March 28, 2005
SOYBEAN RUST CONSIDERATIONS IN SHARE-RENT ARRANGEMENTS AND IN CROP INSURANCE
Some individuals have questioned how fungicide
costs should be shared under crop-share arrangements. In addition,
significant discussion has ensued concerning crop insurance coverage
for rust-induced losses. These issues are covered in the following
Fungicide Costs and Share-Rental Arrangements
Many share-rent arrangements share chemical costs
(i.e., herbicide, insecticides, and fungicides) between landlords
and farm operators in proportion to the shares of crop revenue.
Under many 50-50 share-rent arrangements, for example, landlords
receive 50% of the crop revenue and pay 50% of chemical costs. In
these cases, fungicide costs for rust-control likely will be shared
Questions of how to share fungicide costs arise under arrangements
that do not share chemical costs in proportion to crop revenue.
For example, some 2/3 - 1/3 leases, in which farm operators receives
2/3 of the crop revenues, have farm operators pay all the herbicide
costs. In these situations, there may be ambiguity whether fungicide
costs should be shared equally or be paid totally by the operators.
Written leases may not totally clarify how fungicides should be
split because some may not specifically mention fungicides. For
example, the "Illinois Crop-Share Cash Farm Lease" available
in the law section of farmdoc has categories for herbicides and
pesticides where splits in costs can be indicated, but does not
have a category for fungicides. Technically, fungicides are a sub-category
of pesticides and the cost likely should be split according the
percentage indicated for pesticides.
In general, clarifying up front how fungicide costs will be shared
is wise. In some cases, written leases will be ambiguous on how
fungicides should be split. If an oral lease is used, the issue
obviously needs clarification. Because fungicides provide protection
against crop losses for both the farm operator and landlord, sharing
fungicide costs in proportion to their shares of crop revenue seem
fair if not specified in the written lease.
Documenting Soybean Rust Activities for Crop Insurance Claims
The Risk Management Agency (RMA) continues to
clarify how Asian soybean rust will be covered under multi-peril
crop insurance policies (see a recent press release on RMA's website,
As a general rule, multi-peril crop insurance policies will cover
all naturally-occurring losses, including those from soybean rust,
as long as "good farming practices" are used. By definition,
good farming practices are recommended by agricultural experts so
the crop will reach the production guarantee set forth in the insurance
policy. Economic considerations do not necessarily determine good
farming practices. Failure to use a practice because it is uneconomical
could invalidate the crop insurance coverage.
For soybean rust, concerns with good farming
practices can be divided into two areas:
1. Detecting soybean rust. Failure to detect
soybean rust because of negligence could result in loss of insurance
2. Controlling rust. Once rust is detected, farmers will have to
engage in yield-loss control measures, which will usually involve
spraying fungicides. RMA is not likely to provide guidance as to
the type of fungicide to be used or the frequency of spraying. If
questions arise about whether a farmer followed good farming practices,
recommendations of agricultural experts will be relied on. Hence,
documenting agricultural expert recommendations could prove beneficial
if questions arise.
For those policies with claims, RMA may audit some farmers to validate
that these farmers have followed good farming practices. The following
may prove useful under an audit:
Document rust monitoring activities: Farmers are responsible for
detecting soybean rust; hence, providing evidence that monitoring
is taking place is warranted. This documentation could include 1)
logs of scouting activities on their own farms and 2) lists of sources
that are monitored to determine if rust is moving into the area
(i.e., websites, Extension).
Contact insurance agents if rust occurs: Farmers should contact
their insurance agents if rust occurs. As a general rule, farmers
should report losses to their agents any time they expect losses
Document spraying activities: If rust is detected, farmers should
document fungicide applications. This could include a field-by-field
list of spray dates, fungicide applications, application methods,
Document why rust-infected fields are not sprayed: Documentation
should be kept if a field is not sprayed for some reason. Reasons
for not applying fungicides include:
1. Fungicides were not available. In this case,
documenting the suppliers that were called for spray seems warranted.
2. Applicators were not available to apply fungicide in a timely
fashion. A log of applicators that were called, along with the wait
time for application, seems warranted.
3. Weather conditions prevented spraying. Providing summaries of
weather conditions may provide useful documentation.
4. Fungicide applications would not control yield losses. In some
cases, fungicide applications may be ineffective at controlling
losses. Documenting experts' advice in these cases seems warranted.
Document no matter the crop insurance policy: RMA specifically
states that group policies (GRP and GRIP) fall under the good farming
practice clauses. Hence, providing documentation is important even
in the cases of group policies.
The above are "an ounce of prevention". Given that the
crop is being protected, most farmers will not run into coverage
issues. The above activities provide evidence that good farming
practices were being followed.
Issued by: Gary Schnitkey, Department of Agricultural
and Consumer Economics