May 27, 2019

MFP PAYMENT PROVISIONS COMPLICATE PREVENTED PLANTING DECISIONS

Farm operators in many portions of the Midwest, including parts of Southern Minnesota, Northern Iowa, and Eastern South Dakota will likely not be able to plant a portion of their 2019 corn and soybeans crops by the crop insurance “final planting dates” for their area. Those farmers have been evaluating their crop insurance coverage for prevented planting payments, as compared to the yield and profit potential for late planted corn and soybeans. The prevented planting decision became more difficult for many crop producers following the USDA announcement regarding potential 2019 market facilitation program (MFP) payments.

On May 23, USDA announced preliminary details for $14.5 billion in 2019 MFP payments that could potentially be made to producers. The MFP payments will again be administered through Farm Service agency (FSA) offices. Following is a brief is a brief summary of the 2019 MFP payment details:

• Producers of corn, soybeans, wheat, alfalfa hay, barley, canola, crambe, dry peas, extra-long staple cotton, flaxseed, lentils, long and medium grade rice, mustard seed, dried beans, oats, peanuts, rapeseed, safflower, small and large chickpeas, sorghum, sunflower seed, temperate japonica rice, and upland cotton are eligible for MFP payments in 2019.
• Payments will be based on the total planted acres to those crops on a given farm unit and will not be dependent on which specific crops were planted in 2019. The total acres eligible for 2019 MFP payments can not exceed the amount of eligible crop acreage that a farmer planted in 2018, except for any crop acres that were added in 2019 due to land purchases, land rental contracts, family arrangements, etc. This does not include converted CRP acres.
• As it stands now, 2019 prevented plant crop acres will not be eligible for 2019 MFP payments.
• The 2019 MFP payments will be paid on a single county payment rate. (Details of the payment formula have not yet been announced.) 2018 MFP payments were based on the actual crop production (bushels produced) times an established payment rate ($1.65/Bu. for soybeans, $.14/Bu. for wheat, and $.01/Bu. for corn); however, the 2019 MFP payment formula will be vastly different.
• Hog producers will again qualify for potential MFP payments, based on their hog and pig inventory at a specified date (not yet announced), and dairy producers will earn a 2019 MFP payment based on their production history (similar to 2018 MFP payments).
• 2019 MFP payments are scheduled to be made in three different tranches (or rounds), with the first round occurring in late July or early August following the required crop acreage reporting deadline of July 15 at FSA offices. The second and third rounds of payments will be made in November, 2019 and January, 2020, based on an evaluation of continuing trade related impacts on the affected agricultural commodities.

The biggest provision impacting crop producers in areas that are affected by the continued planting delays is the requirement than crops must be planted in order to be eligible for 2019 MFP payments on those acres; however, it does not specify what crop must be planted. Once a producer plants any crop on the unplanted crop acres, those acres will lose the opportunity for prevented planting crop insurance payments in 2019. For most Midwest farmers, this means a choice of planting very late planted corn or late planted soybeans on those acres, in order to maintain eligibility for potential MFP payments.

Once the crop insurance “final planting date” for corn or soybeans has been reached, farm operators can opt to take the prevented planting insurance coverage, if they have that coverage option, rather than planting the crop. A large majority of producers in the Upper Midwest carry revenue protection (RP) crop insurance with prevented planting coverage on their corn and soybeans. If they choose the prevented planting coverage, they will receive 55 percent of their original crop insurance guarantee for corn and 60 percent for soybeans on a specific farm unit.

One alternative is to plant the original crop during the 25-day late planting period. Following the “final planting date” for a crop, there is reduction of one percent per day in the crop insurance guarantee (from the maximum guarantee) for that crop. For example, corn in Southern Minnesota planted on June 10 would have a crop insurance guarantee that is 90 percent of the original maximum guarantee. The other alternative would be to plant another crop on those acres after the “final planting date”. For example, soybeans could be planted on intended corn acres after May 31. In that case, there would be no prevented planting coverage payment eligibility for the corn acres, and the soybeans would be treated as insurable soybean acres.

Following are the final planting dates for corn and soybeans at various locations:

CORN

• May 25 in the Northern Minnesota, extreme Northern Wisconsin, most of Nebraska, and most counties in North and South Dakota.
• May 31 in the Southern two-thirds of Minnesota, all of Iowa, most counties in Wisconsin, and a few counties in Southeast North and South Dakota.
• June 5 in Illinois, Indiana, Ohio, and most of Michigan.

SOYBEANS

• June 10 in most counties in Minnesota, Nebraska, North and South Dakota, the northern two-thirds of Wisconsin that are eligible for crop insurance.
• June 15 in all of Iowa, the southern on-third of Wisconsin, the northern on-third of Illinois, and most counties in Michigan.
• June 20 in Indiana, Ohio, and the balance of Illinois.

Many farm operators are already dealing with the stress of likely yield reductions from delayed or prevented planting, as well as very tight profit margins for the current year. The 2019 MFP factor adds even more stress to making a decision on whether or not to opt for prevented planting this year. They must now “weigh-in” the economics of possibly of receiving potential 2019 MFP payments, of which they do not know the payment formula or an estimated amount, versus the known payment amount of their prevented planting crop insurance coverage. If they choose to plant a crop very late to protect the MFP payments, knowing they will get reduced yields, they will lose the prevented planting protection.

Farm operators that are facing prevented planting decisions should contact their crop insurance agent for details and information. Kent Thiesse, Farm Management Analyst, has prepared an information sheet titled: “Late and Prevented Planting Options for 2019”, which contains details on prevented planting requirements and considerations. To receive a copy of the prevented planting information sheet, please send an e-mail to: kent.thiesse@minnstarbank.com