Summer 2012

Cropping in drought

By Ray Massey, economist

The current drought has many crop producers looking for salvage alternatives. Any unusual management practice is likely to affect crop insurance. Before doing anything out of the ordinary, contact your insurance agency to determine the impact of your actions on your insured crop.

For an insured crop severely damaged by drought there are several options. The first option is to do nothing out of the ordinary. Wait out the season to see what will finally happen. When you eventually harvest the crop, report your yields to your crop insurance company and receive any indemnity for reduced yields.

A second alternative for corn is to harvest the crop as silage. Before you can harvest corn planted for grain as a silage crop you must first contact your insurance company and ask that an adjuster come to determine yield in the field. The adjuster may make a determination of yield upon inspection of the field or may ask that a strip be left until harvest which will be used to determine the yield of the field. Once the insurance adjuster has determined how to estimate expected yield, he will be able to give permission to harvest the crop as silage. You can harvest the crop as silage and sell it or use it yourself. If you do not plant a second crop on those acres, your insurance indemnity will be the same as if you had left the crop standing until harvest time.

If you harvest corn early as a silage, you can replant corn, sorghum or wheat with the intention of harvesting it as a forage. Crop insurance does not prohibit a producer from trying to make additional income from the land that originally held a failed crop. Given the drought conditions, livestock producers are looking for forages and replanting with the idea of forage production is a win-win for livestock and crop producers. The second, forage intended crop cannot be insured. It is too late to purchase insurance on spring planted crops.

Before planting another crop this year, it's potential to yield needs to be estimated. On the plus side of planting another crop is the fact that the nitrogen fertilizer intended for the corn that was destroyed is still likely available for the second crop. But there are negatives to consider.

Planting another crop incurs the cost of seed and planting. The choice of crops may be limited by the herbicides that were used on the corn crop. Having sufficient moisture for a second crop remains uncertain.

The National Weather Service one month and three month precipitation forecast expects below average rainfall in Missouri. In other words, near term soil moisture conditions that contributed to poor crops are unlikely to improve. Second crops intended for forage harvest may be disappointing.

The reason to consider the forage crop is the reason farmers plant any crop - there is potential to make a profit. Forage prices are rising and there is likely a market for forage if cattle or dairy production is near the farm. Waiting until soil moisture conditions improve and are expected to remain adequate may be wise.

Whatever you choose to do with the original corn acres, remember not to make any decisions on destroying the crop or harvesting it before maturity without first contacting your crop insurance company. Options exist but only if the crop insurance company is brought in first.

Data on Crop Insurance

2011 MO Crop Insurance

In 2011, 83% of Missouri acres planted to corn and soybeans were insured. While the data for 2012 crop insurance is not yet available, it appear that more policies were sold this year than last year. This probably means that more acres were insured in 2012 than in 2011.

The pie chart to the right shows the type of insurance that was purchased for corn and soybeans in 2011. Uninsured acres often are either irrigated acres or the landowner side of a crop share lease where the landowner does not want to purchase crop insurance (the tenant may have for his portion of the crop). Either way, these acres are not going to receive any indemnity if yields were diminished.

Revenue Protection, at 63% of acres planted, is the most commonly chosen type of crop insurance. This insurance guarantees producers a floor on their revenue regardless of yield. Revenue Protection pays based on harvest time prices, which by all indications will be high, so indemnities are likely to be very good for those who purchased this type of insurance.

Yield protection guarantees a percentage of normal yield but pays indemnities at a fraction of a predetermined rate ($5.68 for corn; $12.55 for soybeans). Because harvest prices will be above these prices and because producers chose some fraction of the projected price, farmers who purchased this insurance will receive indemnities to help cover costs but much less than those who purchased Revenue Protection.

Catastrophic insurance is the bare minimum that can be purchased for crops. It insures approximately 25% of the expected value of the crop at planting time. Producers who purchase Catastrophic insurance oftendo so in order to qualify for farm programs or loans. They do not want to purchase insurance as a risk management tool for their crop production.

Back to Commercial Ag Newspaper