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Pasture, Rangeland and Forage Insurance for Cattle Producers
GW MANAGEMENT
Pasture, Rangeland and Forage Insurance for Cattle Producers
Mike Fanning, Ph.D., PAS AgrPrime Insurance Agency
The USDA Risk Management Agency (RMA) launched the Rainfall Index Pasture, Rangeland and Forage (PRF) insurance program in 2007 to provide coverage against the lack of rainfall. The PRF insurance program was developed because ranchers and hay producers historically have not been able to insure their forage grown for grazing and haying. The PRF Insurance program is available in the 48 contiguous United States.
The PRF Insurance program covers only established stands of perennial forages intended for either grazing or haying. A producer has to buy coverage by November 15 for coverage throughout the following year (January – December). Coverage is established on 2-month intervals, or mini insurance periods, county based values and coverage level. County based values are established by grazing and haying intended uses.
The PRF Insurance program is sold by private insurance agents and coverage is guaranteed through private insurance companies and the USDA. The USDA also provides premium assistance by covering between 51% and 59% of the premium costs, based on the producer’s selected coverage level. Each county, rainfall Grid and 2-month intervals are individually rated and influences the cost of the program as do the coverage level and productivity factor chosen by the producer.
The Productivity Factor is the dollar value of forage production per acre set by the USDA RMA. Producers can adjust this amount up or down (60% to 150%), depending on whether they want more coverage or not.
Coverage and indemnities are based on the amount of rainfall measured in each Grid and 2-month interval. The rainfall measured is based on weather data collected and maintained by the National Oceanic and Atmospheric Administration (NOAA) Climate Prediction Center. The index reflects how much precipitation is received relative to the long-term average for a specified area (Grid) and 2-month interval.
Rainfall index values are generated for the two-month periods throughout the year. Producers can choose a coverage level up to 90% of the long-term precipitation averages for their Grid. The producer can choose to increase the County Based Value, up to 150%, to increase the value of their forage.
Precipitation data is collected daily and index values are calculated and published about six weeks after the end of each two-month time period. If the rainfall index for a given Grid’s 2-month interval is below the producer’s selected coverage level, an insurance indemnity is due. Indemnities are applied towards the producer owed premium and once the premium is covered, a check will be sent to the producer. Claims are settled soon after the index values are announced by RMA. In September of the coverage year, if premium is still owed, the insurance company will send you a premium bill.
Below is an example of how a policy performed over a ten-year period in a specific grid.
Figure 1. Net indemnity (Indemnity – Producer Premium) example at 90% coverage/150% Productivity Factor from 2010 through 2020.
There is no loss adjustment associated with the PRF insurance program because the rainfall data is collected by NOAA and losses are not based on forage yields. Indemnity payments are paid more quickly than most crop insurance policies. Unlike disaster assistance programs offered through the FSA, the producer doesn’t need to record and report hay harvested (tons) or stocking rate. F
For more information about the PRF Insurance program and to receive a customized PRF quote, contact AgriPrime Insurance Agency, LLC at info@agri-prime.com or visit our website www.agri-prime.com AgriPrime Insurance Agency is an equal opportunity provider
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