Wetter weather this spring and early summer has led to greener pastures in many parts of the country. But for farmers and ranchers whose pastures are still suffering from the effects of drought, financial help may be available.
USDA’s Risk Management Agency is once again offering its Pasture Rangeland Forage Insurance program for the 2014 crop year. The trouble is, many ranchers and farmers are likely unaware of the program.
The PRF program provides coverage for annual forage crops in Texas, Oklahoma, Kansas, Nebraska, South Dakota and North Dakota. It covers annual crops planted for forage or fodder used for grazing, haying, green chop and silage.
Aaron Berger, Extension educator for the University of Nebraska’s Panhandle Research and Extension Center near Scottsbluff, Neb., said he is concerned that many ranchers are not aware of the product. During the drought of 2012, probably only about one of 10 ranchers he visited even knew the product was listed, he said.
“As an educator, my goal is for people to know the product is available and to use it as part of their risk management strategy,” he said. “If they choose not to use it, fine. But to not participate because they don’t know about it, I feel they would be missing out on the opportunity.”
The PRF insurance only protects against drought and is entirely based on precipitation, not on production. The product insures any native rangeland or pastures and any perennial hay such as alfalfa, orchard grass or smooth brome. It cannot be used for annual forages such as oats, sorghum, sudan or millet, Berger said.
The program is based on the Rainfall Index (RI) model, which uses precipitation data collected by the National Oceanic and Atmospheric Administration Climate Prediction Center (NOAA CPC). The RI reflects how much precipitation is received compared to long-term averages for a specific area during a given two-month timeframe.
Those who will find this insurance the most meaningful are ranchers and farmers who are dependent on precipitation for growth of forage, such as those who have livestock or those who put up a lot of hay and sell it, Berger said.
CHOICES FOR INSURANCE PREMIUMS
There are several decisions producers must make when signing up for insurance, one of which is choosing a two-month time period for which they wish to be insured. This varies by geographical area as to what the critical time for precipitation is.
“For people considering using the product, they need to evaluate and understand how and when precipitation impacts their forage production,” Berger said.
For areas such as the Sandhills in western Nebraska that have predominantly warm-season grasses, the critical time for precipitation would be May, June and July, as those three months are vital for grass growth and forage production. For cool-season grasses, the most critical months are April, May and June.
Also, producers must choose premiums and indemnities based on level of coverage between 70%-90%, as well as what value they place on their forage (level of production valued on a per-acre basis), anywhere from 60%-150%.
Berger cautioned that this year, those questions should be considered carefully considering the rise in forage prices.
“Recently, forage values really ramped up in the marketplace,” he said. “Users should consider looking at the value of forage from a market standpoint and adjust accordingly.”
Users can also consider what level of coverage they want, insuring against various levels of precipitation. Berger explained that lower levels of coverage are more highly subsidized and cost less than higher levels of coverage.
Land can be insured for either grazing or for haying, although annual forages are not eligible. Forage on land insured for haying must be from perennial sources such as alfalfa or grass. Since land insured for haying has a higher production level, it has a higher premium than grazed land.
DECISION TOOLS AND RESOURCES
A decision support tool for PRF insurance is available online here. Berger said the tool is fairly easy to use.
Last year, Berger put together a webinar that walks through examples of how to use the insurance as a risk management tool. The webinar is available for viewing on the UNL Beef page here.
Also available on the UNL website is information regarding the basic features of PRF insurance coverage, along with factors to consider when decided to use the insurance for risk management.
People who use the tool are evaluating — using a series of questions — what they would be paid if drought occurs.
“The question they should ask is whether what the tool suggests matches what has happened historically,” he said. “If so, they should use the insurance product. If not, they may want to reconsider using the insurance.
Deadlines for sign-up for the PRF program vary by state. For instance, the deadline for participating in the PRF insurance program for 2014 in Nebraska is Nov. 15. However, sign-up in Texas is July 15 for the fall growing season, Sept. 1, 2014, through March 31, 2015, for the spring season.
For information regarding deadlines in eligible states, those interested should contact a qualified crop insurance agent.
PRF PROGRAM BEST FOR LONG-TERM
Berger said that the insurance is best used long term, instead of attempting to guess what will happen during the next growing season.
He explained that the product is like car insurance.
“You hope you don’t have to use it,” he said, “but you don’t just take it out once in a while. You carry it all the time because you don’t know what will happen.
“If you’re going to use the product, consider using it for the long term, not just when you are having drought,” he said.
Berger said some producers may have been disappointed in 2013 payouts. Berger said payments are not based on precipitation on individual ranches, but at the nearest recording stations. Some ranches may have had a dry year, but if the recording station had normal or above-normal rainfall, no payments were issued.
“For some people, the fact that payments are not directly tied to what happens on their ranch may result in their choosing not to use it,” he said.
Historically, farm insurance programs have been geared mostly toward crop production and have not included rangeland or forage production.
“We are entering a new era where ranchers are being offered the opportunity to be more included in some of these insurance and disaster programs,” he said.
Berger added that many producers could benefit from the PRF program.
He said that assuming the tool is accurate, many producers would have been paid for PRF insurance for precipitation in the past 30 years.