Crop Insurance Conference

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Nutrient Insurance. A New Tool for Addressing
Water Quality?
Bruce Montgomery Minnesota Department of
Agriculture
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Hot of the PressNutrient BMP Insurance

• Endorsement just released by USDA-Risk Management
  Agency on January 15th.

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Thumbnail Overview Nutrient BMP Insurance

• A new risk management tool for corn growers
  (exclusions discussed later)
• The plan is designed to protect producers from
  the risk that Extension Service fertilizer
  recommendations fail to produce an optimum crop
• Policy covers Nitrogen and Phosphorus
• USDA Risk Management will underwrite the policy
  and will be under the umbrella of Federal Crop
  Insurance.

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USDA Risk Management Agency Educational Grant

• Multi-state educational grant was recently funded
  to promote the policy over the next year in
  Minnesota, Iowa and Wisconsin
• This is a joint venture with many organizations
  including
• Iowa DNR Wis DNR/DATCP Iowa State U
• Univ of MN/Ext USDA National Soil Tilth
  Laboratory
• National Crop Insurance Services AGFLEX
• WI Discovery Farms Univ of WI/Extension AGREN
• MN Department of Agriculture Hiawatha
  RCD
• And USDA-Risk Management Agency

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Selected Pilot States Nutrient BMP Insurance
Program
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Developers of the Policy Language

• The Nutrient BMP Insurance Endorsement is a
  joint product of Agflex and the Agricultural
  Conservation Innovation Center.

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Nutrient Insurance Primer
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Nutrient BMP Insurance Primer Field Design
Establishment (Spring)
Conventional Rates Used by the Producer
40-60 wide strip
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Nutrient BMP Insurance Primer Field Design
Establishment (Spring)
Entire Field, except for the Check Strip, is then
planted at University Rates
University Fertilizer Recommendations
University Fertilizer Recommendations
CHECK STRIP
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Nutrient BMP Insurance Primer Criteria for an
Indemnity?
If the yield difference between the check and the
adjacent strips exceeds 5, an indemnity would be
paid.
CHECK STRIP
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General Topics for Todays Discussion

• Rationale for this type of a policy-both from an
  agronomic and environmental viewpoint
• Who should this policy try to target?
• How does the policy work and who needs to be
  involved?
• Where and how might this policy help both the
  farming and non-farming community?
• What needs to happen for the policy to be
  successful?

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Water Quality Issues
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The Nitrogen Cycle
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Leaching Losses
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Community Water Supplies Impacted by Ag

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Community Water Suppliers Currently Responding
to Nitrate Problems
Park Rapids
Cold Spring
Perham
St. Peter
Lincoln Pipestone Rural Water System
Hastings
Edgerton, Luverne, Adrian, Fulda
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Raccoon River/Des Moines River Watersheds
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Raccoon River/Des Moines River Watersheds
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Midwestern Agriculture Now has National
Environmental Implications
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Agriculture in Southern Minnesota
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The Upper Midwest Contributes 1/3 of the
Nitrogen Loading into the Gulf of Mexico
Courtesy of Mulla and Randall. University of
Minnesota
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Nitrogen Flux in the Mississippi River
Basin..the past 50 years
Streamflow
N Loads
1955 1965 1975 1985 1995
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2001-Largest Recorded
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Agronomic Challenges that Producers and
Agricultural Technical Support Staff (Dealers,
Consultants) Face
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Common Questions from the General Public.
Are Minnesota Farmers Adopting Fertilizer and
Pesticide BMPs?What are the Impacts from
Present Day Agriculture?Will we see
improvements in our water supplies soon?
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Agriculture is always in a high state of flux!

• Farm sizes continue to increase while the amount
  of labor continues to decrease
• High percentages of existing farmland is rented
  in Central MN it is common to have a different
  grower for each part of the rotation
• Overall livestock numbers remain steady while
  densities increase in localized areas
• Public expectations that agriculture will play a
  larger role in resolving water quality problems.

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U.S. Corn and Soybean Production.the Last 100
Years
Corn Productivity Continues to Increase 2 Bushels
per Year
Courtesy of Dr. Kim Polizotto, Potash Corp.
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Corn Yields in Southern Minnesota.the Last 15
Years
Recently, higher rainfall, heat and longer
summers have increased yields even more.
MN Ag Stats.
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Commercial Nitrogen Fertilizer Sales Trends in
Minnesota 1986-2000
MN Department of Agriculture
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Fundamental Nitrogen Relationships
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Nitrogen Losses.Which Ones Can We Control??

• Uncontrollable
• Precipitation and other Climatic Factors
• Soil Mineralization
• Controllable
• Rate and Timing of N applications
• Cropping Systems
• Bacteria conversion rates
• Less obvious factors such as placement, tillage,
  and tile drainage designs

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• Why do producers continue to apply at rates
  higher than what researchers and university
  Extension staff recommend?

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Why do producers error on the high side?Yields
Can Be Highly Variable over Time and Space!
Malzer, University of MN
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Why do producers error on the high side? What
About that One BIG Growing Year?

• Farmers frequently apply insurance fertilizer
  in hopes of an optimal growing season.

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MN Corn Growers Nitrogen ValidationGrowing
Season 2002
Bu/Acre
N Fertilizer Rate (Lb/A) on Corn Following
Soybeans
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Why do producers error on the high side?
University Research is only tested on garden
size plots!
Because most research is developed on small plots
under ideal conditions, many farmers believe that
University recommendations will not work on
production scale operations
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Yield Relationships Between Field Scale and Plot
Research
Small Plots Field Scale
Randall et al, UM
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Rationale for higher rates than necessary?

• Complications from crediting non-fertilizer
  sources of nitrogen (manure, legumes, etc)
• Poor communication/records between producers and
  their ag supplies commonly lead to higher
  application rates
• The Sleep FactorOverall fertilizer costs are
  usually less that 10 of the production costs and
  Insurance Nitrogen is frequently an attractive
  alternative.

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Farm Nutrient Management Assessment
Program(FANMAP)
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Nitrogen Inputs to Corn Production Scenario 1
Dependent on commercial fertilizer no manure or
legume credits
Scenario 1 represents 14 of all corn acres
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Nitrogen Inputs to Corn Production Scenario 2
Corn following a legume crop and no manure applied
Scenario 2 represents 61 of all corn acres
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Nitrogen Inputs to Corn Production Scenario 4
Corn following a legume crop and received manure
Scenario 4 represents 17 of all corn acres
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Rationale for higher rates than necessary?

• Complications from crediting non-fertilizer
  sources of nitrogen (manure, legumes, etc)
• Poor communication/records between producers and
  their ag supplies commonly lead to higher
  application rates
• The Sleep FactorOverall fertilizer costs are
  usually less that 10 of the production costs and
  Insurance Nitrogen is frequently an attractive
  alternative.

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Fertilizer Dealers are a Critical Information
Delivery Avenue
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Agricultural Dealerships Need to be a Critical
Component of Nutrient BMP Insurance

• Traditionally, this segment of professional
  services is orientated toward more supply/sales
  rather than technical services.
• Because of liability issues, concerns about
  losing the farmers trust, profitability, and not
  walking the fields as frequently as a crop
  consultant, the dealerships are frequently
  apprehensive about promoting lower inputs.
• Future Market Potential?-Many dealers are looking
  for innovative ways to replace lost profits from
  reduced fertilizer sales.

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Where could Nutrient BMP Insurance fit into
Midwestern Agriculture?
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What types of farming operations could benefit
the most from Nutrient Insurance?

• Producers with large amounts of livestock manure
  to land apply

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What types of farming operations could benefit
the most from Nutrient Insurance?

• Producers with large amounts of livestock manure
  to land apply
• Producers with alfalfa in the rotation
• Producers who typically do not participate in
  cost sharing and traditional educational
  networks
• Any producer that has not changed their
  fertilizer rates in the past 5-10 years.

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Producers Already Using an Independent Crop
Consultants?

• Producers already using a crop consultant are
  probably not the right audience!
• Crop consultants are paid off the savings from
  increasing the overall efficiency of inputs.
• Crop consultants, however, may want to develop a
  new niche related to this policy.

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What types of farming operations are less likely
to benefit from Nutrient Insurance?

• Many corn-soybean operations with no livestock
• Producers who have already experimented with
  reduced rates
• Those already using crop consulting services
• Producers that must retain fall N applications
  within their operations currently will not
  qualify

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Mechanics of the Policy
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USDA Federal Crop Insurance Corporation

• USDA-Risk Management Agency will underwrite the
  policy
• Nutrient BMP is an endorsement to
• - Multi-Peril Crop Insurance (MPCI)
• - Crop Revenue Coverage (CRC)
• The endorsement may be added to all or only a
  portion of the underlying MPCI or CRC.

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Nutrient BMP Insurance

• Producer may take out policy on Nitrogen and
  Phosphorous or as individual components
• Producer must follow the University Extension
  recommendations and Best Management Practices for
  their state
• Nutrient Management Plan needs to be developed
  for the insured acres.

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How Does the Policy Work?

• Must sign up by March 15th along with crop
  insurance (MPCI) (CRC)
• Producer works with certified crop advisor to
  develop a nutrient management plan
• Certified crop consultant helps producer
  establish check strip
• As part of the nutrient management plan, the
  proper fertilizer rates are determined.

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Nutrient BMP InsuranceMaking a Nutrient
Recommendation
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Nutrient Management Plan

• Plan must follow University Extension
  recommendations for their respective state
• In Minnesota U of M Extension Publication
• - Publication FO-3790-C
• - Fertilizing Corn in Minnesota
• Summary information of plan is required on policy
  application
• Entire plan available for inspection.

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Nutrient Management Plan

• Manure contributions for nitrogen and/or
  phosphorus contributions
• Legume (alfalfa, soybeans, etc) nitrogen
  contributions
• Starter N and/or P205 contributions
• Commercial N and/or P205 contributions
• Soil test results for phosphorus.

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Approved Crop Consultant

• Consultant must have received professional
• certification and continuing education from one
  of the following
• American Society of Agronomy Certified Crop
  Advisor Program
• National Alliance of Independent Crop
  Consultants
• ARCPACS in a discipline applicable to the area
  of Crop Science

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Role of the Crop Consultant

• Will help establish check strip
• Will develop Nutrient BMP Plan
• Must be an individual who is approved by
  insurance provider who has no financial or
  personal interest in farming operation other than
  producer-client relationship
• May be provided by insurance provider or insured.

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How Does the Policy Work?

• Farming practices must remain consistent for the
  entire field (except for check strip)
• One 40 to 60 foot wide Check Strip needs to be
  established in a management zone farmer applies
  nutrients using traditional fertilizer rates that
  they believe are needed
• Remainder of the field will follow university
  recommendations and BMP practices.

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Where to Place the Check Strip?
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Yield Mapping Histories
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Considerations in Check Strip PlacementGeneral
Productivity Yield Maps
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Considerations in Check Strip PlacementBasic
Soils Information
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Considerations in Check Strip PlacementSurface
and Subsurface Drainage
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Check Strip Placement
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Cost of the Policy (Based on 100 acres)

• Three different options available
• Full Service Option - 9.39/A (MN, IA) and 9.13
  in Wisconsin
• Insurance company contracts with a CCA to set up
  check strip and develop nutrient plan
• Producer Arranged Check Strip - 8.14/A (MN, IA)
  and 7.88 in Wisconsin
• Producer already working with a CCA

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Cost of the Policy

• Smaller acreage less than 100 acres
• Minimum charge of 125 test strip set-up
• Minimum charge of 115 for harvest adjustment
• If the producer does not believe an adjustment is
  warranted, will receive a 2.00/Acre credit

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Exceptions to the Policy

• Only for corn grown for grain (not silage corn,
  sweet corn, popcorn, seed corn, etc.)
• Crop of corn where corn was grown the previous
  year.
• Corn that is irrigated.
• No fall applied nitrogen.

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Harvest Procedure if Adjustment Requested
Check Strip harvested and yield check verified
with weigh wagon
CHECK STRIP
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Harvest Procedure if Adjustment Requested
To determine potential yield reduction, field
length swaths from the reduced fertilizer area on
both sides of the check strip also need to be
harvested.
CHECK STRIP
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How might this policy help the farming and
non-farming community?
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Advantages of Nutrient BMP Insurance

• Adoption of Nutrient BMPs can save money and can
  positively impact the environment
• Insurance policy enables producers to adapt to
  lower nutrient inputs, following university
  recommendations and BMPs with reduced risks
• Provides an environment in which producers can
  experiment with relatively complex nitrogen
  crediting (i.e. manure crediting)
• Even if a producer buys the policy for just one
  field, the knowledge acquired may eventually
  spread across the entire farm.

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Cost Saving Example

• A Minnesota farm uses UM recs following soybeans
  and applied sufficient manure. Soil test P is
  High
• UM Recs-No additional N or P
• Farmer typically would use 100 lb/N and 50 lb
  P2O5/A

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Cost Savings-Manured Corn following Soybeans
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Environmental Applications of Nutrient Insurance
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Accelerated Adoption of University Fertilizer
Recommendations through Nutrient Insurance
Policies

• MN, Iowa and Wisconsin received a grant from
  USDA-Risk Management Agency to launch a
  multi-level educational campaign
• Each state selected several target areas where
  Nutrient BMP Insurance may be useful in
  addressing water quality issues.

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Examples of Target Areas
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St. Peter Wellhead Protection Area
St. Peter Pop. 10,000
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Community Water Supplies Impacted by Ag

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Monthly Nitrate-Nitrogen LevelsCity of St.
Peter Drinking Water Wells
U.S. Public Heath Standard for Community Supplies
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St. Peter Source Water Protection Area

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St. Peter 90 Corn Acres Were Receiving Excess
Nitrogen Fertilizer

• 30 lb/A or more
• Within
• 30 lb/A

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Potential Reduction of Annual N Inputs Based on
UM Recs
St. Peter --- 135,000 lbs SWP
Area Or Potential Reduction of 3,000-4,000 Lbs
of N per farm!
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BMP Insurance.A Cost Effective Method to Create
Change?

• Currently federal, state, and St. Peter are
  easily spending 100,000 through education,
  demonstration programs, EQIP, and added costs due
  to new well construction.
• These costs will be significantly higher if a
  nitrate removal system is needed.
• All of the corn acres could be fully enrolled for
  20,000-25,000/year.

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Agricultural P Water Quality Concerns
Until recently, the general scientific consensus
was that if soil erosion was minimized and cattle
were fenced out of waterways, P impacts could be
controlled.
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Phosphorus Impacts on Water Resources and
Agricultural Management Practices
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What has to happen for this policy to be
successful?

• Due to the late release date, it is unlikely that
  there will be a significant number of policies in
  place for the 2003 season
• However, it will be important to establish a
  small number of sites within the pilot states
  these sites may be extremely valuable for
  participating farmers, ag professionals, and
  insurance agents to evaluate the mechanics of the
  policy.

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What has to happen for this policy to be
successful?

• Business partnerships between the Crop Insurance
  Industry and the various Agricultural
  Professionals (Crop retailers, Independent Crop
  consultants, etc) need to form!

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Future Insurance Driven Type Programs?

• Similar programs are currently in prototype
  stages across the US

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Livestock Dietary Feed Supplements
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Controlled Burns
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Corn Rootworm Applications/IPM Type Approaches
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Conservation Tillage?
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For Additional Information
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Nutrient Insurance Educational Coordinator
Paul Brietzke Cell Phone [phone] E Mail
paul_at_fflax.net
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Upcoming Training for NCIS Members Adjusters
2003 NCIS NUTRIENT BMP ENDORSEMENT PILOT
TRAINING
JANUARY 22, 2003 MINNEAPOLIS, MN
Need Registration Info? Call [phone]
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Useful Website Links to Nutrient BMP Insurance
Links

• Agflex http//www.agflex.com/news.html
• AGREN http//www.agren-inc.com/links.php
• NCIS http//www.ag-risk.org
• USDA-RMA
• http//www.rma.usda.gov/
• policies/2003policy.html

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Useful Website Links to Recommendations/Water
Quality Info

• http//www.extension.umn.edu/distribution/cropsyst
  ems/DC3790.html
• http//www.mda.state.mn.us/appd/ace/nutmgmt.htm
• http//www.extension.umn.edu/distribution/cropsyst
  ems/components/6240f.html

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Bruce Montgomery MN Department of
Agriculture Unit Supervisor-Special Projects
Unit Agronomy and Plant Protection Division 90
West Plato Blvd, St. Paul, MN 55107 Bruce.Montgome
ry_at_state.mn.us [phone]