A ‘rearview mirror’ look at planting decision

This spring, for the second straight year, many area farmers decided to continue planting well into summer rather than quit planting and collect federal crop insurance.

The calculated risk paid off handsomely for most farmers last year. The net result this year, however, is murky.

“It’s kind of a mixed bag,” says Jason Mewes, a Colgate, N.D., farmer.

In some cases, late-planted 2014 crops fared well, so the decision to continue planting was a good one. In other cases, “You’d have been better off just parking the planter in the shed,” he says.

Crop prices have dropped substantially since spring, generally reducing the value of crops raised this summer and, in retrospect, weakening the case for continuing to plant, says Kim Dillivan, South Dakota State University Extension crops business management field specialist.

It’s difficult to judge, however, whether farmers were right or wrong to continue planting, he says.

The answer depends in part on the crop, says Andrew Swenson, farm management specialist with the North Dakota State University Extension Service.

Farmers who planted corn late probably would have done better to collect prevented-planting payments, he says.

The prevented-planting payment for corn was relatively good, while the price farmers will receive for harvested corn has plunged.

But farmers who decided to plant soybeans on fields originally intended for wheat - the former is less risky to plant late in the season - probably did better than if they took prevented-planting, he says.

That reflects a relatively poor prevented-planting payment for wheat, which the farmers would have received if they hadn’t switched to soybeans.

But outcomes vary from county to county, and even from farm to farm.

Paul Craigmile, American Federal Bank ag and business banker market president in Hallock, Minn., says adverse weather hurt yields for many of his clients.

He’s had farmers tell him they harvested as little as eight bushels per acre of soybeans on late-planted fields.  With yields that poor, “They’d have been better with prevented-planting,” he says.

2013 vs. 2014

In both 2013 and 2014, wet conditions in much of North Dakota, South Dakota and Minnesota prevented many fields from being planted on schedule. As planting delays dragged on, many producers had to decide whether to keep planting or collect prevented-planting payments through federal crop insurance.

Prevented-planting payments provide a safety net for farmers who can’t plant by certain dates because of adverse weather. The payments are intended to help farmers stay in business, not to give producers a profit.

So, on one hand, collecting prevented-planting would have guaranteed a relatively modest amount of income from a soggy field.

On the other hand, planting could have brought much more, or much less, income, depending on crop prices and how much grain the field produces. Late-planted fields generally produce less, in part because they’re at greater risk from early fall frosts.

In 2013, the region’s frost-free September, which gave late-planted crops the time they needed to mature, boosted yields and, in retrospect, made late planting the right choice.

This year, in contrast, widespread frost in the middle of September hurt yields of many, though not all, fields across the region.

APH, excess moisture

Changes in the 2014 farm bill don’t affect what Swenson calls the “rearview mirror” decision on whether to plant late or collect prevented-planting.

But two other factors, both difficult to assess financially, impact whether farmers made the right decision to continue planting, he says.

Planting crops on soggy fields helped use excess moisture, which could boost the 2015 crop, he says.

But lower yields from late-planted crops can hurt a producer’s actual production history, or APH, for federal crop insurance. APH establishes an average yield for the insured crop based on the grower’s yield in previous years. The APH yield, in turn, helps determine how much insurance money a producer receives when weather hurts his crops.

So, farmers who planted late this year and ended up with poor yields potentially could receive less insurance money in the future.

Regardless, farmers had strong incentive, both instinctively and financially, to plant soggy fields this spring.

Farmers’ basic nature encourages them to plant, and they do so if there’s a realistic chance of a decent crop, Mewes says.

“Farmers always want to plant if they can,” he says.

Planting late this spring also was more attractive because prevented-planting payments are meant only as a safety net.

“I’ve had clients tell me, ‘We can’t make money collecting prevented-planting,’” Craigmile says.