The USDA-RMA, has postponed the Pasture, Rangeland, and Forage Pilot Insurance Program (PRF), better known as the rainfall insurance, until December 1st. Incorporating this risk management tool will help reduce the economic impact of a lack of rainfall in our operations.
Dates and Deadlines
11/30/2021 – Virtual wheat and soil field days
12/1/2021 – Texas Wheat Symposium
12/7/2021 – Swisher County Ag Meeting
12/8/2021 – Armstrong County Fall Producers Meeting
1/19 – 1/20/2022 – Red River Crops Conference
1/25, 1/26, 1/27, 2/9, 2/10, 2/23, 2/24, 3/9, 3/10/2021 – Amarillo Master Markter
What We’re Reading
Brazil clears GMO wheat flour from Argentina in global first, but sales may be slow – Reuters
Talking turkey with Texas A&M AgriLife Extension Service – AgriLife Today
Fertilizer prices continue record climb – AgriLife Today
Speakers announced for annual Hemphill County beef cattle conference – AgriLife Today
5 considerations with high nitrogen fertilizer costs – The Farmer
4 tips to stretch pest control dollars – Southwest FarmPress
U.S. Inflation Hit 31-Year High in October as Consumer Prices Jump 6.2% – The Wall Street Journal
Preparing cows from winter and spring calving – BEEF
Senators reach compromise on cattle market bill – Feedstuffs
Pasture, Rangeland, and Forage Insurance Program Review
The U.S. Department of Agriculture, Risk Management Agency, has postponed the Pasture, Rangeland, and Forage Pilot Insurance Program (PRF), better known as the rainfall insurance, until December 1st. Producers will have until that day to apply and purchase this insurance that helps reduce the economic impact of a lack of rainfall in their operations.
The PRF Insurance program was designed to provide insurance coverage on grazing pastures, rangeland, and forage acres with or without irrigation. The program does not directly measure the drought effect. It measures the lack of rainfall. The National Oceanic and Atmospheric Administration (NOAA) developed a rainfall index to determine the lack of precipitation in a specific area, grid. The index compares the actual rainfall with average rainfall for that grid. Each grid used by NOAA has approximately 17 by 17 miles (if located at the equator).
Indemnities are triggered when the actual rainfall is below the average historical rainfall. As it does not directly measure the negative production impact on your pasture, rangeland, or forage system, the program allows you to assign a productive factor to better match your farm productivity in that given area. Producers also have the chance to select the intended use of those acres (Grazing or Haying), irrigation practice, organic practice, and the coverage level (70%, 75%, 80%, 85%, 90%). Most importantly, producers can select the periods in which they consider coverage is most important for their operations. The system allows you to select the percentage to be insured in bi-monthly intervals.
PRF Example.
This program is an important risk management tool that needs to be incorporated in most operations. Following, we will use a 1000-acre ranch as an example to examine the benefits of using this program in our area.
We will use the USDA-RMA’s Pasture, Rangeland, and Forage Support Tool (https://prodwebnlb.rma.usda.gov/apps/prf) to help us determine premium costs and the impact of this program on our operation. I do recommend ranchers and farmers use this decision tool to understand better the implications of this program will work for their operations. For this example, we randomly chose the location of this ranch that fell into the grid ID 17221, located north HWY 287, in Hardeman County, TX (Image 1). We assumed that 100% of the acres used for this ranch example are in the same grid. However, the acres you want to insure on your farm might be in more than one grid. In that case, you will have to insure each acreage of each grid.
Image 1. Pasture, Rangeland, Forage Support Tool. (USDA-RMA)
First, producers must determine the location of the farm. Producers need to select the intended use of those acres (Grazing or Haying), production systems (irrigation, organic), and the coverage level (70%, 75%, 80%, 85%, 90%). We are going to use a coverage level of 90% and a productivity factor of 100%. Moreover, we are going to use results from the 2011 year as the sample year.
Summer forage production is critical for our production system in this area. The chosen strategy was to ensure those months in which forage production is vital for our operation. A reduction in forage production in that period will have significant production and economic impact. An indemnity payment will help producers to reduce losses and face higher feed costs. For this reason, we chose to insure 30% for the interval May-June, 40% July-Aug, and 30% Sept-Oct. The total percentage selected should add to 100% (Table 1).
The USDA support tool estimated the producer premium at $2.2 per acre for the 1,000 acres ranch example. The estimated indemnity was calculated as $17.07 per acre, resulting in $14.87 after premium cost. Assuming a stocking rate of 15 acres per cow, the net result obtained per cow was $223.05. These indemnities might not be enough to cover all the extra costs and hard work during a severe drought, but they will certainly help pay for most of our additional feeding costs.
Table 1. Protection Table (USDA-RMA)
Further, we analyzed the impact of this strategy during the last 20 years (Table 2). The support tool estimated an average payment of $1.74 per acre for those 20 years above premiums costs. In five of the twenty years, indemnities were not high enough to compensate for premiums paid. In 75% of the cases, the program paid indemnities to cover producers’ premiums costs given this grid location. Most importantly, it supports producers to cover extra and higher feeding cots when precipitation is lower than usual.
Table 2. Historical Indemnities and Net-Results.
The Pasture, Rangeland, and Forage Pilot Insurance Program (PRF) is a great program to support produces in our area when rainfall is below average. The Pasture, Rangeland, Forage Support Tool is indispensable to understand how this insurance will work on your specific location, considering the rainfall variation of the grid where your farm is located and the different strategies that a producer might pursue.