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Prevented Plant Impacts on 2019 Illinois Grain Farms Incomes

link to farmdoc Daily article

In 2019, spring weather was very wet, and many farmers in Illinois had prevented plant (PP) acres. Compared to 2018 incomes, 2019 incomes declined more for those farms that had a larger proportion of their acres in PP. While some have suggested that PP payments may overcompensate farmers, the income results presented in a new paper from the University of Illinois do not support the contention. Todd Gleason has this discussion with ag economist Gary Schnitkey.




Farms Included in Study

Table 1 shows 2018 and 2019 incomes on Illinois grain farms enrolled in Illinois Farm Business Farm Management (FBFM). To be included in Table 1, a farm had to meet the following criteria:
  • Receive the majority of their incomes from grain operations,
  • Have over 500 acres, and
  • Have records that were certified useable by Illinois FBFM staff in both 2018 and 2019.
A total of 1,483 farms meet these criteria, with results for all farms given in Panel A.
For all farms, tillable acres averaged 1,525 per acre, with a range of 500 acres to over 13,000 acres. Net farm income averaged $184,460 in 2018, declining by 51% to $89,866 in 2019 (see Panel A of Table 1)



Income Declines as Percent Prevented Plant Acres Increases

In Panel A, the 1,483 farms are divided into five categories based on the proportion of PP acres. In 2019, 73% of the farms had no PP acres. Even given the wetness of 2019, most Illinois grain farms planted all acres in 2019. Still, of the farms in this sample, a sizable proportion (26%) has some PP. Of those farms that had PP, 15% had less than 10% of their acres in PP. Percentage of farms then declines as the proportion of PP acres increased: 8% had between 11 and 30% of acres in PP, 2% had between 31% to 50%, and 4% had over 50%.
Incomes declines became more negative as the proportion of acres of PP increased, as shown in the last column in Panel A of Table 1. With no PP, the average income change was –45% from 2018 to 2019. The income change was
  • –53% when PP when less than 10%,
  • 97% when 11% to 30% of acres were PP,
  • –103% when 31% to 50% of acres were PP, and
  • –112% when over 50% acres were PP.
On average, net incomes in 2019 were negative when over 31% of acres where PP: -$3,832 per farm when PP was between 31% to 50%, and -$12,638 when PP was over 50% of tillable acres.
Incomes in Table 1 include all sources of revenue, including that from additional government payments offered in 2019 to counter incomes lost due to trade difficulties. Market Facilitation Program (MFP) payments are included in revenue (farmdocDaily, July 30, 2019). Also included is the 10% increase in PP payments.

Income Declines by Region in Illinois

Northern Illinois had more delayed planting than other areas of Illinois. Only 43% of the farms located in northern Illinois got all their acres planted, compared to 81% for central Illinois and 60% for southern Illinois. Over 10% of northern Illinois farms had over 30% of their acreage in PP (6% in 315 To 50% and 4% in over 50% categories) Income declines were larger in northern Illinois than in other parts of Illinois. The average income change in northern Illinois was –76%, compared to –45% for central Illinois and 53% for southern Illinois.

Commentary

The above results do not present an analysis of whether taking PP or planting was the correct decision. To conduct that PP/plant comparison, one would have to link up farms with the same growing conditions who made different PP/plant decisions and then see corresponding results. In this article, we compare incomes with different levels of PP. Given the reluctance of Illinois farmers to take PP, we assumed that most farmers who took PP had no alternative but to take PP. 
There has been some thought that PP payments may provide more than adequate compensation (see Brasher, https://www.agri-pulse.com/articles/12390-coverage-changes-could-limit-prevent-plant-payout ). In 2019, for example, the Risk Management Agency lowered the standard PP payment factor on corn from 60% of the guarantee to 55% (see Risk Management Agency, https://www.rma.usda.gov/en/News-Room/Frequently-Asked-Questions/Prevented-Planting-Coverage-Factor-Changes-for–2019 ). As incomes decline with more PP, income results in this article do not support the contention that PP provides overcompensation. Of course, results could vary by across years.

Tidbits from the ILLINOIS Fam Tax School

Farmers generally try to get their taxes in order before the end of the year. This season they may need to consider MFP and Prevented Plantings payments and how to best make charitable contributions.

The tax implications of the MFP payments are that the money is taxable in the year it is received. One-half of the MFP payment has already been or will be delivered shortly. It is expected 25% will be delivered in a second check in November. And if needed the third check, another 25% of the total, is likely to come in January. The first two checks are taxable in 2019, and the final portion would be taxable in 2020.

Another payment farmers may not be used to dealing with involves the Prevented Planting portion of crop insurance says Bob Rhea, “Those payments are either taxable when received, or under certain circumstances, could be delayed until 2020 the year after the disaster occurred. So, they should visit with their tax professional as they determine, especially as we near year end, whether those should be taken as 2019 income or used under the election to be treated as 2020 income.”

Rhea presented during this fall’s ILLINOIS Farm Tax School Seminars. He reminded the tax preparers in attendance that farmers also have a unique way to make charitable contributions, “IRS has prescribed some specific steps to validate a contribution with grain. One of those is that the grain must be delivered to the charity. The charity must be the owner of the grain in inventory, and the producer should notify the charity that he has provide x-number of bushels in their name at a certain location. The charity then, from that point, takes the risk and makes the sale and handles the cash proceeds from there.”

In simple terms the producer delivers grain in the name of the charity to the grain elevator, notifies the charity, and the charity then makes the sale.

Managing Prevented-Planting Fields | an interview with Emerson Nafziger

by Emerson Nafziger, Extension Agronomist - University of Illinois
link to The Bulletin post

With a lot of acres of corn and soybeans still unplanted as we move into the second half of June, prevented planting (PP) is unfortunately going to be a major part of the story of the 2019 cropping season in Illinois. Here we’ll look at goals and options for managing acres on which the intended crop—corn or soybean—does not get planted.


Emerson Nafziger, University of Illinois Extension Agronomist, on how to manage Prevented Planting acreage this summer.

The main goals of managing PP acres will be: 1) providing a vegetative cover in order to keep the soil in place and to prevent “fallow syndrome”; 2) to prevent or manage weeds so they don’t reseed the field; and 3) to take up nitrogen, including that from any N-containing fertilizer (including DAP/MAP), and any N that will be released from soil organic matter during the growing season. We also need to find ways to keep costs down, given that the PP insurance payments leave little room for adding expenses to these acres. This may not be the best time to invest in expensive cover crop seeding mixes. With high demand this year, such seed—and seed of some less exotic cover crops as well—will be expensive, and some may not be available.

We have not seen “fallow syndrome” very often in Illinois, but there was some in 1994 in fields that were flooded for most of the season in 1993 and did not produce crops or even weeds that year. The symptoms include stunting and purpling that indicate phosphorus deficiency. Plants growing in fields host a type of beneficial fungus (VA mycorrhiza) that assists in the uptake of P; these fungi seem to die off when there aren’t any plants, and they come back slowly the next year. We don’t expect to see this in every field, and it’s more likely to show up where water stood for a long period of time this year. The best prevention is to have plants present sometime during this season to help maintain these fungi. Just about any plant with roots will work, including weeds, but a cover crop species we choose to plant will be preferable to weeds.

Having plants present to take up N is more to keep the N from leaving the field this year than it is to make it available for next year’s crop; it’s not clear how much N captured in crop biomass this season will become available to next year’s crop. But mineralization takes place in every field once soils are aerated, regardless of whether the previous crop was corn or soybean. Grasses with deep roots are the best way extract N from deeper in the soil, and to keep this N out of tile drainage water.

We won’t try to reiterate here the complex rules regarding PP certification, but will only deal with managing these fields to provide cover. It appears that any species will work as cover, as long as the rules regarding what’s done with the cover after the season are followed. That means no harvest of grain (or silage) at all, and harvest by grazing or by making hay only after November 1. Every decision on what to plant should be tested with your crop insurance agent beforehand.

PP corn

Where corn was the intended crop in 2019 and soybean is planned for 2020, using a small grain as a cover crop this summer is an option. Winterhardy cereal rye and wheat won’t form heads until after a period of temperatures in the 30s, so probably not until next spring. They should emerge and provide quick cover, but these are cool-season crops, and when they remain low-growing and don’t send up stems with heads, they likely won’t stay very healthy or grow vigorously through a normal summer season.

Spring oats or spring wheat might do a little better than winterhardy wheat or rye. These tend not to tiller much at high temperature, but they will set seed. It can’t be harvested as grain; check the rules on whether it can simply be left to have the seed shatter out in the fall once it’s ripe. That may reseed the cover crop, but these plants won’t survive the winter. None of these are likely to grow roots as deep as when they grow in cool weather, but they should provide decent cover. With the 2019 oats crop in Illinois planted late and not exactly thriving, it will be difficult to find seed locally. Spring wheat seed will have to come from states north and west of Illinois.

Grain from a bin or an elevator, including from this year’s harvest, might work as seed for small grains, since this is not a “crop” in the usual sense. With wet weather this spring, we anticipate that some harvested grain will have diseased kernels that lower its market price, which may provide an incentive for using it as cover crop seed. Test germination, and if germination is low, increase the seeding rate to plant about at least 15 viable seeds per square foot, using a drill. While drilling will usually produce better stands and require less seed, broadcasting 20–25 live seeds per square foot might work. Shallow tillage with a vertical-tillage implement before or after broadcast seeding will probably improve stands.

Sorghum-sudangrass hybrids and forage sorghum produce a lot of residue and are good at taking up soil N. These species grow well in high temperatures, and they tolerate dry soils. If they won’t be grazed (after November 1), it’s probably better to limit their growth to lower the amount of residue present next spring. Lack of adequate N will limit growth in most fields, and delaying planting until mid-July or so can also help. If there is still a lot of growth, plants can be mowed in September so the residue can start to break down this fall. Some sorghum-sudangrass hybrids are male-sterile, and these species don’t produce much seed in any case. There is no danger of having plants of these species overwinter.

In fields that haven’t had herbicides applied that would prevent their growth, species such as radish, turnip, rapeseed, buckwheat, and forage grasses and legumes could be used on PP corn acres. None of these will be as effective as a well-rooted grass crop at taking up N, and those that grow slowly after emergence will generally not provide good cover early, and they won’t compete with weeds very well. Their seed tends to be expensive, and those with very small seed (such as clovers) can be difficult to establish in mid-summer without specialized equipment.

It may be possible to plant corn on PP corn acres, as long as care is taken not to produce corn grain. Ways to assure this include planting it later than July 15, drilling or planting it in rows no more than 15 inches apart, and planting at least 70,000–80,000 seeds (roughly a bushel) per acre. Lack of N will also help keep seeds from forming or filling, as will very late (September) pollination, which should mean failure of the crop to mature. Some seed companies may offer treated seed that they won’t be keeping over at a price low enough to make this an option. It may also be possible to take seed out of a bin of non-GMO corn grain to use for this. Make sure such seed will germinate, and check to make sure the planter is dropping enough seeds. By the time frost kills them, corn plants should not have formed seed that is mature enough to germinate the next spring. If grain begins to form and seeds begin to fill despite these measures, the corn can be mowed with a stalk chopper to prevent formation of viable seeds.

Soybean PP

Management of PP soybean acres has the same goals as those for PP corn acres, but management changes some if these fields will go back to corn again in 2020. Undisturbed corn stalks have by now broken down to some extent, but they still provide some cover, and keeping some of the stalk material on the soil surface will help preserve moisture and to keep soil in place as a cover crop gets started. The presence of high-C residue from the previous corn crop means that there will be less net mineralization in these acres because some mineralized N will be tied up as microbes break down residues. Even so, good root growth from a cover crop will help to take up N and to keep it from leaving the field.

It is possible to use the growing season that remains in 2019 to produce a leguminous crop that can fix N to supplement the N supply for next year’s corn crop. Such a crop should provide good early growth in order to take up N present as the over crop is getting established. Clovers are small-seeded forage legumes that can work, although seed costs might be high and these species may be incompatible with any herbicides that were applied before planting was prevented. Planting them into corn residue will also be challenging, although no-till drilling may work if seed can be placed well. Broadcasting into corn stalks without tillage is not likely to result in good stands. Red clover is more widely available than more exotic clovers, but supplies of all of these might be limited this year. Sweet clover has larger seed and will grow aggressively once it’s established. It will usually provide more dry matter by spring, and will also be more difficult to control before planting the next crop, compared to other clovers. Hairy vetch also grows vigorously, but its seed is expensive and it may not overwinter very well; this species will work in southern Illinois but is probably not a good choice in central and northern Illinois.

Another legume that can provide fairly rapid cover and that is widely available is soybean. As with corn used as a cover crop, soybean should be planted late, in narrow rows and at a high seeding rate (80 to 90 lb of seed per acre, if germination is at least 80%), to provide fast cover and to keep seed production to a minimum. It is not clear that GMO soybean seed can be used to plant for any purpose except commercial grain production. In cases where treated soybean seed cannot be returned to the dealer, the seed company might be asked if use as cover crop seed this year is allowable. There is no other good use for this seed, and it will probably not remain viable if stored until next year.

Using bin-run non-GMO soybeans as cover crop seed for this should be possible; check with your seed dealer to make sure. Non-GMO soybeans are typically marketed as such, and so are likely to be limited in supply now, unless producers have them in their own bin. Later-maturing varieties would make more vegetative growth and be less likely to set and fill viable seeds than normal-maturing ones, but that would add the expense of finding and transporting such seed. All told, soybeans may not be as obvious a choice as they appear to be at first glance, especially if leftover seed can’t be used for this purpose.

Soybeans used as cover should not be allowed to set and fill viable seed. That’s both to avoid complications from planting a crop following prevented planting of the same crop, and also because the maturing crop may have more residue than desired. Mowing plants off at about stage R5 (beginning seedfill) should work to control growth and prevent seed formation while still allowing capture of some fixed N. A crimper-roller might also work. Soybean plants this size can be difficult to control with herbicides, and mechanical control that leaves the residue on or near the soil surface is probably a better option.

A small grain such as wheat or oats can also be used as a cover for PP soybean acres, although that means foregoing the fixation of nitrogen. These will probably be quite N-deficient when planted into corn stalks, and while this will limit the amount of cover they produce, they should make enough growth to provide fair cover by late fall. If winter wheat or rye is used, they should be terminated in the early spring so they don’t interfere with early growth of the corn crop that follows.

If P and K fertilizers were applied in preparation for this year’s crop that didn’t get planted, their availability for next year’s crop should not be affected as long as the soil stays in place. If MAP or DAP will be applied this fall, a green cover crop present at the time of application should take up some of the N in these P-fertilizer materials, and to preserve it from loss if application is made while soils are still warm. If P and K couldn’t be applied for this year’s crop, PP provides an opportunity to sample soils if needed, and to get these nutrients applied this fall. Late planting will mean late harvest of corn and soybeans this year, which will allow for timely fall work on PP acres.