June 6, 2019

Late Corn & Soybean Planting Decisions:June 6, 2019 Edition

James Mintert, Professor of Agricultural Economics

Michael Langemeier, Professor of Agricultural Economics

June 6, 2019

Delayed Corn Planting Throughout the Corn BeltThe situation

• approximately 30 million acres of intended U.S. corn acreage not planted as of June 2

• About 12 million acres not planted in Eastern Corn Belt states of Illinois, Indiana & Ohio

• Planting progress made this week, but not clear how much

• Your options are:

1) Take Prevented Planting payment;

2) Plant corn late;

3) Switch to soybeans

June 6, 2019

Review: Late Planting Corn Insurance Coverage

Corn in Indiana

– Final Planting Date (June 5) for full insurance coverage has passed

– Can still plant & insure corn from June 6 through June 25, but coverage reduced

– Insurance coverage declines 1%/day during the June 6-June 25 period

– Example: Coverage for corn planted June 10th would be reduced by 5%

• 85% coverage becomes 80.75% coverage (95% X 85% = 80.75%), but you still pay the 85% premium

June 6, 2019

Current Planting Options for Acreage Intended for Corn1. Go ahead and plant corn,

a) Risk of reduced yields

b) Insurance coverage declining 1% per day, starting on June 6

2. Stop planting corn and switch acreage intended for corn to soybeans

1. If you plant soybeans up through June 25, your crop insurance coverage simply switches to soybeans

2. If you plant soybeans on acreage intended for corn after June 25, you can still insure the soybeans & receive a partial prevented corn planting payment equal to 35% of full corn prevented planting payment

3. Take the full corn prevented planting payment, which is equal to 55% of original corn revenue guarantee, and avoid corn production variable costs

June 6, 2019

Corn Prevented Planting Example& No Other Crop Planted on These Acres

1. Assume Trend Adjusted-APH corn yield of 209 bushel per acre

2. Crop insurance projected price of $4.00 per bushel (Feb. avg. of Dec. futures)

3. Revenue Protection (RP) coverage level of 85%

4. Computation of revenue guarantee and prevented planting payment:

– Revenue guarantee = (209 bu. x $4.00 x 0.85) = $710.60 per acre

– Full Prevented Planting (PP) Payment = $710.60 x 0.55 = $390.83 per acre

– PP payment minus land maintenance cost of $30/acre = $360.83 per acre

• Compare this value to your return above variable costs from growing corn or beans

June 6, 2019

Prevented Planting Compared to Planting Corn or Soybean Profitability

• Scenario One– Take full prevented planting payment for corn & leave land idle

• Scenario Two– Crops planted on June 7, 20% decline in corn yields and 15% decline in soybean yields

• Corn crop insurance coverage declines 2% (1% for each day past 6/5)• Full crop insurance coverage is still available for soybeans

• Scenario Three– Crops planted on June 15, 30% decline in corn yields and 20% decline in soybean yields

• Corn crop insurance coverage declines 10% (1% for each day past 6/5)• Full crop insurance coverage is still available for soybeans

June 6, 2019

Possible Planting & Yield ScenariosHigh Productivity Soils in Indiana, Per Acre Costs & Yields

Scenario Scenario ScenarioOne Two Three

Prev. Planting 7-June 15-JuneVariable Cost for Corn $30 (land maint.) $470 $470

Variable Cost for Soybeans NA $262 $266

Reduction in Corn Yields NA 20% 30%

Reduction in Soybean Yields NA 15% 20%

Corn Yield NA 167 146

Soybean Yield NA 55 52

June 6, 2019

Possible Planting & Yield Scenarios (85% RP Coverage)High Productivity Soils in Indiana

Scenario Scenario ScenarioOne(6/7) Two Three

Prev. Plant. June 7 June 15December 2019 Corn Futures NA $4.26 $4.26Mid-Oct. WC IN Corn Basis NA $0.34 $0.34Expected Fall Delivery Cash Corn Price NA $3.92 $3.92Expected Gross Corn Revenue $391 $656 $574Expected Net Corn Revenue $361 $186 $104

Nov. 2019 Soybean Futures $8.85 $8.85 $8.85Mid-Oct WC IN Soybean Basis $0.64 $0.64 $0.64Expected Fall Delivery Cash Soybean Price $8.22 $8.22 $8.22

Expected Gross Soybean Revenue $454 $454 $427Expected Net Soybean Revenue $192 $192 $161

Soybeans Advantage Over Corn $169 $6 $57

At 75% coverage, your net PP revenue drops to $315

June 6, 2019

What Are We Missing in This Analysis?Additional Considerations

1. Need to plant to qualify for MFP payment(s)

• How large will MFP payment(s) be?• Recent passage of disaster bill’s impact?

2. If you plant corn late, it’s likely to reduce your APH for 2020

3. If you plant, you qualify for Harvest Price Option (HPO), which is expected to push corn revenue guarantees up• How much of an increase is needed for that to be significant?

– If Oct. avg. of Dec. futures exceeds $5 this strategy this starts to become attractive

– But remember that your revenue guarantee declines 1%/day after June 5

June 6, 2019

0.00

0.25

0.50

0.75

1.00

1.25

1.50

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

Ratio of Harvest to Projected Corn Crop Insurance PricesSource: USDA-RMA

Corn

1

Corn Harvest (Oct. Avg.) Price > Projected (Feb. Avg.) Corn Price in 6 of last 23 years (26% of the time)

June 6, 2019

Download the slides from this video on our website

Purdue.edu/commercialag

Also, find links to delayed planting crop production management videos from Purdue Extension on our

web site

Thank You