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EAST PEORIA, Ill. — Fifty-five percent of Illinois corn acres were yet to be planted by June 2 and farmers began to weigh the options of planting regardless of the later dates or taking the prevent plant program.
Gary Schnitkey, University of Illinois agricultural economist and farm management specialist, said at the Illinois Farm Economics Summit that prevent plant would have yielded higher returns than planting corn in many situations in Illinois.
“Unless you have unusual circumstances, take prevent plant, particularly in the second or third week of June,” Schnitkey said.
An early June analysis indicated a $48 per acre advantage to plant corn versus prevent plant. An updated analysis in early December showed a $98 per acre disadvantage planting corn compared to prevent plant.
The December analysis included higher yields, lower prices, increased drying costs and policy changes not enacted in early June.
If prevent plant becomes an issue in the future, Schnitkey suggested that the default decision should be to take a prevent plant payment once final plant date of June 5 in most of Illinois and May 31 in the far southern portion of the state has been reached for corn if:
• A Revenue Protection, RP with harvest price exclusion, or Yield Protection policy with a high coverage level has been chosen.
• There is not expected to be a Market Facilitation Program or similar programs only targeted at planted acres.
• Harvest prices are not expected to be higher than projected prices by 50 cents per bushel.
Schnitkey presented six lessons from 2019 regarding plant or prevent plant.
Lesson 1: "Midwest farmers have a bias against prevent plant. It's a good thing that we want to plant because that's what farmers do. After June 5, you can take prevent planting.
“It does not matter if June 6 is a beautiful day and the ground is fit, it’s the farmer’s decision at that point in time. Up to June 5 you have to plant if it’s fit. After June 5, it’s the farmer’s decision and it doesn’t matter what the conditions are.
“We have to realize some of the bias of individuals with vested interests that are providing the information to farmers. Share-rent landowners have legitimate concerns for prevent planting if they don’t have crop insurance.
“If they don’t have crop insurance, there’s no return to the share-rent landowner if no planting occurs. I would suggest that you may want to get those share-rent landowners on crop insurance.
“I’ve heard farmers who had their cash-rent landowners pressure them for planting. I don’t see any legitimate concern for a cash-rent landowner wanting that land planted, particularly with corn.
“You may be doing things worse to the ground than not. Input suppliers want to see planting occur.
“Crop insurance companies really don’t want to make prevent plant acres because they’re the biggest payments that can be made.
“Try to look at the decision objectively, which is hard to do because it is a very emotional decision. Develop a plan for prevent plant beforehand with a strong presumption not to plant if you have a high coverage level once you reach June 5, particularly if there are no storing or drying facilities on-farm.”
Lesson 2: "Future prices are unbiased indicators of price in the future. The December 2019 CME corn contract averaged $4.50 in June and $3.90 in October. June prices already had a significant weather premium built in, and we probably should not have expected more.
“If you’re going to do something because of price, price some of it. Don’t bet on short crops. Many, myself included, believed prices could go up if we had lower acres and lower yields.”
Lesson 3: "All farmers are reacting to the same incentives. All farmers saw the corn was more profitable than soybeans, and corn prevent plant is better than soybean prevent plant.
“Corn acres were only down 1% from 2018 to 2019. Soybean acres year over year went down 16%. U.S. prevent plant acres increased from nearly 1.9 million in 2018 to 19.259 million in 2019.
“Areas that didn’t have prevent plant planted more corn. Areas with large prevent plant, reduced corn acres. Most everyone reduced soybean acres. Acreage changes that happened in 2019 are consistent with economics.”
Lesson 4: "It's hard to beat U.S. Department of Agriculture yield forecasts. The resources USDA devotes to yield estimates are large and include many methods including satellite imagery.
“USDA forecast an average corn yield of 166 bushels per acre in June and 167 bushels per acre in November. Don’t bet on short crops until you see them.”
Lesson 5: "Market Facilitation Program was introduced as a new policy in June. In a USDA press release on June 10, USDA Secretary Sonny Perdue said, 'I urge farmers to plant for the market and plant what works best on their farm, regardless of what type of assistance programs USDA provides.'
“The press released went on to state farmers needed to plant in order to receive MFP payments. Per acre MFP payments ranged from $50 to $87 per planted acre in Illinois.
“There was a 15% top off on RP prevent plant payments. There was a $15 per acre MFP payment for planting cover crops on prevent plant farmland. Government aid netted out to be about the same for planting and prevent plant.
“This administration does not want to influence planting decisions with aid, but we’re not sure about future administrations. There’s a good chance of MFP payments in 2020, but how it’s built into cash rent is problematic. Commodity Credit Corp. authority was used for MFPs, and how future administrations use CCC authority will be interesting to see.”
Lesson 6: "Build in higher drying costs if you plant in June. Also, expect harvest difficulties."