Farmers who have lost wheat because of harsh winter weather should consider the crop insurance implications of planting another crop. This article examines crop insurance considerations for failed winter wheat and assumes the producer selected the “Winter Coverage Endorsement.”
First, report any losses to your crop insurance agent within 72 hours of noticing a potential loss. Your crop insurance agent will send an adjuster to appraise the damage. You should also report this loss to your local USDA Farm Service Agency (FSA) office.
When at least 20 acres or 20% of the insured planted acres, whichever is less, of a winter wheat stand cannot produce 90% of the guaranteed production, you may do one of the four options:
- take the remaining crop to harvest;
- leave the ground idle;
- plant a new crop and do not insure it;
- plant a new crop and insure it.
Each option contains specific benefits and costs that fit differently into each farming operation. As a result, we will discuss each of the options independently.
- Harvest the remaining crop. You could choose to take the damaged wheat crop to harvest. Once harvest is complete, you would be paid on actual losses. If yield was generated by the remaining stand, then this production would be assessed, lowering the amount of the indemnity payment.
- Leave ground fallow. You can destroy the remaining crop, and leave the ground fallow until the following season. Leaving the ground fallow will not affect your crop insurance indemnity payment or the premium you pay for your policy.
- Plant a crop and do not insure it. You can destroy the remaining crop, and plant a new crop on the failed wheat ground. If you do not choose to or cannot insure the newly planted crop, it will not affect your crop insurance indemnity payment for the loss of the wheat crop or the premium you pay for your policy.
- Plant a new crop and insure it. You can destroy the remaining crop, and plant and insure a crop on the failed wheat ground. However, this may affect the crop insurance indemnity payment on the wheat loss.
Crop Insurance has “first crop, second crop rules.” If the first crop you plant and insure fails, in this case wheat, you can plant and insure a second crop on that same ground. However, the indemnity payment and the premium paid on the first crop would be reduced to 35%.
If the second crop has no loss, you may request the full indemnity payment on the first crop. If the second crop has a loss, you will receive the greater of the remaining first crop loss or the second crop loss.
In options 2, 3, and 4, when you destroy the remaining crop you are agreeing to the appraised amount of production determined by the adjuster. Depending on the severity of the loss, the value of this appraisal may be removed from the indemnity payment. For example, if the field is appraised at five bushels per acre, $29.20 (5 bushels X $5.84) will be deducted from the indemnity payment.
For more questions about your crop insurance policy, contact your insurance agent.
Example of “First Crop Second Crop” Insurance Indemnities
A wheat farm has a Revenue Protection policy with a 75% coverage level. The 2019 projected price for wheat is $5.84 per bushel. A farm with a 40-bushel Actual Production History (APH) would guarantee for this farm $175.20 per acre (40 bushels X 75% X $5.84).
If the crop insurance agency declared more than a 90% loss on the wheat, and the farmer planted and insured a second crop, the indemnity payment on the wheat would be reduced to $61.32 per acre ($175.20 X 0.35).
If the second crop had a loss, the farmer could receive the full indemnity payment on the second crop and would pay the entire premium on the second crop. Payments on the second crop loss would depend on the severity of the damage. However, if the second crop did not have any loss, the producer could request the full indemnity payment on the wheat.
