Consider Risk Management Insurance to protect next year’s forages
November 21, 2012
Purchasing pasture, rangeland and forage insurance can help producers protect themselves from forage losses when it doesn't rain, according to a University of Nebraska extension educator. "Pasture, Rangeland, and Forage (PRF) insurance is a group risk management plan underwritten in part by USDA/RMA that can help forage producers with production losses," according to Aaron Berger.
"The goal of this insurance is to help producers deal with forage production losses directly tied to precipitation," he continued. "It can be used as a drought or risk-management tool." The plan is set up to correlate forage production with precipitation, he said, reminding producers the plan only covers precipitation, not damage from grasshoppers, hail, fire, or Mother Nature.
Areas like the Sandhills of Nebraska has primarily warm season grasses, and counts on rainfall in April, May, June and July to make those grasses grow. On the other hand, western Nebraska has more cool season grasses that need precipitation in March, April, May and June. Insurance can be purchased from RMA to insure adequate forage production during those vital months.
Nebraska, Montana, North and South Dakota, Kansas and most of Colorado are all included in the Rainfall Index Plan, which uses information from NOAA precipitation recording stations to measure rainfall in an area. In Wyoming, precipitation is collected using a vegetative index. The Rainfall Index program considers precipitation at the recording stations and compares it to the historical average when considering whether compensation will be made.
Berger cautioned producers that if they are interested in this insurance for the 2013 season, they need to purchase it from a crop insurance agent by Nov. 15, 2012.
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Because precipitation amounts can vary within a grid, Berger admitted this can be good or bad depending upon the amount of precipitation received. If a producer's rangeland is under a cloudburst and the rest of the grid is dry, that producer may be able to collect on his policy even if he received adequate moisture. However, the opposite can also be true. If the rangeland is in a dry area within the grid, and the rest of the grid receives adequate moisture, that producer may be in a drought while the rest of the grid isn't, he added.
"The insurance coverage is for single peril, lack of precipitation," Berger said. "The coverage is based on historical data for the grid area where a producer's farm or ranch is located. It is not for an individual farm or ranch or a specific weather station," he explained. "The index is a ratio. If the long-term, average (median) for annual precipitation for your location is 22 inches, and you only got eight in 2012, your index ratio is 36 percent."
How to determine coverage
Berger said producers can determine what coverage would cost by locating their particular grid on the website: /www.rma.usda.gov/policies/pasturerangeforage/. Through this website, they can also look up the history of their grid for the last 20 years, and see which years a payment would have been issued. Within the site, a producer will need to identify which grid the ranch is located in, if the acres are grazed or hayed, and how many acres will be insured. Level of coverage, level of production and time frames covered also need to be selected. With this information, a spreadsheet will appear showing a producer what his premium will cost, and how much is subsidized by the government. Berger cautioned producers that if they are interested in this insurance for the 2013 season, they need to purchase it from a crop insurance agent by Nov. 15, 2012.
"There are three critical factors for grass growth – plant vigor, available soil moisture, and air temperature," he said. "If you are interested in this insurance, pick a month to insure your ranch when the majority of the precipitation comes that affects your forage production for the year," he explained. Premiums will vary by month, but are typically cheaper during the months when the most precipitation is received, he added.
Berger encourages ranchers to check into purchasing this insurance as a risk management tool. "Just make sure to insure when the precipitation will most greatly affect your forage production," he reminds ranchers. The insurance can also be used as a profit maximizing tool by determining when to insure, levels of coverage and levels of productivity. "I would take time to look at all the options," he said, "especially if a great portion of your ranch is based on forage production."
For more information, Berger can be reached at 308-235-3122 or by email at: email@example.com.