Global Agriculture

What Producers Need To Know About Rainfall Index And Pasture, Rangeland And Forage Insurance

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09 September 2022, US: The USDA Risk Management Agency launched the Rainfall Index Pasture, Rangeland and Forage (PRF) insurance program 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.

How does PRF insurance work?

PRF insurance coverage is based on rainfall rather than yields due to accurately measuring forage production and different management practices that affect forage production and yield.

There is a high correlation between rainfall and forage production and indemnity payments to producers would offset the cost of purchasing replacement feed.

The PRF Insurance program covers only established stands of perennial forages intended for either grazing or haying.

A producer has to buy coverage by December 1 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.  

Who sells PRF insurance?

The PRF Insurance program is sold by private insurance agents and coverage is guaranteed by 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.

What is the Productivity Factor in PRF?

The Productivity Factor is the dollar value of forage production per acre set by the Risk Management Agency. 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.

Documented rainfall amounts for a given area are drawn from precipitation data collected at NOAA climate reporting stations using the NOAA grid areas measuring 0.25° latitude by 0.25° longitude, which is about 17×17 miles.

The Grid used for coverage are based on where the producer’s acres are located and the acres allocated by intended use.

The Grid’s rainfall index value is calculated from rainfall data gathered at four NOAA stations nearest to the center of the GRID and not based on what the producer receives in his/her rain gauge.

Rainfall indexes are generated for the two-month periods throughout the year. Producers can then choose insurance levels on individual PRF policies for coverage as high as 90% of the long-term precipitation averages for their grid area during those specific time periods.

The producer can choose to increase the County Based Value, up to 150%, to increase the value of their forage. 

Purchasing an annual PRF policy

When purchasing an annual PRF policy, you must select at least two 2-month intervals for insurance coverage. The intervals chosen are determined by the producer and when the producer thinks precipitation is critical for a given forage type.

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 triggers and 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.

Checks are sent soon after those index values are announced. If premium is owed, premium is billed in September of the coverage year.

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.

FBN® Insurance Agents have access to a privately developed PRF analysis tool to assist producers in determining optimal coverage and display the historical performance of a Grid.

Also Read: FMC India introduces three new products for pest management and soil fertility

(For Latest Agriculture News & Updates, follow Krishak Jagat on Google News)

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