When you think of federal crop insurance, a Pasture, Rangeland, Forage (PRF) policy isn’t usually the first to come to mind. PRF is an area-based plan that covers perennial pasture, rangeland, or forage used to feed livestock. If you are a rancher, consider a Pasture, Rangeland, Forage policy. It is low maintenance policy that can be a beneficial risk management investment. The goal of this post is to help you understand how PRF works, ultimately allowing you to determine if it is right for your operation.
Pasture, Rangeland, Forage coverage is for one peril: lack of precipitation. As an area-based plan, PRF does not use your operation’s production history. Rather, it correlates production with the precipitation in an area. These areas are called grids, which are approximately 17 square miles. Each grid has a Rainfall Index (RI) determined by historical precipitation, dating back to 1948. Because a PRF policy correlates production with precipitation, deviation from the Rainfall Index determines if a loss indemnity will be paid.
Coverage is based on haying or grazing acreage, index intervals, coverage levels, and productivity factors. Not all acres have to be insured but the acreage insured must be intended for haying or grazing. When electing coverage, you can elect up to six, but no less than two non-consecutive intervals, which are two month periods. For example, you cannot elect intervals January-February and February-March, but you could elect January-February and March-April. Coverage levels range from 70% to 90%. Subsidies for the different coverage levels are as follows: 70% & 75% coverage is subsidized at 59%; 80% & 85% is subsidized at 55%; and 90% is subsidized at 51%. In addition to coverage level election, you can also choose your productivity factor, which ranges from 60% to 150%. The productivity factor is used to value your production in your operation. Each of the elections you make will have an impact on premiums and indemnities.
Indemnity payments for Pasture, Rangeland, Forage are determined when the final grid index data is collected. When the final grid index for an interval falls below the trigger index for that same interval, an indemnity will be received. No loss adjustments are used to determine if indemnities will be paid and the indemnity payments are automatic. Again, because it is an area-based plan, precipitation data is collected in various locations in a grid to create the final grid index. Because the data is collected in various locations, there is a possibility you would not receive an indemnity payment when you have a potential production loss. On the flip side, you could receive a payment when you have no loss.
If you are a rancher or farmer that has pasture, rangeland, or forage, contact Cropland Insurance Services to have a conversation. We will run quotes and look at historical data to help you elect the best intervals for your grid and the proper coverage for your operation. The PRF sales closing date (November 15th) is quickly approaching, so don’t hesitate to ask questions. The returns on this risk management investment might surprise you.