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PRF insurance can protect against drought

by Wyoming Livestock Roundup

With rainfall levels a constant question and drought a possibility from year to year, there are several options available to producers for protecting their livelihood, one of which is Pasture, Rangeland and Forage (PRF) insurance offered by the USDA’s Risk Management Agency (RMA).
    “PRF Insurance protects against a loss in forage production, as established through an index,” explains UW Extension Ranch and Farm Management Specialist John Hewlett. “This is still a pilot program, and they are working on details and adjusting.”
    USDA RMA Risk management Specialist John Lockie says, “There are some changes that have been made recently to the program.”
How it works
    PRF insurance is based on one of two indices – rainfall or vegetation.
    The rainfall index is based on weather data collected by the National Oceanic and Atmospheric Association’s Climate Prediction Center and is based on how much precipitation is received relative to long-term averages.
    The rainfall index has been in place in Montana and North Dakota for a number of years, and for 2013 the rainfall index has been introduced to Nebraska and South Dakota to replace the vegetation index.
    Wyoming falls under the vegetation index, which is based on data from the U.S. Geological Survey’s Earth Resources Observation and Science.
    “The vegetation index reads photosynthetic activity of all biomass in a grid,” explains Lockie. “There is a different wavelength of light for healthy versus unhealthy plants. It looks at UV reflection.”
    Lockie also notes that the method is unable to detect how tall or what the vegetation is, but it can distinguish between plants and other non-photosynthetic green objects, such as tractors or roofs.
    He also adds that the program does not insure the entire year or the amount of production, since there are a number of variables to production.
    To correlate the index to land, a grid, with 4.8-mile squares, is laid out across the U.S. Each grid square has a corresponding index value for every  three month interval. That value is averaged over the time that data has been collected to provide a “normal” value – called the normalized difference vegetation index, or NDVI.
    Producers may choose their coverage level from 70 to 90 percent.  When photosynthetic activity drops below the selected coverage level  an indemnity is paid. Producers should determine what the major plant is within their grid and what months have the highest rate of growth for those plants.  Insuring those months will correlate to the vegetation index results.
Insurance options
    PRF insurance is purchased for a three-month interval, and producers can  cover all or just a portion of their land.
    “If an operation crosses several different grid squares and the land is contiguous, a producer can decide which grid fits the operation,” Lockie says. “Producers can select one point and cover all their acres with that point.”
    A minimum of 10 percent of an operation can be covered, up to 100 percent of the land, and areas cannot be double insured.
    “For example, if you choose to insure during the April, May and June interval, you cannot insure during the June, July and August interval, because you would be double insuring June,” he explains. “In Wyoming, we’ve also blacked-out the winter months, because there is not much vegetation activity from October to April.”
Not perfect
    Because the vegetation index is a measure of photosynthetic activity, Lockie mentions that certain areas are going to measure as “green,” even during drought years. Warmer than normal winters and springs can also trigger a high NDVI reading.
    “In areas where there are a lot of trees, those are going to be green even in drought, so the program doesn’t always work very well if you have a lot of trees,” he says. “If you run in the mountains over the summer, PRF insurance may not be a good choice.”
    He also adds that data only extends back to 1989, which provides a relatively short time for data.
    “Since 1989, we’ve gone through a lot of drought, so our readings are  correspondingly low,” Lockie explains. “As they factor in the lows, they can pull down an average.
    “Producers need to pour over the history and look interval by interval, grid by grid,” he said. “It depends on their area and what is in the grid.”
    By comparing whether data from past years correlates with the personal experience of the producer, individuals can decide if the insurance fits their operation.
    Lockie also mentioned that changes in use or landscape might result in the index to register above normal.
    “If there has been a change in your grid, such as the addition of farming, it may cause the NDVI to read higher than historical normal,” he adds.
A pilot program
    Because the program is a pilot program, Lockie says it is easier to change and develop to fit what is needed. However, the nature of such a program does not offer coverage at catastrophic levels.
    “Because this is a pilot, it is not offered at catastrophic level coverage, or below 70 percent,” explains Lockie. “FSA (Farm Service Agency) continues to offer NAP (Noninsured Disaster Assistance Program) coverage on rangelands. A producer can cover their operation with NAP, but its trigger depends on a lot of circumstances. Producers may obtain both PRF and NAP on the same acres.”
    Lockie also notes that PRF insurance may result in indemnities that are received more quickly. Following the interval, 75 days is required to compile data before results can be released, with payments made within another 30 days. Using NAP, however, it may take longer producers receive payments.
    While PRF insurance offers a number of benefits for some producers, Lockie emphasizes that the program may not be right for everyone.
    “This may not be a perfect fit for everyone,” he says. “Producers need to pour over the history and do the research themselves. Go into researching with your eyes wide open.”
    For more information, click “rainfall/vegetation indices” under Quick Links at Saige Albert is managing editor of the Wyoming Livestock Roundup and can be reached at

Obtaining PRF insurance
    For producers interested in insuring their land using USDA Risk Management Agency’s (RMA) Pasture, Rangeland and Forage (PRF) Insurance, Risk Management Specialist John Lockie encourages producers to visit their crop insurance agent.
    This year, the deadline for obtaining PRF Insurance is Nov. 15. Producers are also required to complete an application and report their acres by that date.
    “If producers need help finding someone, there is an agent and company locator on the RMA website,” he says.
    He also encourages producers to visit the RMA website to see just how the program might work for them.
    “The online mapping tool is a good tool,” Lockie comments. “Producers need to know which grid they are in and look at the history of the area.”
    Lockie continued that producers need to devote time reviewing the historical information and comparing past year production records to the information on the historical tools to determine whether or not this product correlates well to their actual.  How well the product correlates to their past production is a key consideration when trying to determine whether or not this product is a good risk management tool.
    Find RMA’s tools and more information on PRF insurance under the Quick Links item “rainfall/vegetation indices” at Wyoming is covered under the vegetation index.

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