November 1, 2012

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Pasture, Rangeland, and Forage Insurance: A Risk Mangement Tool for Hay and Livestock Producers

A new fact sheet developed by Extension Educator Monte Vandeveer discusses several changes in the pasture, rangeland, and forage insurance for 2013 and provides examples and resources to help you determine the best coverage for your operation. The deadline for buying PRF insurance is Nov. 15.

This will be the first year that Nebraska coverage will be based on the rainfall rather than the vegetation index. If the Nebraska drought continues in 2013, the change in index should benefit Nebraska producers. The nine-page fact sheet discusses eligible land and types of coverage, using several examples to help growers see how indemnity payments would be calculated.

Highlights

• PRF coverage in Nebraska for 2013 will use a rainfall index rather than a vegetation index. The National Oceanic and Atmospheric Administration's Climate Prediction Center will use rain gauge, satellite, and radar information to develop rainfall maps used for the index.
• Coverage is based on rainfall in a grid approximately 13 by 17 miles, rather than on a specific operation's acres.
• Growers need to make two selections regarding coverage level — the guarantee level and the productivity factor. The liability or maximum payout of the policy in case of a total loss is calculated using both of these numbers.
• Coverage is purchased for two-month periods, described as index intervals.  Growers can buy insurance for one or more intervals each year. For example, a producer could buy coverage for April-May, June-July, and August-September. Premiums will vary from one interval to the next, based on estimated plant value and variability of rainfall typical for that period.
• An indemnity is paid only when the rainfall index for the entire grid area falls below the guaranteed level during the interval. Actual production is not considered. Timing of rainfall can be problematic.  For example, if heavy rains occur in the last few days of the interval period, the total for the interval may fall within the index although losses may already have occurred.
• PRF coverage should be effective in most cases and relatively cheap, as USDA will be subsidizing premium costs.