5 minute read

Crop Insurance News

BE PREPARED –PREVENTED PLANT OR REPLANT

If weather conditions prevent you from planting or you need to replant a crop, you may qualify for a claim. File a claim with your crop insurance specialist before replanting. DO NOT replant until you have received approval to do so, or you may not receive an indemnity. If you have a prevent plant situation, a claim must be filed within 72 hours after the end of the late planting period, which varies by crop. (There is a minimum requirement of 20% of the unit or 20 acres for both replant and prevent plant claims, whichever is less.) Some important changes were made for the current crop year in regards to both Replant and Prevent Plant rules. Depending on the timing of the replant period, weather and field conditions, you could be required to replant.

New Updates for 2021 Prevent Plan Claims

Planting season is here and Mother Nature is unpredictable. Be sure to understand the new Prevent Plant claim rules established for the 2021 row crop planting season. The important updates include: • Expanded “1 in 4” requirement: acreage to be insured must have been planted to a crop, insured and harvested (or covered for an insured loss) at least one of four previous years • Added exception allowing producer to receive prevent plant payment on different crop, if proven intent to plant other crop based on inputs applied or available to apply • Extended use of producer’s intended acreage report to establish eligible prevented planting acres in a new county to two consecutive years (instead of previous rule of one year) • Removed requirement for acreage planted to uninsured second crop following a failed first crop within the same crop year to be subtracted from prevented planting eligible acreage For more complete information about these important changes including frequently asked questions and examples, please visit https://www.rma.usda.gov, or contact your GreenStone crop insurance specialist. ■

Your cooperative, your coverage.

With so many things affecting the milk price, producers must challenge themselves to learn more about risk management. When it comes to protecting revenue on a dairy farm there are many options. Some of those are forward contracts, options on Chicago Mercantile Exchange, Dairy Revenue Protection, Livestock Gross Margin, Dairy Margin Coverage, or to do nothing at all. Even though doing nothing is an option, history shows it is rarely the best choice.

Robert Netrefa GreenStone Senior Crop Insurance Specialist

The question, “Is that a good price?” cannot be answered without sufficient information. No matter the risk-management option used, knowing the dairy’s numbers will always help make sound decisions around risk management. Most producers have no problem answering questions on herd performance or production. However, when asked what their basis is compared to Class III or what their breakeven is, many producers don’t know. When Dairy Revenue Protection first started, many producers were looking for any information they could find to help them with those decisions. Over 30 percent of the milk in Wisconsin is now protected with Dairy Revenue Protection, driving a need for solid information. GreenStone teams with Farm Credit associations across the country to work with Marin Bozic, PhD, assistant professor in the department of applied economics at University of Minnesota, to develop a tool that helps producers answer questions they had so they could make sound risk-management decisions. Producers need to understand their milk check. They must be able to track their basis by quarters to understand how protecting a $16 Class III or a $17.50 component price correlates to their pay price. Additionally, revenue-floor numbers should be compared to breakeven numbers. It’s much easier to justify spending $0.30 per hundredweight on Dairy Revenue Protection when data shows that a profit of $1.50 per hundredweight is being protected. Knowing the dairy’s basis will help producers understand what they are protecting and what will show up on the milk check. The Farm Credit Dairy Revenue Protection Analyzer tool – available to GreenStone DRP customers – includes a historical breakdown for producers to see the benefit net after premium. Keep in mind those numbers can only be seen by working in distant months, they are not relevant in the near term. It is wise for producers to work at least 6 months ahead. According to Marin’s math, at the 95% coverage level – which is 44% subsidized – for every $100 paid in premium, over time the producer will collect $1.00/56%, or $178. That is an excellent return on investment. For example, if a producer spends $0.35 per hundredweight, over time the indemnities will average $0.62 per hundredweight and the net farm income will be higher by $0.27 per hundredweight. And that’s after the premium. That will only work if Dairy Revenue Protection is always being used, which could sometimes mean buying below the breakeven will be better than not buying at all. Yes, that’s correct. Even working with numbers that yield a loss, positive numbers can be generated. Think of it this way: the plan protects the maximum amount one can lose, too. Every producer should challenge himself or herself to learn more about their federal order, Producer Price Differentials, and what it all means to their pay price. Learn what depooled milk is and how it affects the Producer Price Differential on the milk check. Consider using multiple options in developing a risk-management plan. Dairy Margin Coverage is a risk-management tool available through United States Department of Agriculture that protects the margin. It protects the difference between the all-milk price and average feed costs and can deliver effective risk management for dairies up to 250 head and partial risk protection for larger dairies. The historical tool on Dairy Margin Coverage, which can be found on dairymarkets.org, shows how effective Dairy Margin Coverage can be for a dairy. In the last ten years, a dairy farmer would only have been out the premium in 2014. The average class III price for that year was $22.34. Using protection tools such as Dairy Margin Coverage, with Dairy Revenue Protection, or Livestock Gross Margin, producers can stack up their coverage. For producers who want to protect their income there is no reason not to use Dairy Margin Coverage. Of course, it is ultimately the producer’s decision. Gain knowledge from all trusted advisors to help make sound risk-management choices. Design a risk-management plan and be flexible to change but not greedy with numbers. Try not to fall into the trap of speculating. No one can predict what markets are going to do. Certainly no one predicted what COVID-19 would do to milk markets when it hit the U.S. Though there may be an idea of where prices are going, there are too many variables impacting milk prices to ever know for sure. That’s why price risk needs to be managed. ■

Dairy Margin Coverage is a risk-management tool available through United States Department of Agriculture that protects the margin.