The Developing Drought In Georgia: Crop Insurance Implications

Wheat, corn, and tobacco have already been effected by the developing drought. USDA estimated that as of April 23^rd, 25% of Georgia's corn crop, 19% of tobacco, and 30% of wheat was rated in poor to very poor condition.

Most of the cotton and peanut crop has yet to be planted as the optimum planting dates for these crop is the last half of April and well into May. Dry conditions, however, have slowed April plantings and pushed even more of the crop to be planted in May. While there is yet time for field operations and planting, the window of opportunity has been narrowed. Rainfall during May will be critical.

In total, acreage insured in Georgia is about split between the minium coverage available (CAT) and "buy-up" coverage. CAT (Catastrophic coverage) is relatively inexpensive but insures the farmer only for yield losses in excess of 50% of the farm's established yield average "Buy-up" policies allow the farmer to insure up to 75% of the farm's established yield. By crop, a large proportion of the state's peanuts, tobacco, and cotton are insured. Less of the corn crop is insured. Peanuts are generally insured at the "buy-up" level. In 1998, cotton acres insured were about split between the two types of polices. It is expected that most cotton in 1999, however, will be insured at some buy-up level due to premium reductions placed in effect as result of last year's financial disaster assistance package.

Georgia 1998 Crop Summary- All Crops
CAT and Buy-Up

Source: USDA Risk Management Agency

Percent of Acreage Insured and Percent of Insured Acreage at Various Levels, Georgia, 1998

Source: USDA Risk Management Agency

Most crop insurance policies have provisions and coverage related to planting. These are late planting, replanting, and prevented planting. Farmers need to know what is in effect for their individual policy.

Delayed (Late) Planted - Most crop provisions allow the insured crop to be covered even if the crop is planted after the final planting date set for the crop. For example: The final planting date for cotton in North Georgia counties is May 20, and May 31, for counties located in Middle and South Georgia. The final planting date for peanuts is May 25th. To qualify for full coverage the crop must be planted prior to it's final planting date. Coverage is reduced depending on the number of days planting is delayed after the deadline.

Replanting - Once the crop is planted, if allowed by the crop insurance provisions, a replant payment may be made if the crop must be replanted. Consent must be given by the insurance company and criteria contained in the crop provisions met. Replant payments will be the actual cost of replanting but cannot exceed the amount established for the crop.

Prevented Planting - If drought or other conditions simply prohibit the crop from being planted, most insurance crop provisions will allow for a prevented planting payment on eligible acres at 50% of the production guarantee. This is a new provision for peanuts and cotton was increased from 35% to 50% effective with this crop year.

Growers are encouraged to notify their agent at the first sign that they are encountering difficulty and they believe one of the 3 provisions may apply to their situation. The agent will be able to give you specific details on your crop/s. USDA's Risk Management Agency expects farmers to replant if practical, even if planting is delayed.

In terms of management decisions, it will depend on what kind of weather the month of May gives us. It is possible, if not likely, to move from a "delayed" situation to a "prevented" situation or even from a normal situation to a "replant" decision. Given the options, careful budgeting will be required to determine the best course of action to take.

For more information contact: Don Shurley 912-386-3512, Extension Economist, Department of Agricultural and Applied Economics, College of Agricultural and Environmental Sciences, Cooperative Extension Service, The University of Georgia.