Ag-at-Large: The case of the disappearing May
It seems that May is slipping away without actually presenting itself much. Quite the trick on all of us.
Farmers I've talked to in CropStop visits have been working at planting, but cold, wet conditions have seriously cut into the available time.
Weather and the calendar have their ways. It seems unlikely that North Dakota will hit what would be a record 4.05 million acres of corn as expected in the U.S. Department of Agriculture Prospective Plantings reports in March. Plantings were expected up 29 percent, yes?
In 2018, North Dakota had 3.1 million corn acres as farmers turned to soybeans based on price expectations. It seems hard to think of how things were prior to the soybean-heavy trade tariff disputes and recriminations.
My urban friends often ask about how it's going out there, and whether farmers are turning to prevented planting crop insurance. Some wonder at what point farmers will choose that route instead of planting a crop. Won't there be a lot of prevented-planting as trade disruptions and a difficult profit outlook make this a tempting option?
I think those decisions are still being made, but the bulk-head doors are inevitably closing.
Farmers in the Fargo-Moorhead area in the Red River Valley were planting like mad this past week. Many farmers south of Watertown, S.D., were still stuck in the mud, not turning a wheel. No one will know for a while how much is or was planted. I have heard of some South Dakota seed suppliers who have 10,000 units of seed — enough to plant 25,000 acres — and they've only sold 100 units.
Will farmers take the PP route if it appears like a more profitable option than actually planting and marketing a crop? The calendar plays a key role, but there are other considerations.
First, to acquire the full crop insurance coverage, the corn "final planting date" is May 25 in much of North Dakota (except for the southeast corner, May 31). Ditto for much of Minnesota (May 31, except southern third) and South Dakota (May 31, southeast corner). That's when most of the decisions are made.
This means farmers can still receive a reduced level insurance coverage of 1 percent per each day of planting for 25 days. If farmers plant after the late planting date, they can still plant with crop insurance, but only up to a 55 percent insurance guarantee for corn.
That 55 percent is the same level of compensation as the prevented planting situation. The insurance company would pay the insurance anyway at that, and the company would only come out better if the crop is planted and yields so that no extra payment if the yield. It is very rare for farmers to plant after this date, except for those who might need corn for silage.
Similarly, with soybeans, farmers can plant through June 10 to get full coverage in North Dakota, South Dakota and Minnesota throughout the entire states.
The late planting period runs beyond that for 25 days (July 5) again with a 1 percent coverage cut for every day delayed until the final planting date, when coverage bottoms out at 60 percent. Again, the prevented-planting option is available at the same coverage level.
Prevented planting insurance is paid on a base price, not on a harvest price.
Farmers that have a high actual production history on corn will have an easier time deciding to go with PP. It won't work as well for those who use county yields.
Of course, some farmers are simply more reluctant to go the PP route. Not planting for a year can affect the planting conditions for the following year. And not planting means 18 months without a new crop to sell. As the saying goes, you can't sell off an empty wagon, regardless of price.