Protect your forage investment with rangeland insurance
“You can think of Pasture, Rangeland, Forage (PRF) Insurance as yield insurance. You use it to protect a level of forage production on range or hay ground, and if that production falls for whatever reason, you may be eligible for indemnity payments to cover some of those losses,” explained University of Wyoming Farm and Ranch Specialist, John Hewlett, of the PRF Pilot Insurance Program, which he discussed with producers at WESTI Ag Days in Worland, WY, in February.
Satellite imagery is used to calculate vegetation indexes on grids laid out in 4.8 by 4.8 square mile sections in some states, and others calculate indexes based on rainfall as reported by various weather stations.
“Wyoming, South Dakota, Nebraska, Idaho and Western Colorado use the satellite vegetation index, and Montana, Eastern Colorado and North Dakota use rainfall measurements,” explained Hewlett.
He added that an index is calculated for each grid annually, and the expected average value is always 100. Each grid’s index will vary, and producers may have land that falls in multiple grids.
Coverage can be purchased for any consecutive three-month time period for any amount of acres owned. These acres do not have to be contiguous. In some areas there won’t be coverage available for all months of the year, most notably late fall and winter months when production is typically stagnant.
“When you’re purchasing coverage, you’re able to choose the level of coverage you want, and establish a trigger level of when the policy will kick in if there is a loss. However, you may experience a loss in one pasture or hay field, but if the grid makes its index as a whole, you won’t be indemnified. Or, it can go the other way, and say your ground didn’t experience any loss, but the grid index was below 100. Depending on your level of coverage, it’s possible indemnities will be paid out when you didn’t experience loss. It doesn’t have to do with your experience right in one spot, but with what occurs within the grid as a whole,” noted Hewlett.
When considering the product, producers will have to choose which grid they are purchasing insurance within, the type of coverage, how many acres they’re enrolling, and whether it is rangeland or hay land.
“You can evaluate this product on the Internet and see how it would work for your own operation. The Risk Management Agency (RMA) Web site will allow you to select your location, what type of insurance you want to purchase and at what level, and the months of the year you would purchase it for. The Web site will show the different types of coverage available through the product and the available coverage levels, which can range from 70-90 percent,” said Hewlett.
“There is also a protection factor, which you may think of as a percent of the grid average you would typically expect, and it ranges from 60 to 150 percent of production. You can view a graph showing the last five years of production for a specific location. It will have the 100 index line, and give you a feel for what indemnities would have been possible within that time period. This is where you start to see whether it would be of benefit to purchase a policy or not,” explained Hewlett.
If producers want to look farther back into production levels and possible indemnity payments, there is data included on the Web site back to 1989. Options on the site allow users to select a level of coverage, and choose to see only the years when indemnities would have been paid out in their location, among other things, using data from the last two decades.
“You can even chart out that information and put it into a spreadsheet to do further calculations on, if that interests you. That allows you to make your own estimates of what might be reasonable in dollars and cents,” stated Hewlett.
In 2011, there were 221 policies sold in Wyoming that insured just over one million acres of range and hay land. Forty-two of those policies were indemnified across the state. For 2012, 172 policies have been sold, insuring 769,000 acres. The annual enrollment date to sign up is September 30.
“The PRF insurance does work well in conjunction with some other products for crop protection. The Disaster Assistance Program from the 2008 Farm Bill required that you purchase some type of insurances for almost all of their programs. Whether pasture, rangeland, forage and-or NAP insurance. If you don’t buy one type, you don’t qualify for coverage under several disaster assist programs, and PRF is one product that provides that protection too,” said Hewlett.
“PRF Insurance will work best if you enroll and stay enrolled. That way you will have coverage on the year your forage production drops off for whatever reason. Visiting the RMA Web site will provide you with resources to see if it is something that will work on your operation. It also has examples of ranches, and walks you through how those people looked at their insurance needs. If you are interested and don’t know where to purchase PRF Insurance, there is an agent locator on the main RMA page as well,” stated Hewlett of how interested producers can find additional information and secure coverage for their operation.
The RMA Web site is located at: http://www.rma.usda.gov.