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NDSU Analyzer Helps With Prevented-planting Decision

NDSU Extension has developed a spreadsheet to help farmers make informed prevented-planting decisions.

After a late start, planting progressed well across North Dakota, but in some cases, wet soil conditions will force producers to decide whether to seed a crop 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, North Dakota State University Extension farm and family financial specialist.

June 10 is the final planting date in North Dakota for soybeans, dry edible beans and flax. The final planting date for full crop insurance coverage varies by crop and geographic location. For example, the date for canola varies from May 15 in the southwestern part of the state to June 5 in the northeastern and north-central area of the state. For spring wheat, durum and barley, it is May 31, except for the northern one-third of the state, where it is June 5.

"After these dates, farmers with insurance can evaluate prevented-planting for that particular crop," says Swenson.

NDSU Extension has developed a spreadsheet, 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 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 one seeds later. 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.

“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,” says Swenson. “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 better than expected yields and market prices exist.”

Swenson adds, “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," he notes.


NDSU Agriculture Communication - May 29, 2018

Source:Andrew Swenson, 701-231-7379, andrew.swenson@ndsu.edu
Editor:Kelli Anderson, 701-231-6136, kelli.anderson@ndsu.edu
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