About This Episode
Steve Johnson of Iowa State University explains to Chris Barron what changed for crop insurance claims after the August windstorm flattened corn across central and east central Iowa. Wind is natural damage under a multi-peril policy, so coverage was never in doubt. The open question was how the Risk Management Agency and the adjusters representing the 14 approved insurance providers would interpret twisted, downed stalks. The answer came through an updated loss manual, and many fields were deemed mechanically unharvestable.
Johnson reads the standard from page 121 of the 2020 RMA Loss Adjustment Manual: acreage that can never be mechanically harvested with normal methods or equipment has no production counted. Released fields can be destroyed, mowed, or rolled, but cannot be harvested by hand or chopped for silage. He urges farmers to get an adjuster out within two weeks rather than try to argue the case in October, and to document with photos exactly which fields and which acres were released.
The risk he flags is the check strip, or representative sample area. If a strip makes 50 bushels, the whole field is assumed at 50 bushels, so a grower needs to hear clearly that the entire field is released. He also warns about quality on the acres that will be combined, recommending harvesting the worst corn first and drying and storing it separately, notes cattle can graze released fields, and points out that enterprise units pool county production and push payment into late November or December.
“Listen carefully to what your adjuster is saying. Are any of these fields deemed unharvestable?”
— Steve Johnson
Key Takeaways
Page 121 of the 2020 RMA Loss Adjustment Manual states that acreage that can never be mechanically harvested with normal methods has no production counted.
Released fields can be mowed, rolled, or destroyed but cannot be hand harvested or chopped for silage; cattle grazing is allowed.
Johnson's advice is to get an adjuster out within two weeks, not October, and to document with photos which specific fields and acres were released.
Watch the check strip: if the representative sample area makes 50 bushels, the whole field is assumed at 50 bushels and that production is subtracted.
On harvestable acres, harvest the worst corn first, dry it separately, dedicate a bin, and identify mycotoxins in the field rather than after delivery, since quality adjustments cut counted production.
Enterprise units pool all county corn production, so payments likely wait until late November or December; RMA moved the premium due date to November 30, with a 15% annual percentage rate penalty after.
Full Transcript
Steve
Johnson: And it all comes down to this. 2 on, 2 out, bottom of the 9th. The Farmers lead by 1. Full count, here comes the play at the plate, and it's the Ag View Pitch!
Chris
Barron: Welcome everybody to another episode of the Ag View Pitch, and today you've got Chris Barron and Steve Johnson, Iowa State University. Steve, how's it going?
Steve
Johnson: It's going great, I'll tell you, nothing like a drought and a windstorm in August to stir things up.
Chris
Barron: Yeah, it's kind of like, you know, get knocked down and then get kicked while you're down, right?
Steve
Johnson: Yeah, it's been an interesting summer. I'll tell you, Iowa was really preparing for a record crop, and we've really taken the air out. And so the likelihood is we've got a lot of crop insurance claims coming this fall.
Chris
Barron: So on Thursday of this last week, I drove across on I-80 just kind of watching the damage and in disbelief, as every single time I've been through that area, and noticed there were a couple of fields that looked like maybe they were, they were mowed down or something. And then on the way back, I even saw a little more of that on Friday. Talk to me a little bit about what's going on with the insurance industry and how is this being handled? And what are some of the challenges that the insurance company and farmers are trying to deal with right now to kind of figure this stuff out?
Steve
Johnson: Well, of course, wind is natural damage. It's a multi-peril coverage policy, so we knew that we're going to have coverage from wind, but what we didn't know was how would the Risk Management Agency and the adjusters, the 14 approved insurance providers, those adjusters, interpret what could and couldn't be done. In most years, you get some wind damage, you blow the stalks down, and you notify your agent, and the adjuster shows up, and, you know, they say, well, you know, let's go ahead and harvest the crop, and, you know, then we'll just subtract, you know, that production, that production times the harvest price. Well, what happened this week was the adjusters came out representing these 14 approved insurance providers, and they deemed many of these fields mechanically unharvestable. So, and that's the term. So I'm going to read right off of the loss manual.
We got updated on Friday the 21st, so we knew something was coming from RMA. And so basically is that when that damage occurred, that wind damage, and these stalks are twisted, is that field can be designated never mechanically harvested with normal harvest methods. In other words, a combine cannot harvest that field. You don't have to count the production. I've only seen one check strip. They, by the way, they call those representative sample areas. Most of these fields have been released, and it's up to the insured to do what they want with those fields. But They can now be destroyed. They cannot be harvested even by hand. They can't be chopped for silage. So that's what's going on is we've got a lot of fields deemed unharvestable by traditional mechanical methods. So unharvestable is the new term across central and east central Iowa.
Lots of unharvest fields got rolled and they got mowed and they basically they got waylaid. So, uh, interesting phenomenon.
Chris
Barron: So with the, with that going on and decisions being made, and this may not be a question you can answer, but I'm gonna ask it anyway, is there a, um, like a timeline? Is there, as we get a little closer to harvest, and let's say for example, you know, that field was not yet deemed unharvestable, but then all of a sudden, you know, the farmer and insurance representatives are out there, you know, the adjusters, and they're looking at, let's say, ears with molds and different things like that, does that qualify for being deemed unharvestable or, or enough of an issue that, you know, some of these fields that are severely damaged, but yet, you know, maybe you can get out there, but then on the same token if 40% or 50% of the ears have, you know, really severely damaged grain quality, does that— how does that kind of factor into the equation, if you know?
Steve
Johnson: I don't know that, and I don't work for the Risk Management Agency. I would not want to err on that side if I was going to have my adjuster out and I was going to have a field deemed unharvestable. I would do that in the next 2 weeks. Do it now, because I I think the real advantage is going to be those fields that are already— they were already mowed over, they were already rolled, right? Because you kill the plant, and so there's going to be nothing going to that ear. I think you're going to reduce the chance of, you know, there being any sort of ears there. And the fact that you're going to have all sorts of volunteer corn issues next year, that was a part of that strategy, I believe. I know these farmers that took care of that corn this week and they're corn on corn guys. I got to believe that they don't want to mess around with a lot of that issue.
But yeah, I don't want to wait until October and see if I can talk my adjuster into unharvestable. I think most of those fields will be identified now and they should be. And if you haven't seen your adjuster, then you want to make sure you're having those conversations. But at least here in central Iowa, We've got a lot of fields and there are worse fields, I'll be honest with you. Most of them are all flat and every once in a while you'd see a stalk sticking up, but the adjusters can deem the field unharvestable and that is where I would want to go now if I was an insured, especially here in central and east central Iowa. Get my adjuster out and see if they're going to release a field and they're not all the fields and most of our insureds are in enterprise units.
So, you know, they're not going to have any production on that particular field, but they're going to have to throw all their production together because they're— they've grouped all their corn fields together in the county to receive that enterprise unit discount. But I think it's mostly going to be an issue of reducing the time and effort that it would take to harvest that crop. And Chris, you're spot on. We've got all sorts of corn quality issues coming at us. That we will not know how we're going to resolve. And I think what you'll see— I'm guessing a lot of these farms that are going to have to pull in and harvest that crop, they're going to go after the bad stuff first. I would, I would be thinking right now, I'm going to go after the very worst corn in that field. I'm going to harvest it. I'm going to dry it separately from my good corn.
I'm probably going to try to feed it to ruminants, probably beef cows or feedlot out. And then I, I don't want to store it for a very long period of time. And if I've got to store it on my farm, I'm going to dedicate a bin. And that's exactly what's going to play out. I just described what's going to play out over the next probably 60 days, trying to segregate the poor quality corn that was damaged both by drought as well as wind and segregate that corn because we're going to have mold and we're going to have all sorts of mycotoxin issues, and that's going to get discounted. And for crop insurance purposes, you've got to identify those toxins in the field. You can't wait until they show up in the grain bin, can't show up until they, until they, you know, go to town, because they're going to get docked.
So what the crop insurance adjuster does is he makes adjustments for quality, which reduces the amount of production on that particular farm. So maybe you guaranteed 190 bushel an acre, but because of all of the mycotoxins, that was only 160 bushel an acre. There's the part of the problem, is that you kind of compound this when you've got quality issues as well. That is still to be determined, but those farmers that get these fields released because they're unharvestable, they're not having that same concern about that field. That field is released. They have no production on that field. And so there's the advantage, I believe, that's playing out right now with the unharvestable fields that are mostly being mowed or rolled.
Chris
Barron: So as far as, I mean, obviously the message here, the moral of the story here, I guess put it that way, is have the adjuster out there, make sure that you're thinking of everything proactively, don't react to anything, be thinking about all of these things that could possibly be an issue.—
Steve
Johnson: and document it. Take pictures. I heard the adjuster say that that field and that section and those 40 acres are released. They're unharvestable. The farm across the road is still deemed harvestable. It's because you don't want to mess up and roll the wrong field. And so I think communications, listening carefully, But you might have to have that adjuster back out because now you've seen that field and now we're 2.5 weeks out from storm. We're probably going to see some things that maybe we didn't see before. And that corn is not coming back up. And I believe a part of this is the ears and the stalks are across rows. So I'm going out tomorrow night to do some yield estimates. And Chris, that is going to be tough. To estimate yields when you've got ears that are from different stocks, from different rows. But there's your term, unharvestable.
Listen carefully to what your adjuster is saying. Are any of these fields deemed unharvestable? Make sure you document, and that is your field. And the likelihood is we're going to graze a lot of cows this fall on a lot of these fields. That were harvested, and we did our best. And the fact that even these fields that were deemed unharvestable, I gotta believe there's still gonna be ears there. So it'll be all sorts of chances for the cow-calf guy to find places to graze cows come October.
Chris
Barron: Well, that's what I was gonna ask. So that, that's not an issue then as far as insurance company goes? You said you can't take ears or stuff out of the field, but you could bring cattle in? To the field.
Steve
Johnson: Yep. You can bring cattle in. Don't bring the FFA chapter out. Okay. Pick up corn on the ground because that could be deemed harvestable. And so, but by any mechanical means, and even the manual means are also referenced in this, but from the 2020 RMA Loss Adjustment Manual, that's what I'm reading. Okay. And I'm reading on page Page 121 is that a crop acreage that is typically mechanically harvested is damaged or inaccessible due to an insured loss, that's wind, that it can never be mechanically harvested with normal harvest methods or equipment. No production will be counted for such acreage. There you go. No production is counted. That particular field or that tract is deemed unharvestable. That's what's driving this discussion.
Chris
Barron: And the key of that—
Steve
Johnson: we—
Chris
Barron: well, and the key of that is, is the adjuster making that determination with the farmer, and then the farmer documenting that, taking pictures, having that in writing, in other words, and you're good to go.
Steve
Johnson: And you know what, I'd want to make sure that I understood that that field was unharvestable, because in many cases I think the potential's there that you're going to be asked to go ahead and harvest the field but leave that check strip, leave that check strip in the field. If there's a check strip in the field, and that check strip called a representative sample area, RSA, by the Risk Management Agency, If that strip has 50 bushel an acre corn, guess what? The whole field was assumed to have 50 bushel corn. That's going to have to be subtracted off, or you're going to have to make an adjustment because you didn't zero out that field. There is where I'd be concerned. I'd want to make sure that I listen carefully, that the entire field is deemed unharvestable. Because the RMA manual says no production will be counted for such acreage. That is really key in a year like this.
Chris
Barron: Okay, well, and like you said, the— all the other challenges on the harvestable fields, you know, the harvest, the handling, logistics, the grain quality, the headaches aren't going to go away, are they?
Steve
Johnson: No, in fact, I— but I believe that these fields that were mowed or rolled, I think they set themselves up better for next year because I got to believe a lot of those farms, they're going to let those stalks die, then they're going to go out there and probably with, you know, some sort of an offset disc and they're going to try to bury those stalks and cut those stalks up and get that corn below ground. And if there is some of that corn that's going to try to regrow, maybe we do that this fall.. And so we don't have near the volunteer corn problem. I think we're going to see a lot of volunteer corn in Iowa cornfields next year where we had the wind damage, because that corn that was just starting to dent, just right on the edge of being mature enough.
So being aggressive, you know, being proactive, but setting yourselves up for a potential to grow that '21 crop without the same headaches as a result of the windstorms.
Chris
Barron: Anything else I didn't ask you as we wrap up here on the insurance side of things that others outside of this storm damage area that, that farmers are learning that, boy, I wish I would have known that before, or whatever, to kind of wrap up?
Steve
Johnson: I've got a lot of farmers that wish they'd been an optional unit and not enterprise unit.— so that they could have collected on that cornfield in that section. Because when we went to enterprise units, and again, we've done this for 10 years, we get the discount, the enterprise unit discount, but our cornfields are all put together. So the likelihood is there probably would have been more losses if we'd been in optional units, but this windstorm really didn't discriminate. It kind of took, right, you know, most of the field. And the other thing, Chris, is that I think we got some cash flow problems. RMA said, you know what, forget October 1st, we don't need to collect our crop insurance premium November 30th.
So for those listeners on the podcast, they don't have to come up with the premium for crop insurance, and you can wait till November 30th, but then that penalty, that 15% annual percentage rate adjustment, but that is also telling me that we're going to have cash flow problems. You're not going to get paid for crop insurance purposes until likely you've harvested all of those fields in that county, because all that production is going to have to be totaled. Then you're going to have to multiply your total production times the harvest price. Again, month of October, simple average December corn, to determine what your revenue to count is. Right. So I think you want to deliver the corn that you've already priced.
You know, is that if you've got some corn that you can deliver against your hedge to arrive or your forward cash contract, plan on doing that because we're going to have some basis gains that are going to play out. And again, I'm concerned about cash flow. A lot of these farmers impacted by the weather events this summer are probably not going to have much cash from crop insurance purposes until we get into maybe late November or December. And again, crop insurance is taxable in the year received. Right.
Chris
Barron: Hey, I think this was a great conversation, probably something that there will continue to be lessons learned, and we can do some follow-up on this as we get a little further down the road and can kind of look back. And hindsight is always 20/20, isn't it?
Steve
Johnson: Yeah, and we've got a live webinar. It'll be on September 17th, and maybe you and I can talk before then, but I think you'll like the title: Grain Storage and Corn Quality Issues. So we'll bring Dr. Charlie Herberg in from Iowa State University because we've still got some other challenges on the backside of that. You know, we lost a lot of grain storage, both commercial as well as on farm. So we're going to be challenged on the storage side, and then we're going to have some poor quality corn, low test weight corn. Likely molds and mycotoxins that we've got to figure out how we're going to segregate those and not let them into the supply chain.
Chris
Barron: You bet. And I think we'll use that as a teaser. We'll probably wrap, wrap another podcast up here quick with a little discussion on the, uh, the grain and, and acres and, and basis and some of those things in the next one here. But, uh, hey, uh, really appreciate your time and your wisdom, and, um, we will definitely be continuing on this topic, I think, down the road, especially as we look back at what we learned.
Steve
Johnson: Okay, my pleasure. Again, stay safe. Thanks for the opportunity.
Chris
Barron: Yeah, thank you. Thanks, uh, Steve Johnson, Iowa State University, and Chris Barron. And I'd like to thank everybody for listening again to the Ag View Pitch, and we will catch you next time.