For producers and farmers, the phrase “saving for a rainy day” is more than a cute saying – it’s an important consideration for protecting their operation from the risks that come with dry weather. Fortunately, a PRF insurance policy provides producers with insurance coverage for increased feed costs, destocking, depopulating, and other activities that may occur during periods of dry weather.
There are numerous benefits that come with having a PRF insurance policy that we’ll discuss later, but let’s first define what a PRF insurance policy covers for producers. After all, smarter risk management starts with being well-informed about the policies you purchase for your operation.
What is PRF Insurance?
In 2007, the Pasture, Rangeland, and Forage (PRF) program was launched as a pilot program in certain areas of the United States. In 2016, the PRF program was made available to the rest of the 48 contiguous states. Unlike single peril, Pasture, Rangeland, and Forage insurance is a federal program.
The Pasture, Rangeland, & Forage (PRF) program is designed to safeguard a producer’s operation by providing coverage for perennial pasture, rangeland, or forage used to feed çattle and livestock. These policies are based on grids and the rainfall index that is determined by data from the National Oceanic and Atmospheric Administration Climate Prediction Center (NOAA CPC).
What is a “grid” in PRF insurance policies?
When discussing PRF, a grid refers to the physical area for which your operation is insured. Indemnities are paid based on the losses determined using data from the Rainfall Index. It’s critical that you choose the correct grid or grids where your agricultural operation is located so you receive the proper indemnity payments. PRF policies are designed to help protect an agricultural operation from the risks that accompany a lack of precipitation.
What is the Rainfall Index & how are losses calculated?
The Rainfall Index uses information based on NOAA CPC Daily Precipitation Data to determine the rainfall level that would typically occur within a producer’s grid. Then, the Risk Management Agency (RMA) gathers data for the insured two-month period and compares it to the historical data for that grid.
If your grid index of rainfall drops below the average for the insured interval, a loss is recognized for farmers, ranchers, and producers who have signed up for insurance within the trigger grid index.
How PRF Insurance Works
This federal agricultural program is designed to help protect a producer’s operation from the risks of forage, rangeland, or pastureland having a lack of precipitation. Using weather data from the National Oceanic and Atmospheric Administration Climate Prediction Center (NOAA CPC), the coverage level for your operation will depend on your answers to the following questions:
What is your intended use?
One of the first questions you’ll need to answer is about your intended use for their acreage. Will you be using your land for grazing or hay? Your answer to this question is important since the insurable value for grazing acreage is much lower than the insurable value for hay, which means that your premiums will be lower. Obviously, the acreage that you want to insure for haying must be hayable.
What is your desired coverage level?
Regarding the base value per acre is established for your county or region, it’s important to note that values will vary between grazing acreages and haying acreages. Producers will choose either 70, 75, 80, 85, or 90 percent of the baseline county value as their insurance coverage level. Higher coverage levels will require higher premium costs.
What is the productivity factor?
A productivity value per acre will be established for your county based on the typical income received for haying and grazing operations, using the normal rainfall grid index as a reference. Once this is done, producers choose their desired protection factor, ranging from 60 percent to 150 percent of the established county value.
It’s critical to choose an amount of protection according to the forage value that best reflects your grazing or haying operation on the land. Your premiums will increase or decrease, directly correlating to your chosen protection factor. Producers can only choose one productivity factor per crop type and county.
What is your preferred insurable interest?
Next, producers must choose their desired insurance interest for their acreage. Insurable interest is the percentage of your insured crop that is at financial risk. Coverage is available for both owned and leased acres.
If your insured crop is on leased pastureland, rangeland, or forage acres, and will be used for grazing, your percentage of the insured crop will depend on whether the acres are cash-leased or share-leased.
If the acres are cash-leased, then the insured crop at financial risk will be based on your percentage of interest in the livestock to be grazed.
On the other hand, if the acres are share-leased, your percentage of the insured crop will be based on the value gained of the livestock being grazed.
Note that lessors under a cash lease are not regarded as having a share in the insured crop.
What is the amount of insured acres?
Your acreage cannot be insured for both haying and grazing within the same crop year. It’s also critical to note that only 60 percent or less of the insured acreage can be placed into an Index Interval, whether your acres are being used for haying or grazing.
If your acreage is located in more than one trigger grid, producers can either put all of their acres into a single grid or divide their acres into separate grids. However, you cannot insure the same acres in more than one grid.
What are your index intervals?
Index intervals are two-month time periods during the crop year when rain is most important to your operation. Producers must choose at least two index intervals and decide on the percentage of acreage they’d like to insure within each index interval.
Each index interval must include between 10 percent and 60 percent of the insured acreage. It is not possible to put more than 60 percent into a single index interval. Also, the total percentage of insured acreage in your index intervals must equal 100 percent.
Contact Us To Find A Crop Insurance Agent Near You
If you’re interested in a PRF policy, don’t hesitate to reach out to us! In addition to PRF insurance, we offer multiple peril insurance, whole-farm revenue insurance, and other crop insurance services. If you’d like to learn more about crop insurance topics like the strawberry PRH program, visit our blog. Thanks for reading!