Flooded crops: Replant decisions in regards to crop insurance

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Earlier in June, several large rain events caused significant flooding and ponding in fields throughout South Dakota. In some areas, flood waters uprooted crops and washed away topsoil. In fields where ponds remained after rains ended, soils were likely water-saturated and largely devoid of oxygen. Although at this point the extent of the damage to crops is still being determined, some fields have been compromised and yield loss will likely occur. As a result, producers with crop damage are now considering whether to replant, plant a different crop, or do nothing. Additionally, they are considering the ramifications those decisions have on crop insurance.

Crop insurance is an important risk management tool utilized by producers in many parts of the U.S., including South Dakota. In South Dakota, crop insurance protected $5.6 billion in liability on growing crops in 2013 and 17 million acres were insured (about 97% of acres planted to major crops).

Multiple Peril Crop Insurance (MPCI) covers crop yield loss caused by different types of natural disasters such as drought, freeze, and flooding. Newer insurance options combine price and yield protection to protect against loss of revenue. MPCI, under the Federal Crop Insurance Program (FCIP), is one of two types of crop insurance available to farmers in the U.S. (Crop hail insurance policies do not fall under FCIP and must be purchased separately.) Like hail insurance, MPCI is provided by private companies, however, MPCI policies offered by these private insurers are supervised and regulated by USDA’s Risk Management Agency.

For producers who have insured crops that have been affected by flooding, they should first contact their insurance provider. Crop agents must be notified within 72 hours following an eligible loss.

At this time of year, several options exist for insured producers who have crop losses caused by natural disasters such as flooding. These are:

 

  • Leave damaged crop as is and receive insurance indemnity.
  • Replant the same crop.
  • Plant a different crop.

 

When it is practical to replant the insured crop, the producer must replant that crop, on those acres, for coverage to continue on those acres. Should the grower choose not to replant, although it is practical to replant, no coverage for the first insured crop will be provided. Practical to replant is determined by the producer’s approved insurance provider (AIP). To do this the AIP will consider various factors in deciding whether replanting allows sufficient time for crop to reach maturity.

When it is practical to replant the insured crop, and the same crop is replanted, the insured grower is potentially eligible for a replanting payment, and insurance coverage for the first insured crop now also covers the replanted crop acres. For a replanting payment to apply, the damaged, insured crop must be projected to produce less than 90% of the guaranteed yield. Also, the replanted acreage must be a minimum of 20 acres or 20% (20-20 rule) of the insured unit, whichever is smaller. In other words, very small cropland areas do not qualify for replanting payments. The replanting payment per acre will be the lesser of the actual cost for replanting or the amount specified in the contract provisions.

If it is not practical to replant the first insured crop, the producer must decide to leave the acres idle, and receive a full indemnity payment, or plant a second crop. A producer who plants a second crop, but does not insure that crop, also receives a full indemnity payment on the first crop.

If the second crop is insured and eligible for coverage (crop is eligible if included in original policy), the producer will first receive 35% of the loss payment on the first crop – and pay 35% of the premium on the first crop. If the second crop does not have a loss, the remaining 65% indemnity for the first crop will be paid after harvest, and the full premium becomes due. If the second crop does have a loss, the producer accepts the second crop indemnity payment, or receives the remaining 65% indemnity payment on the first insured crop.

Given that it is late June, corn replanting, or planting corn as a second crop is unlikely. However, there may still be time to replant soybeans, or to plant soybeans as a second crop.

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This iGrow information is for educational purposes only and is not intended to be a substitute for professional advice. Crop producers should contact their insurance agent for specific questions regarding their insurance coverage.


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