Todd Gleason 0:06
This is the Illinois Nutrient Loss Reduction Strategy Podcast episode 60 The Intel, R.S. 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 whether 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. It's called Paste 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. Megan Dwyer is with the Illinois Corn Growers Association. And Gary Schnittke, 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 1:25
Megan Dwyer wanted to give a little back a little context, especially why Illinois Corn is interested in the post coverage. 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. 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 taste 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. 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.
Todd Gleason 2:30
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 weather. Here's Gary Sinicki with more.
Gary Schnitkey 2:50
So what pace will do is provide payments. If you cannot apply nitrogen after planting because of weather related reasons. So it has to be weather related. It can't be, for example, not having access to nitrogen or some other means. It has to be weather related. That's the same with all crop insurance products. This is an endorsement and two to the compo product. So we are simply here following the rules associated with making payments on crop insurance claims that are through our May. The way pace will work is that it is like an event insurance. It is like hail 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. Final yield also does not matter. So it doesn't matter if your yields were at a page or below a page. What does matter is that you were not able to apply nitrogen after planning because of weather related reasons.
Todd Gleason 4:03
AP And you'll know this if you use crop insurance products, stands for actual production history or yield.
Gary Schnitkey 4:11
Basis a lot like an event insurance. It is an event insurance and it's sort of like how you will get paid if you buy health insurance and you have hail and the final, final, final year does not matter. To be eligible for pace, you have to have one of the combo products are p r p with high risk price exclusion won't be your protection. It isn't available for the area products or margin protection unless you have bought the underlying r, p, r, P, HP, or y p. So it's a endorsement to our P or one of the other R of combo products. PACE is a a 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 and North Dakota. It is for the non irrigated practice. So to be eligible for AC pace, 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 look for one particular county and we are going to go to to LaSalle County, Illinois, and we're going to use parameters in determining pace, the premium for pace. And then what will pay for this LaSalle County, Illinois, example? We're going to use a projected price of four 8220 bushels per acre yield. That's our trend adjusted aperture. What we're setting guarantees that so a farmer will have till March 15th, which is the deadline for all crop insurance products and knows that region for for corn and soybeans. Farmer will decide by March 15th whether they will take pace or they will not take place again. It's a it's an event insurance it's an endorsement to our p. What a farmer will do is is report the total nitrogen to be applied to this year and a post application percent let's say that's 40%. So if you're applying
£200 of actual and during a year and 40% of that would be £80. So in this example of 40%, in £200, it would be £160 before planting £80 or 40% after planning. 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 would discuss how that impacts premium. Let's say we've taken a 40% post application percent. So 40% is the amount of nitrogen we post applied. We then have one other decision and that's the 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 farm paid premium of at a 90% pace. Coverage level has a $2 and 33 cent premium. 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 to the hour. We would pay a premium of $2.33 per acre and get an indemnity of $57 if we are not able to apply nitrogen 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 our P our P as that guarantee increase in it and that guarantee increase will impact that pace. And in indemnity.
Todd Gleason 9:23
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 RPI crop insurance product has gone up, in which case there will be a new factor involved in the calculation.
Gary Schnitkey 9:59
One other note here is the unit choice will not inflate influence per acre payments. If you're looking at this, the per acre payment is $57 per acre. That's not you can apply whether it's an enterprise basic or optional unit. The only thing the in the unit impacts is the the premium. And again, that's because of the the the the subsidies involved in these three basic products.
Megan Dwyer 10:33
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?
Gary Schnitkey 10:49
That's a good question, Megan. Actually, 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 of that has to be done is to be look at the weather index and then payments occur are occurred. This is not the case here with with the PACE product or post application product. It's more like hail insurance. You know, insurance of a farmer would have to initiate the 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, and in the actuarial document it's there is a window listed where post applications are typically made and those vary by county. So and they will also vary by planting day. Take, for example, you plant corn on May one, the post application window listed in the actual that the documents are from June one through June 22nd. The reason why that's important is not because a farmer cannot apply a f before or after those dates. They can, but that's the window in which
adverse weather will be checked. Farmers and again, let's say we're planted on May one. There's a window listed in the actual documents from June one 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 and this claim will receive more scrutiny if weather analytics indicate that the adverse weather did not exist between those planning dates or excuse me, those are the those application dates. So there was no rain between June one and June 22nd. And there's
a place claims that is going to receive a bit of scrutiny. In a sense, pace will is will be very much like that plant in its application and if there are no other plant came claims in the area the one prevent planning claim will receive scrutiny. All right, Megan, there's any other questions that sort of fit at this point or should we just keep going?
Megan Dwyer 13:53
We are that the question that kind of fits now and you've kind of touched on it that may maybe re re explain. So the question is about how your you know, your pre plant application or app planting application, how that percent is determined and how that potentially is proven then on what you're applying pre versus post.
Gary Schnitkey 14:14
So there's a number of ways of of in the document for for for proving that receipts are one of those in nitrogen plan is an is another not another one of those those items that we also have an article on farm Doc January 18, 2022 which goes over this in detail more is in detail. One of the pace of piece of further information is on the grape paste crop insurance that. Megan, do you have really been looking at the fact that.
Megan Dwyer 14:56
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 policy include to mitigate risks associated with that extreme weather events like shifting climate patterns? 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 that's under this endorsed that was developed to help cover that risk, knowing that we might see heavier rainfalls that could prevent that application or things of that nature. And so really paises looking to do just that and help you use an insurance policy to protect the risks there. On what we are seeing with changing weather patterns and variability. Anything you want to add to that, Gary?
Gary Schnitkey 15:51
No.
In general, if you're trying to mitigate, mitigate the climate impacts in agriculture, applying it closer to one than like the plant is being used will generally have that impact. So post the pace product in some senses encourages that the plant that applying closer to the time when the the plant will use it sounds good.
Megan Dwyer 16:21
Our next question does the paste 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?
Gary Schnitkey 16:34
Well, I would say this is a individual policy, so not specifically. That's a that's an interesting question. Not specifically, although if you look at it, the the chance of not making an an A application are geographically determined. It's whether for a geographical region that goes into that calculation, we will see those rates differ. So it's it's not community based but there are geographical considerations going on in the writing of the policy.
Megan Dwyer 17:16
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. 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 right. 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 assessments and provide more accurate coverage? 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 a lot map. So I think you know being able to use that technology and again just having another a piece out there to protect that investment and making those more economical, economically driven decisions.
Gary Schnitkey 18:41
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. And if there are risks, we we mitigate those or we mitigate the risk of weighting
of financially weighting with this product.
Megan Dwyer 19:08
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? I don't know, Gary, if you've got any answers to that.
Gary Schnitkey 19:26
I don't have anything to say in particular about pace. I would say that security is a big concern in our types that are in the crop insurance industry do take that seriously. So and that would apply to anything, any any product that they have as security is obviously one of their big concerns.
Megan Dwyer 19:49
Does the indemnity payment from PACE and the underlying PCI indemnity offset each other or do you get 100% of both?
Gary Schnitkey 19:58
So you get 100% of both. So the the the pace indemnity does not count in the the calculation of the underlying IRP, IRP, HP or WIP product. So you could you receive a pace indemnity. And then also we see the full underlying IRP or combo product, but they don't offset each other, so they're completely independent. You could have an IRP claim and not a peace claim. You could have a police claim and not a IRP claim. The only requirement is that the pace indemnity can't exceed the deductible.
Todd Gleason 20:45
That's University of Illinois agricultural economist Gary Schnittke. He was joined by Megan Dwyer from the Illinois Corn Growers Association for a farm doctor webinar, which you can see in its entirety on YouTube. Just search out YouTube.com backslash, the at sign Farm doc and then search out pace P a C, 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 Hammer, Mack and Rachel Currie. I'm your host, University of Illinois extension farm broadcaster Tom Gleason.