Minding Ag's Business
Marcia Zarley Taylor DTN Executive Editor

Wednesday 05/29/13

Options for Washed Out Acres
Water-logged Iowans and Minnesotans would plant corn if they could, but increasingly are considering prevented planting claims as a last resort.[Read Full Blog Post]
Posted at 5:27PM CDT 05/29/13 by Marcia Zarley Taylor | Post a Comment
Comments (10)
DTN's MBAg Columnist Adam Erwin farms in the swamped out corridor in Iowa and Minnesota and has been emailing his personal analysis. here's a sample of what he plans to do given he's only 70% finished on corn and has virtually no soybeans in the ground: Looking over the Iowa State University link to their extension pamphlet, it's way out of synch for the prime area of IA and MN with problems. APH yields are too low. Doesn't factor in the diff between sunk and recoverable costs. Option 1. Take PP. Don't plant corn. Get a check for $475 to $500, lose the nitrogen, reset for 2014 Option 2. Plant corn, costs $300-$400 to grow and dry, pick 30% on Thanksgiving in the snow, have guarantee of $725 ish. My best case scenario with 145 bu corn at $6.50 is about $50 higher than PP. Why risk it? Option 3. Plant beans. Landlady doesn't wonder why you don't farm. However, your revenue guarantee is only $525 ish. And they cost you $200 to grow. Best case scenario with 48 bu beans at $15? Again, only $50 or so higher than PP and you have risk and expense. Nobody with a pencil and a calculator is going to plant corn after June 1 north of I-80. --Adam Erwin
Posted by Marcia Taylor at 10:39AM CDT 05/30/13
It is sad that crop insurance guarantees a profit which gives us incentive to sit on our butts instead of trying to feed the world. I hope this open' s congress's eyes and they make us pay 100% of the premium if we are gonna profit on an already heavily subsidized program while we spend all summer basking at the lake. I hope the hardworking taxpayers in this country do not find out about this waste and abuse!
Posted by Bill Billson at 11:43AM CDT 05/30/13
$597 per acre annual lottery award for prevented planting. A certain number of the lottery's awardee's only invested $500 per crop acre for their cropland and less originally. The $97 certainly would certainly cover real estate taxes and a couple of applications of roundup. $500 net would be a 100% ROI. Most economists would consider that an obscene profit. For those who inherited land or were gifted their cropland obviously the ROI would be higher. 5000 acres corn base - $2.5 million net for no crop - should be a few dollars to reelect a corrupt congesssman for the dude with no land debt.
Posted by John Olson at 1:53PM CDT 05/30/13
Yesterday University of Illinois economist Gary Schnitkey weighed in with interesting calculations on prevented plantings. "Prevented planting is an attractive alternative this year, particularly if you've taken a high insurance coverage level of 85% or 80%," he said in a podcast on FarmDoc daily. If you've pre-applied alot of N fertilizer, you'll have incentive to plant though. http://farmdocdaily.illinois.edu/2013/05/evaluating-prevented-planting-corn.html Without accounting for $300 to $400 cash rents, fertilizer applications of $150/acre or more, pre-plant herbicides or other "sunk" costs, Schnitkey estimates someone with 80% RP coverage and 180 APH yield would collect $445 from PP. That coverage would cover that overhead, essentially a breakeven or no profit option depending on your situation. On other hand, a 151 bu. corn crop planted 6/6 could return $388/acre in his example, without accounting for rent. So it's a close call, but that depends on a lot of variables in your situation. I don't see many people getting rich on either choice unless your land costs are free. Go to farmdoc for more http://farmdocdaily.illinois.edu/2013/05/evaluating-prevented-planting-corn.html
Posted by Marcia Taylor at 12:08PM CDT 05/31/13
RMA's handbook has 146-pages of rules regarding Prevented Planting. An industry expert e-mailed to say: "BE VERY CAREFUL PROVIDING PP INFORMATION!!! THIS IS DANGEROUS TERRITORY. Rules are ambiguous, adjusters judgment varies, some insurance companies have different rules." He recommends documentation of weather for folks desiring to bullet proof their PP claims. What was the rainfall amount? What is affect on that soil type? What is the preplant land preparation? What is the available working days?
Posted by Marcia Taylor at 12:18PM CDT 05/31/13
When government assumes the role of guarantor of land rents a whole lot of individuals are getting their networths turbocharged with this largess. Included in these would be landlords, farmers owning land free and clear or otherwise, bankers, and obviously those employed in the government crop insurance complex and larger farmers. For decades the beneficiaries of the largest subsidies and guarantee packages are most likely those with the greatest net worths as well as the most acres farmed. In other words government is targeting the greatest benefits to those who are the least needy of the help.
Posted by John Olson at 1:03PM CDT 05/31/13
One option is growing cows. Does not work for everyone though. See http://muscatinejournal.com/business/where-s-my-cow-insurance/article_12a3291c-5daf-57cd-9ecc-56b92e1d896e.html
Posted by John Olson at 4:58PM CDT 06/01/13
Marcia, your last comment is of great value to growers. Use PP as an avenue of LAST RESORT, because of these ambiguous and complex rules, one could be left holding their hat in their hand when their claim is denied. My advice is always (in order) plant the intended crop, switch to a second crop when it is no longer feasible to plant the intended crop and lastly, file PP when all hope is lost for that second crop to make. Advice to growers: if you haven't finished planting your corn, call your agent NOW and notify them. They should be opening a PP claim on you so you have options if the second crop can't get planted either.
Posted by Jarrod Bennett at 12:51PM CDT 06/03/13
there will be tens of thousands of PP ac. in s.MN and n.IA ... I has been close to non stop rain for 3 weeks. just my opinion but some farmers try to run more land than they are capable of dealing with in difficult years. planting beans as option B just isn't going to happen.
Posted by Paul Beiser at 9:40PM CDT 06/05/13
Bill Bilson apparently you didnt even read or at least understand the article. There is no profit in PP. How does a crop that gets planted late and gets frosted feed any of the world except the people who make tractors, fertilizer, bank farm managers, and in city landowners, These are the people that I see going by pulling their huge boats to the Lake.
Posted by Unknown at 5:46AM CDT 06/07/13
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