Livestock producers have always been an independent bunch with little in the way of a government program to keep them from going over a cliff when times get tough. There is, however, a growing safety net that is drawing the attention of many in the industry — Pasture, Rangeland, Forage Insurance (PRF).
This insurance program, a part of USDA's Risk Management Agency, remodeled itself in 2010 after starting in 2007 across select states. The federally-subsidized program continues to expand. In 2010, 31,134,818 acres were covered under PRF's two indices, a rainfall index and a vegetation index. This year, as more states were added to the rainfall index program, acres covered increased significantly to 48,224,559. Of that, just 4,248,825 acres were insured using the vegetative index.
One state where producers will now use a rainfall index as their basis of coverage will be Nebraska. The shift from vegetative index in 2012, to rainfall index for 2013, is a positive step, says Monte Vandeveer, Extension educator with the University of Nebraska at Lincoln.
“One concern with the vegetative index was that while the satellite might see greenness, it might not be the right kind of greenness. The vegetative, or the greenness index, did not reflect quality of the forage out there. We think the rainfall index will do a better job and it should be a more accurate reflection of what is out there,” he says.
Several states made the switch to rainfall index for the 2013 program. The only states still covered by the vegetative index are Oregon, Nevada, Idaho, Wyoming, Utah, Arizona, New Mexico and the western half of Colorado.
PRF is sold through local crop insurance agents, and is subsidized from 51{8a1275384cb93b18aa3d41af404144e37302a793dec468d70d54c97b65cfac05} to 59{8a1275384cb93b18aa3d41af404144e37302a793dec468d70d54c97b65cfac05}, depending on the coverage level chosen. Producers sign up prior to the season and pay premiums later. This year's sign-up deadline for the 2013 season is Nov. 15. The rainfall index ties to a specific grid area, instead of a production history. Producers insure only the area of their operation they consider key to their grazing or haying program. The rainfall amount used by the index is based on a grid area of about 13 miles east to west and 17 miles north to south. Data used to determine payout comes from the National Oceanic and Atmospheric Administration (NOAA).
COVERAGE SPECIFICS
Losses tied to fire, hail, frost, freeze or insects are not covered under the PRF program. Perennially grazed land and hay land can be insured, but land that is planted annually is not covered. Overseeding into existing forage crops or pasture is allowed.
Producers choose whether to cover the insured area as grazing or haying land, not both. Grassed waterways cut for grass hay can be insured, but land in either the Conservation Reserve Program or the Wetlands Reserve Program is not eligible.
At signup producers will choose a guarantee level, which establishes the percentage of average rainfall at which insurance payments are triggered, and a productivity factor that will adjust the dollar value of the grazing or haying. Producers also must select at least two, two-month time periods in which precipitation is important for the growth and production of the forage species. These time periods are called index intervals. The crop year is divided by RMA into 11 of these two-month intervals, with the first interval beginning with Jan. 1-Feb.28.
In Nebraska, Vandeveer says producer premiums for PRF grazing coverage in most places should be around $1 per acre, depending on coverage levels and index intervals. Haying premiums are higher. He recommends that index intervals be selected for those times when rainfall is the most critical to the grazing or haying production.
“In our part of the country this is a good option for cattlemen, I think,” says Vandeveer. “With the premiums being significantly subsidized over time, I think the average producer will get back a little more than they pay in. It's about the only game in town when it comes to insuring this kind of forage production. In a drought year, it means you will have the cash on hand to buy replacement forage, which can get expensive.”
There are a number of states that have not been included in the program yet. These include Louisiana, Mississippi, Tennessee, Kentucky, West Virginia, Ohio, Indiana, Illinois, Michigan, Iowa, Washington, Delaware, New Jersey, Rhode Island, Connecticut, Massachusetts, Vermont, New Hampshire and Maine. For updates on the program and coverage maps go to www.rma.usda.gov.
Source: DTN
Posted by Northern Ag Network