July 2024

Flood damaged crops, crop insurance payments, and lease contracts

Some Iowa corn and soybean producers are facing substantial, if not complete crop losses, due to flooding and other natural disasters in 2024. Fortunately, in recent years, well over 90% of Iowa’s corn and soybean acres are protected by multiple peril crop insurance. USDA RMA data from 2023 reported 95% of corn and soybean acres in the state were protected by Multiple Peril Crop Insurance (MPCI), and 15% of these acres also had additional companion program coverage, such as Supplemental Coverage Option (SCO), Enhanced Coverage Option (ECO), or Margin Protection (MP).

Crop insurance

Most Iowa producers purchase crop insurance policies with a 75% or 80% level of coverage. This means that if crops are a total loss, the producer must withstand the first 20-25% of the loss. In 2023, 96% of the crop acres insured in Iowa were covered under MPCI Revenue Protection policies that offer an increasing guarantee if prices increase between February and October. So far, this has not shown to be a factor for 2024 crops, with current November/December Futures trading below the spring projected price guarantees of $4.66 per bushel for corn and $11.55 per bushel for soybeans.

Producers with crops that have been totally destroyed by flooding will not have to incur the variable costs of harvesting. This could save around $40 per acre for soybeans and perhaps $75 per acre for corn, depending on potential yields and drying costs. Nevertheless, even producers who carried insurance at an 80% coverage level could be looking at net revenues of at least $100 per acre below those obtained from normal yields this year.

Potential losses

For example, assume an insured tract has an expected corn yield of 200 bushels per acre and an insurance proven yield of 185 bushels per acre. A normal crop marketed at $4.40 per bushel would bring $880 per acre. The insurance indemnity payment for an 80% RP guarantee, zero yield, and spring guarantee of $4.66 would equal 185 bu. × $4.66 × 80% = $690. Saving $75 in harvest costs would give an equivalent of $765 per acre, or $115 below the value of a normal crop. For soybeans, assume both the expected yield and the proven yield are 55 bushels per acre, and the crop could be marketed at $11.20 per bushel. Gross income for a normal crop would be $616 per acre. The insurance payment for a complete crop failure and a $11.55 guaranteed price would be 55 bu. × $11.55 × 80% = $508. Savings of $40 in harvesting costs brings the equivalent of $548 per acre, or $68 below the value of a normal crop. Ag Decision Maker Information Files A1-48, Current Crop Insurance Policies and A1-57, Delayed and Prevented Planting Provisions for Multiple Peril Crop Insurance provide more information on crop insurance coverage in Iowa.

In many cases, flooded acres will make up only a portion of the insured unit, so production from non-flooded acres will be averaged in with the zero yields from the flooded acres. The next question is how much will it cost to clean up fields and bring them back into production next year? The full extent of damage is yet to be determined and many Iowa farmers have not had prior experience with fields being under water for extended periods of time, so effects are difficult to estimate. Problems will range from physically removing debris to leveling eroded areas to restoring fertility.

Rental contracts

What do these questions imply for rental contracts? A great deal of uncertainty, for one thing. Lease agreements in Iowa continue in effect for another year under the same terms if they are not terminated, in writing, on or before September 1. Either an owner or a tenant can terminate a lease. Operators who rented flood or weather impacted land this year may want to think seriously about whether they want to rent those acres next year, especially at the same level of cash rent. Leases can be terminated by delivering a notice in person to the other party, sending it by certified mail, or (rarely) publishing it.

Landowners will have to bear the burden of mitigating damages—that goes with owning property. But, a better solution may be for renters and owners to work together to repair the damage and bring the land back into production. Farm operators may have access to machinery that can help accomplish the job that owners do not. In return, tenants should be compensated for their efforts, either directly, through a significant discount on the 2025 rent, or with a long-term lease. Guidance on addressing the agronomic impacts for flooded soils to restore field conditions or to plant a suitable cover crop is available for Iowa landowners and tenants.

Next year

In some cases, there may be doubt as to whether land flooded this year can even be planted next year. Risk Management Agency rules state that land must be physically available for planting to be insurable. Land that cannot be planted due to weather events that occurred before the sales closing date (March 15 in Iowa) is not eligible for prevented planting payments. When operators report their 2024 production, they can request that their 2024 yield histories reflect a value equal to 60% of the county “T-yield” rather than a zero or very low yield (with a yield adjustment exception of 80% for Beginning Farmers and Ranchers).

Close communication and cooperation between owners, crop insurance agents, and renters can be a “win-win” strategy in the long run, but recovery will likely take several years. Flooding and other unexpected impacts due to weather outside our control create stressful situations for everyone involved. Recognize and take action to mitigate personal, family, and business stress. If the capacity to address weather related impacts becomes overwhelming and unmanageable, seek professional help from a mental health agency, church pastor, private counselor, or crisis hotline. Iowans can contact ISU Extension and Outreach Iowa Concern, www.extension.iastate.edu/iowaconcern/; 1-800-447-1985, for help and referrals for dealing with stress.

Additional information about managing flood damaged cropland as the waters recede and the situation is assessed is available from Iowa State University Extension and Outreach.

Ann M. Johanns, extension program specialist, 515-337-2766, aholste@iastate.edu

William Edwards, retired economist. Questions?


Ann M. Johanns

extension program specialist
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William Edwards

retired economist
View more from this author