Congressional Research Service Report: 'Federal Crop Insurance Program – Replanting, Delayed Planting & Prevented Planting' (Part 1 of 2)
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SUMMARY
The federal crop insurance program (FCIP) offers farmers the opportunity to purchase insurance coverage against financial losses caused by certain adverse growing and market conditions. FCIP policies provide indemnities for losses on planted acres and payments for replanting acres after losses.In addition, some FCIP policies provide payments for certain situations where planting is not possible. These payments can help farmers manage cash flow and financial risk for their operations.
The FCIP imposes certain production and reporting deadlines that producers must meet in order to maintain eligibility for indemnity payments on their FCIP coverage. These deadlines vary by crop and location. The FCIP has specific rules around replanting, delayed planting, and prevented planting to limit opportunities for waste, fraud, and abuse in the program.
Understanding the FCIP rules around planting requirements can explain how policy changes to the program may influence how producers respond to market conditions and weather related setbacks, as well as how the cost of risk is shared between producers and the
The total amount of prevented planting and replanting that occurs each year depends on weather and soil conditions. While total acres insured under the FCIP consistently increased from 2010-2020, total acres replanted and prevented from planting did not always follow the same pattern. Expenditures on replanting payments typically comprise a small share of total FCIP indemnities, while expenditures on prevented planting payments can account for a substantial share of total FCIP indemnities in years with particularly adverse spring planting conditions such as occurred in 2011, 2019, and 2020.
By design, the FCIP limits the amount of coverage available on planted acres so that producers can never earn more money from collecting crop insurance than from harvesting and selling their crops. However, coverage levels for replanting and prevented planting are not bound by the same limits as coverage on planted acres, and the potential exists for farmers to earn better economic returns from collecting prevented planting payments than from crop production. Supplemental payments provided for prevented planting acres in 2019 provided additional economic incentives for farmers to collect prevented planting payments instead of opting to plant their crops late in the season, which could call into question whether prevented planting payments mitigate the need for ad hoc disaster assistance funding--an objective of the FCIP. This experience has renewed interest among industry stakeholders in evaluating whether the FCIP rules on prevented planting may contribute to the moral hazard of the overall program. Additionally, there has been increased congressional interest in how the FCIP's rules impact the incentives for farmers to address broader conservation and environmental goals, as well as the potential cost of the overall program.
This report reviews the connections between crop planting cycles and FCIP policy deadlines, and provides an overview of FCIP rules for replanting, delayed planting, and prevented planting. As part of its ongoing oversight of the FCIP,
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Contents
Introduction ... 1
Crop Planting Schedules and Federal Crop Insurance Deadlines ... 4
FCIP Coverage for Replanting ... 6
Farmer Requirements for Replanting Coverage ... 6
Replanting Payments ... 7
Claims for Replanting Payments ... 9
FCIP Coverage for Delayed Planting ... 9
FCIP Coverage for Prevented Planting ... 11
Farmer Requirements for Prevented Planting Coverage ... 12
Prevented Planting Payments ... 13
Prevented Planting Claims ... 15
Prevented Planting in 2019 ... 16
Support for Cover Crops on Prevented Planting Acres in 2021 ... 17
Issues for
Figures
Figure 1. FCIP Insured, Replanted, and Prevented Planting Acres ... 2
Figure 2. FCIP Total, Replanting, and Prevented Planting Indemnities ... 3
Tables
Table 1. Replanting Payments and Operating Costs per Acre for Selected Crops ... 8
Table 2. Crops with Late Planting Period and Prevented Planting Coverage ... 10
Table 3. Prevented Planting Coverage and Total Production Costs for Selected Crops ... 13
Table 4. Prevented Planting Coverage for Corn, 2017-2020 ... 15
Contacts
Author Information ... 20
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Introduction
Producing an agricultural commodity entails risk. In some years, producers may plant and harvest crops with no losses relative to their expected crop production. In other years, producers may plant their crops normally but incur losses after planting. In still other years, weather events may result in conditions that delay or prevent the planting of crops. How farmers respond to production losses resulting from adverse planting conditions may be influenced by the risk management tools available to them, including insurance coverage purchased from the federal crop insurance program (FCIP).
FCIP policies provide indemnities for losses on planted acres. In certain situations, they can provide payments for replanting acres after losses or for situations where planting is not possible. These payments can help farmers manage cash flow and financial risk for their operations. The FCIP has specific rules (including policy conditions and deadlines) for replanting, delayed planting, and prevented planting to limit opportunities for waste, fraud, and abuse in the program.
Understanding the FCIP rules around planting requirements can help to reveal how policy changes to the program may influence how producers respond to market conditions and weather related setbacks, as well as how the cost of risk is shared between producers and the
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What is the Federal Crop Insurance Program?
The FCIP offers farmers the opportunity to purchase insurance coverage against financial losses caused by certain adverse growing and market conditions. FCIP payments can help farmers manage cash flow and financial risk for their operations. The federal government subsidizes the premiums that farmers pay to private insurers for these insurance policies to encourage farmer participation. Farmers can choose among many types of policies--and within each policy, many coverage options--to customize the coverage to their farm businesses' specific needs. Private-sector companies sell and service the policies, while the
The FCIP is permanently authorized under the Agricultural Adjustment Act of 1938 (P.L. 75 -430, 52 Stat. 72) and the Federal Crop Insurance Act of 1980 (P.L. 96-365, 7 U.S.C. Sec.Sec.
For more information on the FCIP, see CRS Report R46686,
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The total amount of replanting, delayed planting, and prevented planting that occurs each year depends on weather and soil conditions. Generally, delayed and prevented planting is associated with excessive springtime moisture or wet conditions that prevent farmers from getting into their fields by specific planting dates established under the FCIP. In contrast, replanting is usually associated with a late springtime freeze that kills immature crops or an unusually heavy rain that washes out planted crops before their root systems are established.
While total acres insured under the FCIP increased from 2010 to 2020, total acres replanted and prevented from planting did not always follow the same pattern (Figure 1)./1
FCIP expenditures on replanting payments typically comprise a small share of total FCIP indemnities, while expenditures on prevented planting payments can account for a substantial share of total FCIP indemnities in years with particularly adverse spring planting conditions (Figure 2)./2
For example, adverse spring planting conditions in 2011, 2013, 2019, and 2020 resulted in high levels of prevented plantings. Prevented planting payments accounted for 20% of total indemnities in 2011, 18% of total indemnities in 2013, 47% of total indemnities in 2019, and 25% of total indemnities in 2020.
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1 RMA does not publish records on delayed planted acres insured under the FCIP.
2 The FCIP does not provide prevented planting indemnities for delayed planting. For more information about indemnities available for delayed plantings, see " FCIP Coverage for Delayed Planting."
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[See link at end of text for Figure 1. FCIP Insured, Replanted, and Prevented Planting Acres, 2010-2020 Crop Years]
Source: CRS calculations using USDA RMA Cause of Loss data files and Summary of Business database, downloaded on
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[See link at end of text for Replanting, and Prevented Planting Indemnities, 2010-2020 Crop Years]
Source: CRS calculations using USDA RMA Cause of Loss data files and Summary of Business database, downloaded on
Notes: Amounts not adjusted for inflation.
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In most years, FCIP expenditures associated with replanting, delayed planting, and prevented planting are a relatively small portion of the overall program cost. However, FCIP rules around these provisions can influence farmers' planting decisions, and thereby aggregate crop production and market prices. By design, the FCIP limits the amount of coverage available on planted acres so that producers can never earn more money from collecting crop insurance than from harvesting and selling their crops. Coverages provided for replanting and prevented planting are not bound by the same limits as coverage on planted acres, and there exists the potential for farmers to earn better economic returns from collecting prevented planting payments than from crop production. Supplemental payments provided for prevented planting acres in 2019 provided additional economic incentives for farmers to collect prevented planting payments instead of opting to plant their crops late in the season, calling into question whether prevented planting payments mitigate the need for ad hoc disaster assistance funding./3
This has also renewed interest among industry stakeholders in evaluating how the FCIP rules on prevented planting may contribute to the moral hazard of the overall program./4
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3 One of the reasons
4 Moral hazard in the insurance industry refers to the general tendency of an insured party to take on greater risk once insured.
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Additionally, there has been increased congressional interest in how the FCIP's rules influence the incentives for farmers to address broader conservation and environmental goals,/5 as well as the potential cost of the overall program (see "Issues for
This report reviews the connections between crop planting cycles and FCIP policy deadlines, and provides an overview of FCIP rules for replanting, delayed planting, and prevented planting. The report also identifies several possible issues for
Crop Planting Schedules and Federal Crop Insurance Deadlines
Agricultural production occurs on a specific schedule driven by a region's agro-climatic setting, including latitude, altitude, soil type, and weather patterns. Crops require a certain period of time after planting--uninterrupted by freezing temperatures--to grow to maturity. In addition, different crops require certain weather and climate conditions to support growth, including sufficient precipitation, soil moisture, sunshine, and daily minimum and maximum temperatures.
Crops planted too early in the crop year may fail to sprout due to frosts or other cold weather-related conditions. Crops planted too late in the crop year may fail to mature due to an insufficient number of warm, sunny days and/or other climate and weather conditions unsuitable for crop production such as an early freeze in the fall. Crops harvested either too early or too late in the crop year may fail to reach optimum yields.
The start of the growing season varies by crop and by location. Areas with milder winter climates are typically able to begin planting earlier and finish harvesting earlier than areas with more severe winter conditions. Major field work generally begins earlier in southern states and works its way north to the Canadian border through the spring. Additionally, crops with longer maturation periods are typically planted earlier in the year compared to crops with shorter maturation periods. For example, corn and spring wheat planting tends to start in March or April, while soybean and cotton planting tends to start in April or May./6
For most crops, early planting will generally produce average or above-average yields, whereas late planting tends to produce below-average yields./7
Because the timing of planting can impact the likelihood of producing a viable crop, the FCIP imposes certain production and reporting deadlines that producers must meet in order to maintain eligibility for indemnity payments on their FCIP coverage (see text box "Federal Crop Insurance Program Deadlines for Producers"). These deadlines vary by crop and location, but generally correspond to the schedule of crop planting and harvesting for the local area./8
Because the timing of crop planting depends on the weather and climate conditions, farmers can face certain challenges in meeting FCIP deadlines around planting dates, including replanting after crop damage, delayed planting, and/or prevented planting./9
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5
6 For details on typical planting dates by location, see
7 For example, see
8 RMA publishes the deadlines by crop and region so that producers can be aware of applicable deadlines. These deadlines are available at USDA RMA Actuarial Information Browser, at https://webapp.rma.usda.gov/apps/ actuarialinformationbrowser/.
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Federal Crop Insurance Program Deadlines for Producers
In order to maintain eligibility for the full benefits under FCIP policies, agricultural producers must adhere to certain deadlines (which vary by crop and location):
* Sales closing date. This is the last possible date to apply for a new FCIP policy or make changes in coverage continuing from the previous year. The sales closing date for most spring-planted crops is either
* Earliest planting date. This is earliest possible date crops become eligible for replanting payments.
Replanting payments can defray the cost of replanting acres if the initial plantings fail to grow properly. Acres planted before the earliest planting date can still receive full coverage for yield or revenue losses provided the producer adheres to the FCIP's requirements for good management practices for the specific crop and location.
* Final planting date. This is the last possible date to plant crops and receive the full coverage for yield or revenue losses on the acres insured under the FCIP. Acres planted after this date receive less than the full amount of coverage for yield or revenue losses.
* Late planting period. The late planting period lasts for up to 25 days after the final planting date, depending on the crop. During the late planting period, the coverage level for yield or revenue losses is reduced 1% per day from the elected coverage level. After the end of the late planting period, the coverage level for yield or revenue losses is fixed at 55% for corn, 60% for soybeans, and at various levels for other crops.
* Acreage reporting date. This is the last possible date for a farmer to revise the acreage report that was submitted to the
* Billing date. This is the date that crop insurance premiums are due, which is typically at harvest time. The total premium is payable as soon as the crop is planted, but farmers may pay their share of the total premium up until 30 days past the billing date without incurring interest charges. Interest charges on late premiums accrue at a rate of 1.25% per month.
* End of insurance period. This is the last date that the acreage is covered against yield or revenue losses. The end of insurance period will occur on the earliest of (1) the crop being harvested, abandoned, or destroyed; (2) the final adjustment on losses being made; or (3) the final calendar date specified by the FCIP.
* Date to file notice of crop damage. This is the last date to report production or quality losses in order to receive an indemnity payment. This date is set at 15 days after the end of the insurance period. However, farmers are required to inform their Approved Insurance Provider within 72 hours of the discovery of damage throughout the insurance period.
* Policy termination date. Policies automatically renew for the next year if premiums are paid by this date.
* Cancellation date. This is the last date to provide written notice to cancel policy coverage for the next year.
* Production reporting date. This is the last date to submit crop production records from the most recent harvest. These records are used to update producers' yield or revenue guarantees for the next year. The production reporting date is usually 45 days after the policy cancellation date.
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10 Farmers report the same number of planted and prevented planting acres to FSA and to RMA. However, FSA and RMA report separate tallies of planted and prevented planting acres. Not all farms participate in
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FCIP Coverage for Replanting
Farmers who purchased FCIP policies and whose crops are damaged by an insurable cause of loss--such as frost, hail, wind, floods, or other natural occurrences--are eligible for FCIP indemnities if the harvested crops' values are below the insured levels. However, if the crops are damaged early enough in the year, producers may prefer to replant those acres in order to earn a better overall return from producing a replanted crop than they would expect to receive from FCIP indemnities plus the reduced harvest on the initially planted crop. Farmers cannot insure the full value of their crops under federal crop insurance. Maximum coverages vary by policy and crop, but generally do not exceed 80% or 85% of the expected outcome. Because the FCIP limits the amount of coverage available, producers can never earn more money from collecting crop insurance than from harvesting and selling their crops; this is meant to reduce the potential for moral hazard in the program.
Farmer Requirements for Replanting Coverage
Producers are not required to replant damaged acres--that is one of the options they can pursue after their Approved Insurance Provider (AIP) assesses the practicality of replanting. Farmers are required to notify their AIP about any crop damage within 72 hours of discovering it. Once notified, the AIP will make a determination if it is practical to replant those acres. An AIP may consider it not practical to replant if replanting is physically impossible, or if the AIP believes there is no chance of seed germination, emergence, and formation of a healthy plant at that point in the season./11
If the AIP determines that it is practical to replant, the producer may choose not to replant, choose to replant the same crop, or choose to replant a different crop.
* If the producer chooses not to replant, then no indemnity is provided for the damaged crop and no premium is charged for the policy.
* If the producer chooses to replant the same crop, no indemnity is provided and full insurance coverage continues on the replanted crop just as it was on the initially planted crop. There is no decrease in the yield or revenue guarantee, and the producer receives a replanting payment.
* If the producer chooses to replant a different crop, no indemnity or replanting payments are provided. Coverage is transferred from the initially planted crop to the new crop--provided that all insurability requirements are met for the new crop. If the second crop is planted prior to its final planting date, it will be eligible for full insurance coverage.
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11 USDA RMA, Frequently Asked Questions: Replanting and Final Planting Dates, updated
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If the AIP determines that it is not practical to replant, the producer may choose not to replant or choose to replant and insure a second crop or choose to replant and not insure a second crop.
* If the producer chooses not to replant, the producer will receive 100% of the indemnity on the insured crop. In lieu of replanting the insured crop, farmers may plant a cover crop for haying and grazing without any FCIP restrictions.
* If the producer chooses to replant and insure a second crop, the producer will receive 35% of the original indemnity on the first (damaged) crop. If the second crop does not suffer a loss, the producer can receive the remaining 65% of the indemnity from the first crop. If the second crop suffers a loss, the producer will be eligible to receive an indemnity payment for the second crop in addition to the 35% indemnity on the first crop.
* If the producer chooses to replant and not insure the second crop, the producer will receive an indemnity of 100% of the insured value on the first crop. No insurance coverage will be provided for the second crop.
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Hypothetical Examples of Farmers Facing Replanting Decisions
Consider three hypothetical farmers who planted corn in 2019 and incurred losses before the last planting date for corn in their locations. The AIP determined that it was practical for Farmer A to replant her crop, and that it was not practical for Farmer B or Farmer C to replant their crops. Each farmer had an insurable corn yield of 200 bushels per acre and an insurable soybean yield of 70 bushels per acre, and had purchased Revenue Protection insurance for corn at 80% coverage. Assume that RMA projected corn prices at
Potential insurance coverages included the following:
* Corn: revenue protection guarantee of 200 bushels x
* Soybeans: revenue protection guarantee of 70 bushels x
Farmer A was not eligible to receive an indemnity payment because the AIP determined that it was still practical for her to replant and harvest her intended crop that year. Farmer A decided to plant soybeans instead. She received no replanting payments and her insurance coverage was transferred to her soybean acres. She harvested 60 bushels of soybeans per acre and earned 60 bushels x
Farmer B was eligible to receive an indemnity payment because the AIP determined that it was not practical for him to replant and harvest corn that year. Farmer B decided to plant a cover crop on the land, which he did not hay or graze. He received an indemnity equal to 100% x
Farmer C was also eligible to receive an indemnity payment because the AIP determined that it was not practical for her to replant and harvest corn that year. Farmer C decided to plant soybeans on the land and produced 50 bushels of soybeans per acre. She received (1) an indemnity payment for corn equal to 35% x
Farmer A and Farmer C both incurred losses on their corn crops and planted soybeans instead. Even though Farmer A produced a higher soybean yield, Farmer C earned more total income because she was eligible to collect an indemnity on her damaged corn crop. Farmer B earned less income than Farmer C because Farmer B had no sales or grazing income from his cover crops, while Farmer C earned income from her soybean production.
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Replanting Payments
The amount of the replanting payment is either the actual costs for replanting or an amount specified in the Crop Provisions or Special Provisions attached to the policy--whichever amount is lower./12
The amount specified in the Crop Provisions or Special Provisions is generally set as a crop-specific factor multiplied by the projected price for that crop (see Table 1)./13
Calculating replanting payments as a multiple of the projected price ensures that incentives to replant increase automatically in years with higher projected crop prices. The crop-specific factor allows
In general, the maximum replanting payment per acre is limited and cannot exceed 20% of the insured value.
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12 Most FCIP policies include a combination of basic provisions that are common to all crops insured under that policy, crop-specific provisions that are unique to the specific crop insured, and special provisions that allow for specific coverage options (e.g., using a contracted price in lieu of a market price to establish the insured guarantee). Updated copies of basic and specific provisions are available from RMA at https://www.rma.usda.gov/en/Policy-and-Procedure/ General-Policies, and crop-specific provisions are available from RMA at https://www.rma.usda.gov/en/Policy-andProcedure/Crop-Policies.
13 For major commodity crops (e.g., corn, soybean, and wheat) planted in the spring, RMA projects the harvest -time price for insurable crops based on the average of daily closing prices for harvest-time futures contracts during the month of February. RMA announces the projected prices in early March. For additional background on prices used in FCIP policies, see CRS Report R46686,
14 RMA calibrates prevented planting payment coverage factors in relation to estimates of the pre-planting costs incurred by farmers in planting the insured crops, as described in " Prevented Planting Payments".
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[See link at end of text for Table 1. Replanting Payments and Operating Costs per Acre for Selected Crops, For the 2021 Crop Year]
Sources: CRS, using USDA RMA, "2021 Crop Year (CY) Common Crop Insurance Policy and Area Risk Protection Insurance Projected Prices and Volatility Factors; Malting Barley Endorsement Project Price Component and Volatility Factor, and Hybrid Seed Price Endorsement - Hybrid Seed Corn Prices," Product Management Bulletin PM-21-013,
Notes: N/A = not applicable.
a. RMA calibrates prevented planting payment coverage factors in relation to estimates of the pre-planting costs incurred by farmers in planting the insured crops.
b. Amounts listed as replanting payments per acre are for producers with 100% ownership shares in the crop production; producers who share crop ownership will have their replanting payments adjusted according to their ownership share in the crop. Replanting payments are not available for upland or extra-long staple cotton. Maximum replant payments for peanuts are fixed at
c. Total operating costs per acre are 2020 estimates by USDA ERS. USDA ERS does not prepare separate estimates of production costs for extra-long staple cotton. Unless otherwise specified, replanting payment per acre is calculated as the crop-specific factor multiplied by the projected price for that crop.
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Claims for Replanting Payments
Since 2010, claims for replanting payments have typically impacted less than 4 million insured acres each year (Figure 1). The 2017 crop year had the largest number of replanted acres, at 6.8 million, and also the largest expenditure on replanting payments, at
In 2020, the most common reasons for replanting were excess moisture, precipitation, or rain (58% of claims) and cold wet weather (14% of claims)./15
Soybeans were the most commonly replanted crop (48% of claims), and corn was the second most commonly replanted crop (33% of claims); corn and soybeans also accounted for 40% of all acreage policies sold that year./16
The states with the most replanting claims were
FCIP Coverage for Delayed Planting
Farmers may be delayed in planting some or all of their acres for a variety of reasons, such as poor weather, poor soil conditions for planting, impeded access to fields, or other reasons. If the delays are resolved before the final planting date, then there is no modification to the FCIP crop insurance coverage.
When planting is delayed, producers can choose to plant their originally chosen crop, an alternative crop, a cover crop,/17 or not to replant. If farmers plant their originally chosen crop, the yields from those planted acres will be included in future calculations of yield or revenue guarantees under crop insurance./18
Yields from late planted crops are likely to be lower than yields from crops planted on time, so including them in future calculations could result in lower insurance guarantees in future years. Some farmers may prefer to plant an alternative crop instead of their originally chosen crop so that future calculations of yield or revenue guarantees do not include yields from crops planted late. If planting is delayed but not prevented, the FCIP provides no extra incentives to plant cover crops or an alternative crop.
Not all crops qualify for late planting period coverage. For those crops that do qualify (see Table 2), the most commonly purchased yield and revenue policies include provisions that specify a late planting period of up to 25 days (depending on the crop)./19
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15 CRS calculations using USDA RMA Cause of Loss data files for the 2020 crop year, downloaded on
16 CRS calculations using USDA RMA Summary of Business, downloaded on
17 A cover crop is a crop planted for erosion control or other purposes related to conservation or soil improvement. Cover crops allowed under the FCIP include grasses, legumes, and forbs. Cover crops must be managed and terminated according to
18 For background on how the FCIP calculates yield and revenue guarantees, see CRS Report R46686,
19 For example, corn has a late planting period of 20 days, soybeans have a late planting period of 25 days, and cotton and wheat have late planting periods of 15 days.
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If the planting delays are resolved after the final planting date but before the end of the late planting period, then FCIP coverage is reduced 1% per day for each day after the final planting date. If the delays are resolved after the end of the late planting period, then FCIP coverage is reduced to the minimum level specified for each crop. For example, the minimum level is 55% for corn and 60% for soybeans. Producers may be able to increase the minimum level by 5 or 10 percentage points by paying a higher premium (see "Prevented Planting Payments").
Producers may receive regular indemnity payments for insurable losses incurred on delayed plantings./20
Producers are not eligible for prevented planting indemnity payments if planting occurs before the end of the late planting period. Producers planting after the end of the late planting period may be eligible for prevented planting indemnities (see "FCIP Coverage for Prevented Planting").
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20
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[See link at end of text for Table 2. Crops with Late Planting Period and Prevented Planting Coverage, For the 2021 Crop Year]
Sources: CRS, using USDA FCIC, Loss Adjustment Manual Standards Handbook, updated for 2021 and succeeding crop years; and USDA FCIC, Prevented Planting Standards Handbook, updated for 2021 and succeeding crop years.
Notes: FCIP policies include basic provisions that are common to all crops insured under that policy, crop specific provisions that are unique to the specific crop insured, and special provisions that allow for specific coverage options (e.g., using a contracted price in lieu of a market price to establish the insured guarantee). The Winter Coverage Endorsement is a type of special provision that allows for FCIP coverage of winter-planted wheat or barley.
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Most FCIP policies include a combination of basic provisions that are common to all crops insured under that policy, crop-specific provisions that are unique to the specific crop insured, and special provisions that allow for specific coverage options (e.g., using a contracted price in lieu of a market price to establish the insured guarantee).
FCIP Coverage for Prevented Planting
FCIP defines prevented planting as "the failure to plant an insured crop with the proper equipment by the final planting date or during the late planting period, if applicable."/21
For policies offering prevented planting coverage, any eligible insured acres that cannot be timely planted due to insurable causes of loss can receive a prevented planting payment. The FCIP provides coverage for prevented planting due to insured causes of loss--such as adverse weather conditions, drought, floods, and other natural events--that affect a particular geographic region. Failure to plant a crop by the final planting date due to factors that impact only an individual farm may not qualify for prevented planting payments.
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21 USDA RMA, Prevented Planting Insurance Provisions Drought, fact sheet, revised
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Farmer Requirements for Prevented Planting Coverage
In order to be eligible for prevented planting payments, the insured acres must have been planted to a crop, insured, and harvested at least once in the previous four years./22
From 2012 to 2020, this requirement only applied to the Prairie Pothole region--an area in the upper Midwest prone to wet conditions during spring planting time. Starting in 2021, this requirement applies nationwide. Following a year with a claim of prevented planting, farmers must have two consecutive years of harvests (or losses for causes other than those associated with prevented planting) in order to quality for prevented planting coverage again./23
A farmer must also have at least 20 acres or 20% of the acres in the insured unit prevented from planting in order to be eligible for prevented planting payments./24
Producers are required to notify their AIPs about insured acres that were prevented from planting within 72 hours after the final planting date, or if a late planting period applies, within 72 hours of deciding that they will not be able to plant or do not intend to plant before the end of the late planting period./25
AIPs make a determination if prevented planting has occurred based on the circumstances impacting the producer submitting the claim as well as the circumstances impacting similar producers in the local area. Producers may be asked to provide weather records, soil moisture indices, written opinions from local experts, and/or other information to verify the cause of loss for prevented planting.
Farmers' options when confronted by prevented planting are similar to the options they have when planting is delayed: the producers can choose to plant their originally chosen crop, an alternative crop, a cover crop, or not to plant.
* If producers choose to plant their originally chosen crop, they will receive no prevented planting payment. Producers have the option to insure the originally chosen crop under the terms that apply to delayed plantings (see "FCIP Coverage for Delayed Planting").
* If producers choose to plant an alternative crop, they will receive a payment equal to 35% of the prevented planting payment for the originally chosen crop. The alternative crop can also be insured, but coverage levels will be reduced by 1% per day for each day of the late planting period for the alternative crop. Yield for the original crop will be assigned as 60% of the regularly expected yield (i.e., actual production history) when calculating future yield or revenue guarantees.
* If producers choose to plant a cover crop, they will receive 100% of the prevented planting payment for the original crop provided that the cover crop is not harvested for grain or seed./26 No yield will be assigned for the original crop for the purposes of calculating future yield or revenue guarantees.
* If producers choose to plant nothing on the acres, they will receive the full prevented planting payment for their originally chosen crop. No yield will be assigned for the original crop for the purposes of calculating future yield or revenue guarantees.
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22 Acres may also be eligible for prevented planting coverage if at least once in the previous four years the acres were planted to a crop, insured, and not harvested due to an insurable cause of loss unrelated to flood, excess moisture, drought, or another cause of loss specified in the Special Provisions.
23 This provision is intended to discourage agricultural production on wetlands, soils that have poor drainage, and other types of land that are often unsuitable for cultivation during the regular planting period.
24 Insured units are groupings of land based on ownership and geographical boundaries for the purpose of providing coverage under the FCIP. For additional information, see CRS Report R46686,
25 USDA RMA, 2021 Prevented Planting Standards Handbook, FCIC-25370.
26
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Prevented Planting Payments
The prevented planting payments associated with a crop insurance policy are calculated as a fixed proportion of the policy's insurance guarantee (i.e., insured liability). The fixed proportion varies by crop (see Table 3). Farmers can purchase additional prevented planting coverage, which provides payments based on larger fixed proportions of the insurance guarantee, of either 5% or 10% above the standard guarantee./27
For example, standard prevented planting payments for corn and soybean Yield Protection and Revenue Protection policies are calculated as 55% of the insurance guarantee for corn and 60% of the insurance guarantee for soybeans. Therefore, the maximum prevented planting coverage that can be purchased is 65% for corn and 70% for soybeans.
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27 USDA RMA, Common Crop Insurance Policy Basic Provisions 17(b), updated
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[See link at end of text for Table 3. Prevented Planting Coverage and Total Production Costs for Selected Crops]
Sources: CRS, using USDA RMA, Establishment of Prevented Planting Coverage Factors for the Federal Crop Insurance Program, updated
Notes: N/A = not available. Average liability per acre for 2020 calculated as total liabilities divided by total insured acres. Average prevented planting coverage per acre calculated as the coverage factor multiplied by the average liability per acre for 2020. Estimated pre-plant costs per acre are
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All FCIP coverage for planted acres has a deductible. By statute, FCIP coverage for production losses can only cover a maximum of 85% of a farmers' insured yield or 95% of the area yield (7 U.S.C. Sec.1508(c)(4))./28
Thus, if farmers incur a loss on planted acres, the loss must exceed 15% of their insured yield (the deductible) in order to receive an indemnity payment. The deductible helps to insure that farmers cannot earn higher returns from collecting insurance indemnities than from producing crops.
In contrast, prevented planting payments do not have a deductible. The statute does not place any limitations on the amount of loss that can be insured under the FCIP when a farmer is prevented from planting a crop, meaning that prevented planting payments can equal or exceed the amount of financial losses incurred when a farmer is prevented from planting a crop.
Although prevented planting payments are calculated as a proportion of insured liabilities, RMA calibrates prevented planting payment coverage factors in relation to estimates of the pre-planting costs incurred by farmers in planting their crops./29
Under the FCIP, pre-planting costs can include purchase of machinery, land rent, fertilizers and pesticides applied prior to planting, actions taken to prepare the land for planting, labor, and repairs. RMA targets the prevented planting coverage to correspond to varying amounts of these costs by crop, and updates the prevented planting coverage factors on a five-year cycle./30
For example,
Because prevented planting payments are calculated as a proportion of insured liabilities, the value of prevented planting payments depends on market prices for the commodities covered. In years of higher commodity prices, prevented planting payments may account for a larger share of total production costs than in years of lower commodity prices. For example, RMA sets prevented planting payments for corn at 55% of average liabilities, which is intended to be sufficient to offset an approximately equal proportion of pre-plant costs for corn. This formula resulted in prevented planting coverage that varied between 88% and 91% of estimated pre-plant costs during the 2017 to 2020 period (see Table 4).
* * *
28 Area-based policies are not eligible for prevented planting payments.
29 There is no statutory definition of pre-planting costs. In the Congressional Committee notes on H.Rept. 103-649,
30 For additional details on
* * *
[See link at end of text for Table 4. Prevented Planting Coverage for Corn, 2017-2020]
Sources: CRS, using USDA RMA, Establishment of Prevented Planting Coverage Factors for the Federal Crop Insurance Program, updated
Notes: Average prevented planting coverage per acre is calculated as 55% of the average liability per acre. Estimated pre-plant costs per acre are
* * *
Additionally, providing higher prevented planting payments in years of higher commodity prices could increase the incentive for farmers to opt for prevented planting payments instead of planting a second crop. In setting prevented planting coverage factors,
Prevented Planting Claims
Since 2010, claims for prevented planting payments have typically impacted fewer than 10 million insured acres each year out of the 260 million to 398 million acres insured annually over the period 2010-2020 (see Figure 1). The years with more than 10 million acres of prevented planting were 2011, 2019, and 2020--all years with widespread, unusually poor spring planting conditions. Expenditures on prevented planting payments ranged from
In 2020, the most common reasons for prevented planting were excess moisture, precipitation, or rain (78% of claims) and cold wet weather (12% of claims)./32
The crops with the most prevented planting claims were corn (32%), soybeans (29%), wheat (17%), and cotton (5%); these four crops also accounted for the majority of acreage planted and insured in 2020. The states with the most prevented planting claims were
* * *
31 USDA OIG, RMA: Controls over Prevented Planting, Audit Report 05601-001-31,
32 CRS calculations using USDA RMA Cause of Loss data files for the 2020 crop year, downloaded on
* * *
Prevented Planting in 2019
The 2019 crop year was exceptional in that it marked the highest number of prevented planting acres on record since
Other states that were significantly affected included
As of
Farmers who were unable to plant a crop during the spring of 2019 due to natural causes were potentially eligible for multiple payments under federal farm programs. First, federal crop insurance provided
Second,
As of the end of 2020, payments to prevented planting acres from the 2019 supplemental appropriations bill totaled
These latter payments were not provided through the FCIP and are not included in the indemnity total.
* * *
33
35 For additional background on planting conditions in 2019, see CRS Report R46180,
36 For crop-specific indemnities per acre, see CRS Report R46180,
37 Producers receiving supplemental prevented planting disaster payments were also required to purchase coverage from either the FCIP or the
38 CRS calculations using data from USDA RMA Summary of Business 2019 Preven ted Planting Supplemental Payments, downloaded
39 The Market Facilitation Program provided assistance to farmers in 2018 and 2019 in response to trade damage from tariff retaliations and trade disruptions. For additional information about this program, see CRS Report R45310, Farm Policy:
* * *
Hypothetical Farmers' 2019 Prevented Planting Payments
Consider three hypothetical farmers who intended to plant corn in 2019: Farmer A planted his corn acres with no losses, Farmer B planted her corn acres with losses, and Farmer C was prevented from planting his corn acres.
Each farmer had an insurable yield of 200 bushels per acre, had purchased Revenue Protection insurance at 80% coverage, and had 5% buy-up coverage for prevented planting. Assume that RMA projected corn prices at
The potential insurance coverages included the following:
* Revenue protection guarantee of 200 bushels x
* Prevented planting payments of (55% + 5%) x
Farmer A planted his corn acres on time and incurred no losses. He produced 200 bushels per acre, worth
Farmer B planted her corn acres on time but had a loss. She produced 150 bushels per acre, worth
Farmer C was prevented from planting his acres and did not plant cover crops on the acres. He produced no bushels per acre, earned
In this example, Farmer A had the highest revenue from crop production,
* * *
Support for Cover Crops on Prevented Planting Acres in 2021
Producers who planted cover crops during the 2021 crop year, including on acres that were prevented from planting their intended crop, were eligible for additional crop insurance premium subsidies through the Pandemic Cover Crop Program (PCCP). The PCCP provided a one-time increase of up to
PCCP premium subsidy payments could not exceed the amount of premium owed.
The
* * *
40 USDA ERS Commodity Costs and Returns estimated the 2019 total per acre costs for corn as
41
42
43 USDA FCIC and USDA RMA, Notice of Funding Availability; Pandemic Cover Crop Program, 86
Continues with Part 2 of 2
* * *
View report at https://crsreports.congress.gov/product/pdf/R/R46874
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Congressional Research Service Report: 'Federal Crop Insurance Program – Replanting, Delayed Planting & Prevented Planting' (Part 2 of 2)
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