Latest / The Illinois Nutrient Loss Reduction Podcast / Episode 60 | The NLRS, Nitrogen Applications & Crop Insurance
Transcript
- Episode 60 | The NLRS, Nitrogen Applications & Crop Insurance 00:00:06:06 - 00:00:41:26 Todd Gleason This is the Illinois Nutrient Loss Reduction Strategy podcast. Episode 60 the NLRS nitrogen Applications and Crop Insurance. I'm University of Illinois Extension's Todd Gleason. Now, for those of you that split apply nitrogen or that have been thinking about post planting applications of nitrogen, but are worried about the risk related to weather, there is a crop insurance pilot program that covers all the counties in Illinois, all the counties in Iowa, and many of the counties in the surrounding states, including Indiana, Wisconsin, and others. 00:00:41:26 - 00:01:06:21 Todd Gleason It's called PACE, or the Post Application Coverage Endorsement. And for those states that have been working towards a nutrient loss reduction strategy that includes both Iowa and Illinois, this is part of the solution package to help farmers to put nutrients in the ground when their crops are growing and need them most, and to be used more efficiently by that crop. 00:01:06:23 - 00:01:25:17 Todd Gleason Megan Dwyer is with the Illinois Corn Growers Association, and Gary Schnitkey, of course, is with the University of Illinois Extension and the farm Doc team. They put on a webinar a couple of weeks ago related to pace, and I pulled some excerpts for you to listen to today. We'll start with the corn growers: Megan Dwyer. 00:01:25:17 - 00:01:31:25 Megan Dwyer I wanted to give a little background, a little context, especially why Illinois Corn is interested in the post coverage. 00:01:32:03 - 00:02:01:03 Megan Dwyer Post application coverage endorsement. Hopefully you're familiar with the nutrient loss reduction strategies that many states in the Mississippi River basin have trying to target the reduction of nitrates and phosphorus entering the Gulf. And in Illinois, we found, that the nitrogen application timing can have a big impact on that. And when talking with our members, we found that the number one reason more farmers are not applying their nitrogen is for the fear of not getting that that application made. 00:02:01:05 - 00:02:23:26 Megan Dwyer And so we went and worked together to say, how can we overcome that risk? What can we do to to help with that? And that's where really the idea and the premise of PACE came from. And Gary's going to really dive into what this does and how it can help a grower. But we're trying again to find ways that look at both the environmental and economical impact of nutrient loss and think that piece can really help with that. 00:02:23:28 - 00:02:30:10 Megan Dwyer With that, I will turn it over to Gary, and then we will both be here to help answer questions. Again. Feel free to throw them in the chat. 00:02:30:12 - 00:02:47:10 Todd Gleason Again, you're listening to excerpts of a Farm Doc Team webinar. You can find the webinar at youtube.com. Backslash at Farm Doc. Look for PACE. PACE by the way, makes payments if post plant nitrogen application is prevented by whether. 00:02:47:12 - 00:02:50:01 Todd Gleason Here's Gary Schnitkey with more. 00:02:50:03 - 00:03:12:24 Gary Schnitkey So what PACE will do is provide payments. If you cannot apply nitrogen after planting because of weather related event reasons. So it has to be weather related. It can't be, for example, not having access to nitrogen or some other reason. It has to be weather related. That's the same with all crop insurance products. 00:03:12:27 - 00:03:45:29 Gary Schnitkey This is an endorsement and to to the combo product. So we are simply here following the rules associated with making payments on crop insurance claims that are through are made the way PACE will work is that it is like an event insurance. It is like health insurance. What will simply matter is in the determination of whether you get a payment or not is whether or not you've been able to apply nitrogen after planning. 00:03:46:01 - 00:04:02:22 Gary Schnitkey The final yield also does not matter. So it doesn't matter if your yields were, at APH or below APH. What does matter is that you were not able to apply nitrogen after planning because of weather related reasons. 00:04:02:22 - 00:04:11:07 Todd Gleason APH, and you'll know this if you use crop insurance products stands for Actual Production History or yield 00:04:11:10 - 00:04:13:17 Gary Schnitkey PACE is a lot like an event insurance. 00:04:13:19 - 00:04:49:11 Gary Schnitkey It is an event insurance, and it's sort of like hail. You will get paid if you buy hail insurance and you have hail in the final. Final, final yield does not matter. To be eligible for PACE you have to have one of the combo products. RP, RP with harvest price exclusion, YP, yield protection. It isn't available for the area products or margin protection unless you have bought the underlying RP, RPHP or YP. 00:04:49:13 - 00:05:25:00 Gary Schnitkey So it's an endorsement to RRP or one of the other our combo products. PACE is a, a pilot project, and it's available in all counties in Illinois, Iowa, most counties in in Wisconsin and Minnesota, and then some smart counties in Michigan, Ohio, Indiana, Kansas, Nebraska, South Dakota, North Dakota. It is for the non irrigated practice. 00:05:25:02 - 00:05:53:26 Todd Gleason So to be eligible for case you have case you have to have non irrigated corn in one of those pilot products. I am now going to give you an example of how PACE will work. If we for one particular county and we are going to go to, to LaSalle County Illinois, and we're going to use parameters in determining case the premium for pace. 00:05:53:29 - 00:06:21:00 Gary Schnitkey And then what will pay for this LaSalle County, Illinois example? We're going to use a projected price of 480, 220 bushels per acre yield. That's our trend adjusted APH or what we're setting guarantees that. So a farmer will have till March 15th, which is the deadline for all crop insurance products in that region for, for for corn and soybeans. 00:06:21:03 - 00:06:58:26 Gary Schnitkey Farmer will decide, by March 15th whether they will take PACE or they will not take PACE again. It's a, it's an event insurance. It's an endorsement to RP. What a farmer will do is, is report the total nitrogen to be applied the this year and a post application percent. Let's say that's 40%. So if you're applying 200 pounds of actual N during a year and 40% of that would be 80 pounds. 00:06:58:26 - 00:07:37:17 Gary Schnitkey So in this example, 40% in 200 pounds it would be 160 pounds before, planting or 80 pounds or 40% after planting. So given that post application percent, a person will have a choice of whether the unit is enterprise, basic or optional that will impact premiums and we’ll discuss how that impacts premium. Let's say we've, taken a 40%, post application percent. 00:07:37:17 - 00:08:09:27 Gary Schnitkey So 40% is the amount of nitrogen we post apply. We then have one other decision and that's the PACE coverage level. And that PACE coverage level can range from 75% to 90%. I'm going to go back here a 75% has a farmer paid premium $0.95, a farmer pay premium, and a 90% PACE coverage level has a $2 and 33 cent premium. 00:08:10:00 - 00:08:45:28 Gary Schnitkey As you increase the coverage level, you increase the pace in DMD. When it happens, we're at a 75% coverage level. We would get a pace indemnity of $48 per acre. If we are not able to post apply nitrogen. If, on the other hand, we make a 90% coverage level, selection, we would get paid two or we would pay a premium of $2.33 per acre and get an indemnity of $57 if we are not able to apply nitrogen. 00:08:45:28 - 00:09:17:19 Gary Schnitkey After planning. So in my 90% example, we would have a farmer pay premium of $2.33, and we would get paid $50, or the indemnity would be $57 if we cannot apply nitrogen. That $57 could go up if we're if our harvest price is greater than the projected price, if we have selected RP, RP is that guaranteed increase in it. 00:09:17:22 - 00:09:23:00 Gary Schnitkey And that guaranteed increase will impact that piece and in an indemnity. 00:09:23:00 - 00:09:58:24 Todd Gleason That's Gary Schnittke, agricultural economist here at the University of Illinois from a farm doc webinar. Here's the short version of what he just said. If the farmer has signed up for RPO or revenue protection crop insurance and taken the Pace endorsement and was unable to apply nitrogen in the prescribed window, and then the payment at 90% in this particular example is $57, unless the harvest price for the crop insurance product has gone up, in which case there will be a new factor involved in the calculation. 00:09:58:24 - 00:10:32:23 Gary Schnitkey One other note here is the unit choice will not in flat influence per acre payments. If you're looking at this, the per acre payment is $57 per acre. That's not you can't apply whether it's an enterprise basic or optional unit. The only thing the, and the unit impacts is the, the, the premium. And again, that's because of the, the, the, the subsidies involved in these three basic products. 00:10:32:25 - 00:10:48:16 Megan Dwyer There is a question that kind of fits in right here. The question is about on how the payments are triggered. And does this work similar to like a pasture product, where a payment just automatically goes to those with the policy? Or does a claim still have to be filed? And how does that process work? 00:10:48:19 - 00:10:51:24 Gary Schnitkey That's a good question, Megan. 00:10:51:27 - 00:11:23:01 Gary Schnitkey Actually, it it isn't like pasture. It is, farmers have to initiate that claim process. So, you know, one of those rainfall index, pasture index products, all that has to be done is to be look at, the weather index and then payments of, occurred. This is not the case here with with the PACE product or Post application product. 00:11:23:04 - 00:11:49:20 Gary Schnitkey It's more like hail insurance. You know, insurance. A farmer would have to initiate the same process, same thing here with, with pace, the farmers would initiate the claim process and they would indicate the number of acres that they could not, post apply. There are a couple of checks that happen when a farmer initiates the claim process. 00:11:49:20 - 00:12:28:03 Gary Schnitkey And in the actuarial documents there is a window listed where and post applications are typically made. And those vary by county. So and they will also vary by planting date. Take for example you plant corn on May 1st, the post application window listed in the actual that the documents are from June 1st through June 22nd. The reason why that's important is not because a farmer cannot apply, before or after those dates. 00:12:28:03 - 00:13:00:20 Gary Schnitkey They can. But that's the window in which, adverse weather will be checked. Farmers, and again, let's say we planted on May 1st, there's, window listed in the actual documents from June 1st through June 22nd. Farmers can apply, post apply nitrogen before or after those dates. But crop insurance companies will be provided weather analytics for between those dates. 00:13:00:23 - 00:13:41:28 Gary Schnitkey And this claim will receive more scrutiny if weather analytics indicate that the adverse weather did not exist. Between those planting dates are, excuse me, those, the, those application dates. So there was no rain between June 1st and June 22nd, and there's, a PACE claim, that is going to receive a bit of scrutiny in a sense, pace will is will be very much like prevent plant in its application and if there are no other prevent plant came claims and area. 00:13:42:01 - 00:13:53:20 Gary Schnitkey The one prevent plant claim will receive scrutiny. All right Megan, is there any other questions that sort of fit at this point or should we just keep going there? 00:13:53:20 - 00:14:11:13 Megan Dwyer We have another question that kind of fits now. And you kind of touch on it, but maybe re re explain. So the question is about, how your, you know, your pre plant application or at planting application, how that percent is determined and how that potentially is proven. 00:14:11:13 - 00:14:14:07 Megan Dwyer Then on what you're applying pre versus post. 00:14:14:09 - 00:14:39:14 Gary Schnitkey So there's a number of ways of well in the document for, for, for proving that receipts are one of those and, and nitrogen plant is and is another not another one of those, those items that we also have an article on Farm Doc from January 18th, 2022 which goes over this in detail. 00:14:39:15 - 00:14:54:07 Gary Schnitkey More is in detail. One of the pace of piece of further information is on the great pace crop insurance.com. Megan, do you have you been looking at the. 00:14:54:09 - 00:15:12:20 Megan Dwyer I have we've got a few that have come in. So we'll go back to the earlier questions here that we haven't addressed yet. Considering the increasing impacts of climate change, what specific strategies or provisions does the Pace policy include to mitigate risks associated with that extreme weather events like shifting climate patterns. 00:15:12:23 - 00:15:38:03 Megan Dwyer And so I think that's part of it. Knowing that the fear exists on when we can get that split application made, knowing that applying the nitrogen closer to when the corn needs it is more, more efficient. And so really, this whole, this whole policy, this under, this, endorsement was developed to help cover that risk, knowing that we might see heavier rainfall that could prevent that application or things of that nature. 00:15:38:03 - 00:15:51:13 Megan Dwyer And so really, PACE is looking to do just that and help you, use an insurance policy to protect the risk there on what we are seeing with changing weather patterns and variability. Anything you want to add to that, Gary? 00:15:51:15 - 00:16:08:00 Gary Schnitkey No. In general, if you're trying to mitigate, mitigate the climate, impacts and agriculture, applying it closer to one the night, the plant is being used will generally have that impact. 00:16:08:00 - 00:16:20:10 Gary Schnitkey So to the base product in some senses encourages, that the plant that applying closer to the time when the the plant will use it. 00:16:20:12 - 00:16:34:10 Megan Dwyer Sounds good. Our next question does the PACE policy explore the concept of community based risk pools, where farmers within a specific region collectively share risks and resources, fostering a sense of community resilience? 00:16:34:13 - 00:16:39:24 Gary Schnitkey Well, I would say, this is a individual policy. 00:16:39:24 - 00:17:16:01 Gary Schnitkey So not specifically. That's a that's an interesting, question, not specific required. Although if you look at it, the the chance of not making and application are geographically determined. It's whether for a geographical, region that goes into the calculation, we will see those rates differ. So it's it's not community based, but there are geographical considerations going in on in the writing of the policy. 00:17:16:04 - 00:17:44:12 Megan Dwyer How does the PACE policy incentivize or reward farmers for adopting sustainable or environmentally friendly agricultural practices, aligning with global trends in sustainable agriculture? And I would say that the Pace policy is one of those tools in the toolbox. We know that barriers exist for seeing scalable conservation adoption on the farm. And anything we can do to help remove those barriers and reduce that risk is going to be a positive, for seeing an increase in those practices being done. 00:17:44:20 - 00:18:15:14 Megan Dwyer And so, while the Pace policy doesn't directly incentivize that practice, it definitely helps the risk and hopefully takes away one of those barriers and those reasons why a farmer would not, choose to do this application. All right. Let's see, another one here. How does the Pace policy align with precision agriculture practices, leveraging data from sensors, drones and other precision tools to enhance risk assets assessments and provide more accurate coverage? 00:18:15:17 - 00:18:40:26 Megan Dwyer I think that's again, you know, the policy does not exclude different application types of, of nitrogen. As long as we're on that, non irrigated corn acre in those, those counties like Gary showed on that map. So I think you know, being able to use that technology and again, just having another piece out there to protect that investment and making those more economical, economically driven decisions, 00:18:40:28 - 00:18:55:03 Gary Schnitkey I would suspect that precision agriculture also drives you more towards post application percent, particularly if there's some weather, weather related, information in that, decision. 00:18:55:05 - 00:19:08:10 Gary Schnitkey And if there are risk, we, we mitigate those or maybe we mitigate the risk of waiting, of financially waiting with, this product. 00:19:08:10 - 00:19:23:21 Megan Dwyer This one really, I think is a little more general, to crop insurance. But it was asked, considering the increasing importance of cybersecurity in insurance in the insurance industry, what measures are in place to protect sensitive data within the crop insurance policy framework? 00:19:23:23 - 00:19:25:23 Megan Dwyer I don't know, Gary, if you've got any answers to that. 00:19:25:25 - 00:19:47:28 Gary Schnitkey I don't have anything to say in particular about pace. I would say that, security is a big concern. And I, in our AIPs that are in the crop insurance industry do take that seriously. So and that would apply to anything, any, any product that they have. Security is obviously one of their big concerns. 00:19:48:01 - 00:19:57:26 Todd Gleason Sounds good. Does the indemnity payment from pace and the underlying MPCI indemnity offset each other, or do you get 100% of both. 00:19:57:28 - 00:20:27:03 Gary Schnitkey So you get 100% of both. So the the the PACE indemnity does not count in the the, calculation of the underlying RP, RPHP, or YP product. So you could you receive a piece indemnity and then also receive the for underlying RP or combo productivity. 00:20:27:05 - 00:20:44:22 Gary Schnitkey They don't offset each other. So they're completely independent. You could have an RP claim and not a PACE claim. You could have a PACE claim and not an RP claim. The only requirement is that the Pace indemnity can't exceed the deductible. 00:20:44:25 - 00:20:58:10 Todd Gleason That's University of Illinois agricultural economist Gary Schnitkey. He was joined by Megan Dwyer from the Illinois Corn Growers Association for a farm Doc webinar, which you can see in its entirety on YouTube. 00:20:58:17 - 00:21:28:16 Todd Gleason Just search out YouTube.com, backslash, the At Sign Farm doc, and then search outpace P a c e, which stands for Post Application Coverage Endorsement. It's part of the crop insurance decision that farmers will be making by the 15th day of March. You, of course, have been listening to the Illinois Nutrient Loss Reduction podcast. It's produced in conjunction with Nicole Haverback and Rachel Curry. 00:21:28:18 - 00:21:33:13 Todd Gleason I'm your host, University of Illinois Extension Farm broadcaster Todd Gleason.