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Pasture, Rangeland, Forage, Rainfall Index and Apiculture
Worried about the impact of poor rainfall on your pasture and forage acreage?
Pasture, Rangeland, Forage, Rainfall Index (PRF-RI) provides protection when there's a deviation below normal average rainfall. It's an area-based plan based on grids that are approximately 17 miles X 17 miles in size. Simply put, it covers lack of normal rainfall in two month insurance periods.
PRF-RI coverage is available in the lower 48 states for both Grazing and Haying crops, and Apiculture.
How Does It Work?
Rainfall produces forage to feed livestock. Without that forage, you may be forced to sell that livestock lighter than expected or spend a lot of money supplementing the food supply. Either outcome hurts your business’s bottom line.
Coverage is based on the experience of a grid rather than individual farms. Losses are paid when the grid’s accumulated index, known as the final grid index, falls below the insured’s trigger grid index.
PRF-RI covers losses caused by only one thing: lack of precipitation.
Coverage level (70% to 90%, in 5% increments - CAT is not available)
Productivity factor (60% to 150%)
Index Intervals (You choose at least two 2-month periods where precipitation is important to your business.)
Rainfall Index Interval Periods
The crop year begins January 1 and ends December 31. In most counties there are 11 flexible, two-month time periods to choose form, however they cannot overlap.
A minimum of two intervals (four months total) per crop year must be insured under the PRF-RI program. You may select multiple intervals throughout the year, but no more than 50% in any one interval.
The expected grid index multiplied by the selected coverage level is the trigger grid index
Irrigated Hay Acreage
Coverage for Irrigated Haying practice is available in some states. This coverage is designed to cover above normal irrigation expenses when normal precipitation shortfalls occur within an insured grid. The protection values for the irrigated practice will be lower than non-irrigated due to the fact that it only is providing protection for additional irrigation expenses.
The sales closing date and the acreage reporting date are both December 1 preceding the start of the crop year.
Where You're Insuring
The location and acreage of the insured cropland will fall into one or more grid ID numbers. A rainfall grid is an approximate 0.25 x 0.25 degree gridded area established by NOAA and identified by longitude and latitude. These grids are approximately 17 x 17 miles at the equator.
The grid is utilized to determine the expected grid index and the final grid index, which are used in premium and loss calculation. The grid ID number will be reported on the acreage report.
A coverage unit is all insured acres within a grid ID for each crop type and index interval.
Calculating Your Protection
The coverage for PRF-RI is a selected dollar amount of protection per acre.
Each year the RMA will determine the county base value per acre by crop type.
County base value = $39.00 (Published in the county actuarial by crop type.)
Coverage level = 90% level (Elected by the grower.)
Productivity factor = 120% (Grower selects a number between 60% and 150%.)
$39.00 × 0.90 × 1.20 = $42.12 is the dollar amount of protection per acre.
The dollar amount of protection per acre will apply to all insured acres by crop type for the county
Indemnities are based on the deviation from normal for each grid. Precipitation data will be determined by the National Oceanic and Atmospheric Climate Prediction Center (NOAA CPC). The data is not based on individual farms or ranches or specific weather stations in the general area.
A payment may be made only if the final grid index for the insured unit is less than the grower’s trigger grid index.
The payment will be equal to the payment calculation factor multiplied by the policy protection per unit.
County Base value = $39
Coverage value = 90%
Productivity factor = 120%
Dollar amount of protection is $39 x 90% x 120% = $42.12 per acre
Assume the Expected Grid Index is 100. The trigger grid index would be 90 (90% x 100).
Assume FCIC publishes the Final Grid Index as 82. The Final Grid Index is below the Trigger Grid Index, so there is an indemnity for this grid.
The payment calculation factor is the difference between the Trigger Grid Index and the Final Grid Index divided by the Trigger Grid Index. For this example (90 – 82) ÷ 90 = 0.089.
The payment per insured acre would be the payment calculation factor multiplied by the dollar amount of protection. $42.12 x 0.089 = $3.75 per acre.
Since this is an area-based plan of insurance, it is possible to suffer a loss on an individual operation and not receive an indemnity payment. It is also possible to receive an indemnity payment and not suffer a loss on an individual operation.
Crop insurance simplified is not just our motto, it’s what we do every day. We work hard so that you can focus on more important farming issues. Give us a call and we’ll be happy to give you a quote.
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