IRRIGATION ISSUES AND PREVENTED PLANTING

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IRRIGATION ISSUES AND PREVENTED PLANTING

• By Dennis A. Kaan
• Agriculture and Business Management Specialist

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Extensions Role in Prevented Planting Issues

• Basic provisions define good farming practices
  as
• The cultural practices generally in use in the
  county for the crop to make normal progress
  toward maturity and produce at least the yield
  used to determine the production guarantee or
  amount of insurance, and are those recognized by
  CSREES as compatible with agronomic and weather
  conditions in the county.

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Prevented Planting Definition

• Basic Provisions 17(d)
• Drought or failure of the irrigation water supply
  will be considered to be an insurable cause of
  loss for the purposes of prevented planting only
  if, on the final planting date (or within the
  late planting period if you elect to try to plant)

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Prevented Planting Definition

• Basic Provisions 17(d)(1)
• For non-irrigated acreage, the area that is
  prevented from being planted has insufficient
  soil moisture for germination of seed and
  progress toward crop maturity due to a prolonged
  period of dry weather. Prolonged precipitation
  deficiencies must be verifiable using information
  collected by sources whose business it is to
  record and study the weather, including,

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Prevented Planting Definition

• Basic Provision 17(d)(1) continued
• but not limited to, local weather reporting
  stations of the National Weather Service or
• Basic Provision 17(d)(2)
• For irrigated acreage, there is not a reasonable
  probability of having adequate water to carry out
  an irrigated practice.

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Important Dates

• Final Sign-up Date (Sales Closing)
• March 15, 2003
• Final Acreage Reporting Date
• July 15, 2003
• Report prevented planting acres on this date.

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Final Planting Date

• Barley April 30
• Oats April 30
• Sugar Beets May 20
• Corn May 25
• Potatoes May 31
• Sunflowers June 15
• Dry Beans June 20
• Millet June 20

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Environmental Diversions

• Decreased water allocation resulting from the
  diversion of water for environmental or other
  reasons is NOT an insurable cause of loss unless
  the diversion is directly related to an insured
  cause of loss.

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Irrigation Issues

• Policy States Only that acreage for which there
  exists adequate facilities and water at the time
  insurance attaches, or the reasonable expectation
  of receiving adequate water at the time coverage
  begins to carry out a good irrigation practice,
  is insurable under an irrigated practice.

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What Can Insureds Do Without Adequate Water?

• Plant fewer acres
• Plant and insure acreage for which adequate water
  is not available under a non-irrigated practice
  (if available), or
• Report acreage as prevented planting (if
  available), provided all prevented planting
  policy provisions are met.

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Failure of the Irrigation Water Supply

• Covered only to the extent that the failure was
  due to an insured cause of loss that occurs
  within the insurance period.

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Insureds Burden

• To show that any prevented planting or loss on
  planted (or perennial acreage such as forage
  production) acreage is caused by an insured cause
  of loss.

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Insurance Providers Must

• Determine that any failure of the irrigation
  water supply is due to an insured cause of loss
  before making prevented planting payments or
  paying a loss on planted acreage.

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Reasonable Expectation is the Key

• Producers who know prior to the time insurance
  attaches that the water supply may be reduced
  before coverage begins, or will be reduced or cut
  off during the irrigation season, have no
  reasonable expectation of adequate irrigation
  water.

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Good Irrigation Practice

• Application, in an acceptable manner, of adequate
  water, at the proper times necessary to produce
  at least the yield used to establish the
  irrigated production guarantee

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Adequacy of Water

• Based on
• The water available at the time insurance
  attaches from the irrigation water supply, soil
  moisture levels, and snow pack storage levels
  and
• Supplementary precipitation which would normally
  be received, after insurance attaches, during the
  period that a good irrigation practice is
  normally carried out.

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Adequacy of Irrigation Facilities

• Facilities include the physical resources, other
  than water, used to regulate the flow of water
  from a water source to the acreage
• Adequate, means that at the time insurance
  attaches, facilities will be available and usable
  at the times needed to have the capacity to
  timely deliver water in sufficient quantities to
  carry out a good irrigation practice.

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No Reasonable Expectation

• For ALL or PART of the Acreage at the time
  insurance attaches
• The amount of planted irrigated acreage reported
  on the acreage report must be reduced to the
  amount for which there was a reasonable
  expectation of an adequate irrigation water
  supply.

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Acreage That Has No Reasonable Expectation

• Of adequate water at time of planting (or on the
  calendar date for the beginning of the insurance
  period for perennial crops) must be reported as
  non-irrigated acreage, or uninsurable acreage if
  a non-irrigated practice is not available.

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Carryover Policyholders

• With no reasonable expectation of adequate water
  on the final planting date (including late
  planting period if applicable) DUE to an
  insurable cause of loss that occurred within the
  insurance period, may report such acreage as
  prevented from planting, provided all
  requirements for prevented planting have been met.

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Carryover Policyholders

• Are eligible for prevented planting payments if
  the insured cause of loss that caused the failure
  of the irrigation water supply occurred after the
  sales closing date for the previous crop year and
  all other requirements for prevented planting
  have been met.
• For example, corn sales closing date on March 15
  cause of loss occurs on or after March 15,
  2002, could be eligible for a prevented planting
  guarantee for the 2003 crop year.

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Insurance Period Example 1

• Average Snow pack/Precipitation during IP would
  allow for irrigation on all acres
• Example
• Normal irrigated acres 100
• 60 acres were PP in 2002
• Water allocation for 2003 40 acres
• 60 acres would be eligible for PP in 2003

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Insurance Period Example 2

• Average Snow pack/Precipitation during IP would
  not allow for irrigation on all acres
• Example
• Normal irrigated acres 100
• Ave. snow pack/precip. during IP would provide
  for irrigation on 75 acres
• Water allocation for 2003 35 acres
• 40 acres would be eligible for PP in 2003

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Irrigated Prevented Planting Coverage
100,000 Acre Feetfor 2002 Crop
Normal Replenishmentand Usage
50,000 Acre FeetMarch 15, 2001
If 100,000 Acre Feet would supply 100 percent of
needed water, producer would have full prevented
planting coverage.
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Irrigated Prevented Planting Coverage
60,000 Acre Feetfor 2003 Crop
Normal Replenishmentand Usage
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10,000 Acre FeetMarch 15, 2002
If 60,000 Acre Feet would supply 60 percent of
needed water and allow the producer to plant 200
acres, then prevented planting coverage would be
provided if the water supply is reduced so less
than 200 acres can be planted.
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Insurance Period Example 3

• Drought continues from 2002 IP and information
  not available to separate occurrence in 2002 IP
  from occurrence in 2003 IP
• Example
• Normal irrigated acres 100
• 60 acres paid on PP 2002
• Water allocation for 2003 25 acres
• 15 acres would be eligible for PP in 2003 (acres
  in excess of 60 acres paid in 2002)

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New Policyholders

• Are eligible for prevented planting payments if
  the insured cause of loss that caused the failure
  of the irrigation water supply occurred after the
  sales closing date for the current crop year and
  all other requirements for prevented planting
  have been met.
• For example, corn sales closing date on March 15
  cause of loss occurs on or after March 15,
  2003, could be eligible for a prevented planting
  guarantee for the 2003 crop year.

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Prevented Planting

• Acreage historically grown under an irrigated
  practice for which the insured had no reasonable
  expectation of adequate irrigation water on the
  final planting date (or within the late planting
  period, if applicable) may be eligible for an
  irrigated prevented planting payment even if the
  acreage could have been planted to a
  non-irrigated practice and the producer elected
  not to plant.

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Prevented Planting

• Recent droughts have identified weaknesses in
  current prevented planting coverage
• RMA will be evaluating its current prevented
  planting rules
• Crop insurance industry and commodity groups will
  participate
• First meeting held January 14, 2003

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Prevented Planting Insurance Development
Guidelines

• Must provide meaningful coverage to insureds
• Must provide certainty for both companies and
  insureds
• Must be simple to administer
• Must be actuarially sound

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Risk Management Agency

• http//www.rma.usda.gov/

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