farmgate: The Juggler: Balancing Replanting Versus SURE Disaster Benefits
You may not be a Kansas wheat farmer, but you may want to eavesdrop on their coffee shop debate about whether to plant a spring crop on failed wheat acres or hope for the best from the new SURE disaster program. The SURE program will be available for all farmers who signed up for crop insurance, and it may or may not benefit corn and soybean farmers later on this year in the event of a crop disaster. Some wheat farmers may take the program for a test drive, and everyone else will be able to see how it handles.
Currently, it is too early to determine if there is freeze damage to the winter wheat crop, but Kansas State ag economist Art Barnaby says as insurance companies settle claims, “Farmers need to be careful they don’t void their free SURE disaster aid coverage from the Farm Service Agency (FSA).” In his latest newsletter Barnaby suggests that planting a replacement crop of sorghum on failed wheat acres could jeopardize any SURE disaster program benefits.
Since crop insurance was required for SURE benefits, failed acres would have been insured. Insurance adjustors may require farmers to leave a test strip to determine later the extent of any loss, and allow them to plant the balance of the field in another crop, such as sorghum. That changes the level of coverage from a high wheat base price of $8.77 to the lower value of the sorghum crop. The performance of the wheat test strip will determine net revenue, which will be lower if the sorghum crop fails.
Barnaby alerts farmers that insurance companies will not release the wheat acreage until it heads, and at that time the sorghum will be considered by FSA to be a double crop, which will negate the disaster benefits of the SURE program. He says for the sorghum to be discounted by FSA as a double crop a farmer would have had to pay the $250 per crop premium for non-insured acreage or NAP. Few would have done that by the March 15 deadline, consequently, production of sorghum behind a failed wheat crop would eliminate the SURE payment.
There is a significant problem, however, which Barnaby says results from the lack of rules for the SURE program. They are expected sometime later this year, but they will be needed to determine the benefits of the SURE program. The general rules indicate part of the formula depends on the average price of the Marketing Year, similar to the ACRE program, and since marketing years end 12 months after harvest, delays can be expected in benefit payments.
Prior to the wheat forming heads, the Risk Management Agency allows farmers to pay 35% of their premium and receive 35% of their indemnity payment, close out their wheat insurance policy on wheat and then plant another crop, which will also be insured, if it was originally listed as a replacement in the event of a failed wheat crop. While that seems like a solution to the SURE controversy, Barnaby says it becomes a problem if landlords and operators went different directions on their crop insurance program, and one will lose out on the SURE disaster payments. He says another downside to the program is that it will force more crop share arrangements to switch to cash rents.
While the issue at hand has been potentially failed wheat acreage, and whether a follow up crop of sorghum is planted, move eastward into corn and soybean territory. Under Barnaby’s scenario, a farmer who plants corn, which might be flooded out in May or June, could follow it with a replacement soybean crop. His example suggests the planting of the soybeans would negate the opportunity to apply for a SURE disaster payment on the failed corn crop. However, before taking any action, always consult your crop insurance company, and check with FSA for any official information on program details.
Barnaby says since the provisions of the Farm Bill were not finalized in time for the 2008 crop, Congress allowed participation in the disaster program by opening a late sign up period. However, he says don’t count on that for 2009.
Summary:
A spring freeze after wheat emerged from dormancy may be the first test for the new SURE disaster program. Farmers who abandoned their failed wheat and plant a second crop of sorghum, may be jeopardizing their disaster benefits under the new SURE program. Similarly, planting soybeans following a failed corn crop might possibly be a parallel. One of the problems for the uncertainty is the lack of final rules for the SURE program.
Posted by Stu Ellis on April 22, 2009 12:24 AM to farmgate