Pasture, Rangeland, Forage: Rainfall Index Insurance is a Risk Management Tool for 2018

The USDA Risk Management Agency is offering the Pasture, Rangeland, Forage (PRF) Insurance – Rainfall Index program for the 2018 crop year. Purchasing this insurance can help producers mitigate the financial impact of reduced forage production from drought. The Rainfall Index model is based on weather data (precipitation) collected and maintained by the NOAA's Climate Prediction Center. The index reflects how much precipitation is received relative to the long-term average for a specified grid area during a given two-month time frame.

Factors Affecting Insurance Premiums

Insurance premiums and indemnities are based on the level of coverage (70% - 90%) and level of production (60% - 150%) selected by the producer.

Producers can insure their land for either grazing or for haying. For land that is insured for haying, forage production must come from perennial forages such as grass or alfalfa. Land insured for haying has a higher premium than grazing land as a higher level of forage production is expected. Annual forages are not eligible under this program. They are eligible under the Rainfall Index – Annual Forage Insurance Plan.

Producers using this insurance will need to choose the level of coverage and time periods throughout the year they want to insure. The decision support tool on the PRF Decision Support Tool page can help producers evaluate the cost benefit relationship of these options.

Using this tool provides some insights.

• Based on the use of this tool, the purchase of Pasture, Rangeland, Forage Insurance for precipitation would have been a paying proposition for producers using a consistent plan and insuring every year over the last 30 years.

• Insuring time periods with the highest levels of precipitation that impact rangeland forage production is the best approach for matching precipitation risk with potential drought impacts.

• Producers should evaluate how different strategies have paid historically to help determine how to use the insurance to best meet their desired goals.

Factors to Use in Evaluating Use of Insurance

The following are things to know when evaluating this insurance as a possible risk management tool.

1. Land can be insured for grazing or haying using PRF insurance. Acres insured for haying cost more to insure and also pay more when an indemnity occurs.
2. Insurance premiums are subsidized 51 - 59% by the Federal Government depending on level of coverage.
3. Research on rangeland and pasture has shown that April through July precipitation accounts for a majority of the variation in forage production for this region. Precipitation in the months of May and June are especially critical.
4. This insurance product is best utilized over the long term where a producer participates every year and doesn't try to outguess what the next year will bring.
5. Because the precipitation data is based on NOAA weather recording stations, what occurs at these locations will often differ from rainfall on a producers insured acres. Over the long term these differences and any indemnities that occur due to precipitation deficits should even out.

Pasture Rangeland and Forage Insurance is a risk management tool that producers should consider utilizing to provide income to offset loss of forage production due to drought conditions. The deadline for participating in the PRF Insurance program for 2018 is November 15, 2017. Insurance can be purchased through a qualified Crop Insurance Agent.

Other Resources

A webinar that explains Pasture, Rangeland, Forage – Rainfall Index Insurance is available at http://beef.unl.edu/beefwebinars.

A UNL NebGuide Pasture, Rangeland, and Forage Insurance: A Risk Management Tool for Hay and Livestock Producers is available at the UNL Extension Publication website.
 

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