Pasture, Rangeland and Forage (PRF) insurance, offered through USDA’s Risk Management Agency (RMA), is a unique program that provides insurance for ranchers. Traditionally, commodities like crops and livestock have been insurable, but now producers have the opportunity to insure a totally different, but equally important, aspect of their operation – rainfall.
“The program is basically designed to insure against poor rainfall,” explained Dr. Eric Belasco, an associate professor in the Department of Agricultural Economics and Economics at Montana State University.
It can be confusing, since the program is called Pasture, Rangeland and Forage insurance, but Belasco emphasized it is not the grass or rangeland that is protected, but rather the precipitation. The idea is if there is lower than normal rainfall, insured individuals can collect an indemnity.
“The intention is the low rainfall correlates with grass growth or rangeland health,” Belasco said.
The program utilizes a rainfall index, provided by the National Oceanic and Atmospheric Administration Climate Prediction Center, to determine precipitation for coverage purposes. In addition, the program looks at average precipitation levels over a 70-year period.
To further determine coverage, the program uses a grid system. Land is broken down into blocks that are 17 miles X 17 miles. The grid system allows the program to more closely pinpoint coverage area and insured acres can be located in one or more grids.
Finding the grid block your operation would belong in is fairly straight forward, simply type your address into the Grid ID Locator provided by the RMA. A map will be generated with a pin positioned on your specified location. A corresponding grid number is provided. The grid number can then be used in the PRF support tool, which can help guide individuals through the decision making processes. The PRF support tool provides a quick overview by listing historical averages, as well as cost and indemnity estimations.
Policy holders can choose a coverage level between 70 and 90 percent. Like any insurance, premiums increase with the more coverage that is selected. Belasco has noticed that most policy holders in Montana choose the higher coverage options.
Most importantly, policy holders must decide what time interval to insure. PRF insurance is sold in two-month time intervals and individuals must select at least two separate intervals that are non-continuous.
This is where strategy comes in. Belasco notes that policy holders can approach PRF insurance from two different angles. You can choose to insure the months where moisture and precipitation are most important to your operation, or you can choose months with the highest loss ratios, and therefore pose the greatest potential for indemnity payouts.
“In general, it should work out in your favor with either strategy you choose. It’s completely up to the producer to decide how to use it,” Belasco stated.
Keep in mind, precipitation is insured only in the specific grid where the acres lie. If snowpack is important to your operation’s summer success, be mindful. The snowpack that feeds water sources on your operation may lay outside of the allotted grid that the PRF insurance was purchased for.
Deciding if PRF insurance is right for your operation can be a tough question to answer. Belasco notes that it is subsidized, so over the long-term, if purchased on a consistent basis, PRF insurance is likely to pay off.
“It may be frustrating within a given year, but over the long haul, you should come out ahead,” Belasco said.
PRF insurance can be purchased from any crop insurance agency. To find an agent in your area, log on to the RMA website and use the “Agent Locator.”