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Corn+Soybean Digest

Decisions Await Farmers With Crop Insurance

Indiana farmers who insured their 2008 crops have decisions to make if recent floods damaged their cropfields, said a Purdue University Extension agricultural economist.

"In some instances, farmers may not have been able to plant their original crop in a timely manner, and in other instances farmers have lost crops due to flooding," George Patrick said. "These producers, if they have followed good farming practices, may be eligible for different crop insurance benefits depending on the type of insurance they have and their individual circumstances."

Producers prevented by weather from planting their intended crops on time have three options, Patrick said.

"They can go ahead and plant the original crop even though the yield may be reduced," he said. "Second, they can plant an alternative crop, such as shifting from corn to soybeans. Or third, they can abandon the acreage and take a prevented planting payment."

Multiple peril crop insurance plans based on a producer's Actual Production History (APH), Crop Revenue Coverage, Revenue Assurance and Income Protection all provide a 25-day late-planting period, Patrick said.

"In Indiana, this begins June 5 for corn and June 20 for soybeans, with yield coverage levels being reduced 1% per day that planting is delayed, with a maximum reduction of 25%," he said.

"After the late-planting period, the yield guarantee is 60% of the original yield guarantee level. If soybeans were included in the original insurance coverage, a producer could shift from corn to soybeans before June 20 with no reduction in the yield guarantee level."

If planting was delayed because of weather and not by a farmer's choice, an insured producer could choose not to plant a crop and receive 60% of the original yield guarantee level. "The county-based crop insurances -- Group Risk Plan and Group Risk Income Plan -- do not have prevented planting coverage," Patrick said.

Farmers who planted on time and have suffered flood-related crop damage have four options available to them, Patrick said.
They are:
* Leave the damaged crop as is.
* Replant part or all of the damaged area to the same crop.
* Replant part or all of the damaged area to a different crop.
* Abandon the crop and plant a cover crop.

"If the crop is left 'as is,' the yield, or revenue, for the insurance unit would be compared to the insurance guarantee," Patrick said. "If the yield or revenue was below the guarantee level, an indemnity would be paid. Because many farmers insured at the 75% level or less, a substantial portion of the insurance unit could have a zero yield before an insurance indemnity would be paid.

"For example, a producer with an APH yield of 160 bu./acre insured at the 75% level would have a yield guarantee level of 120 bu. and could suffer a complete loss on one-quarter of the insurance unit with no insurance indemnity if the rest of the unit had the 160-bu. yield. For county-based, or group, insurances, an indemnity would be paid only if the county yield was below the trigger yield specified in the insurance policy. Thus, individual producers could suffer major losses without insurance indemnities if county yields were not reduced to below the trigger levels."

If a flood-damaged field is expected to yield less than 90% of the original yield guarantee level, a producer can replant to the same crop. If the area to be replanted is at least 20 acres or 20% of the insurance unit, then the producer may qualify for a payment equivalent to 8 bu. for corn or 3 bu. for soybeans. The county-based insurance products and catastrophic level coverage do not include a replant payment.

Should a farmer elect to replant with a second crop -- such as shifting from corn to soybeans -- the crop insurance company must release the flood-damaged area, Patrick said.

Patrick encouraged producers facing crop losses to work closely with their crop insurance agents.

"The claims procedures and documentation requirements need to be followed carefully," he said. "Failure to comply with procedures could result in insurance claims being denied."

In 2007 in Indiana, about 69% of the corn acreage and 66% of the soybean acreage was insured. Crop insurance is not available in Indiana for forage crops and some specialty crops.

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