are two other policies that farmers may want to consider. Like federal crop insurance, these coverages are purchased through a broker.
Hail insurance — Special coverage for hail, fire and extreme wind can be stacked on top of a federal crop insurance policy. Costs and premium rates will depend on crop and farm location.
Production Cost Insurance — This new policy covers a farmer’s input costs, without consideration for their crop’s average historical yield. This private product can be purchased in addition to, or in lieu of a federal crop insurance policy, and will be tailored to the crop and farm location.
Farmers can raise their coverage level based on the amount of money they put into the crop. For example, planting more expensive types of wheat, or when additional or specialized fertilizer or herbicide is required, the policy payout can be increased. In some cases, farmers who purchase a production cost policy will buy a lower level of federal crop insurance.
It is important to note that production cost insurance does not allow farmers to file a preventative crop claim, only a yield protection claim.
Contact your HUB Agribusiness specialist for more information on protecting your farm’s crop liability this and every year.