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Prevented Planting Economics (5/31/18)

North Dakota crop planting progress as of May 27 was ahead of average but behind last year for nearly every crop.

Prevented Planting Economics

North Dakota crop planting progress as of May 27 was ahead of average but behind last year for nearly every crop. For example soybean planting was 72 percent complete, compared to 79 percent last year and the 61 percent five year average. However, each year there are some prevented planting acres due to wet soil conditions.

The USDA Risk Management Agency has final planting dates by crop for each county. For example, June 10 is the final planting date in North Dakota for soybeans, dry edible beans and flax. For spring wheat, durum and barley, it is May 31, except for the northern one-third of the state, where it is June 5.

Producers may be eligible to receive a prevented planting insurance indemnity payment if planting cannot be achieved due to weather by the final planting date. Acreage on which a prevented planting indemnity payment is received is subject to certain restrictions for the remainder of the crop year.

The producer can choose to plant the crop after its final planting date but the insurance revenue or yield guarantee for most crops is reduced 1 percent per day for the first 25 days of “late planting” after the final planting date. The insurance guarantee is reduced 1 percent per day for just a 15 day late planting period for field pea and lentil. For canola it is reduced 1 percent per day for days 1-5, and 2 percent per day for days 6-15. Crop insurance is not available after the late planting period.

NDSU Extension has developed a spreadsheet to help with the decision of whether to plant the crop after the final planting date 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.

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 as cover crop seed, chemicals and fuel, to maintain the land that will not be used for crop production in 2018. This is compared with the income that could be obtained from growing the crop after the direct costs of production have been subtracted.

Two critical assumptions are the expected yield and market price if the crop is seeded late. Producers run the risk of lower yields and quality. The analysis also considers crop insurance indemnities, which may be received if a producer plants the crop late and yields suffer.

Crop insurance coverage level only diminishes 1 percent per day for the first several days after the date when producers can choose prevented planting.

Therefore a producer still can plant a few days late and have a fairly strong safety net and have the upside revenue potential if better than expected yields and market prices exist.

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, producers can analyze the prevented-planting option and should consult an insurance agent if unsure whether the acreage qualifies, what the payment rates may be and other details.

Andrew Swenson

Extension Farm Management Specialist

This site is supported in part by the Crop Protection and Pest Management Program [grant no. 2017-70006-27144/accession 1013592] from the USDA National Institute of Food and Agriculture. Any opinions, findings, conclusions, or recommendations expressed are those of the website author(s) and do not necessarily reflect the view of the U.S. Department of Agriculture.

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