Calf prices and precipitation are two key factors impacting the profitability of ranchers in the West. The improved Pasture, Rangeland and Forage (PRF) crop insurance program is a relatively new program designed to address the reduced cash flow when snow or rainfall are below average.
Mitigate Short-Term Drought Conditions
PRF improves cash flow during short-term drought. PRF has been piloted across the nation since 2007. Improvements have been made so that today it’s an option that all ranchers should consider. PRF recognizes the difficulty in measuring grazing and forage production, which are highly correlated to rainfall/snowfall precipitation. PRF allows a rancher to insure rainfall/snowfall as a proxy for forage or grazing.
How it Works
• You insure the precipitation in an area – PRF allows a rancher to insure between 70-90 percent of the normal amount of precipitation expected to be received in their area.
• The area – The National Oceanic and Atmospheric Administration (NOAA) has established 17 by 17-mile grids across the nation. NOAA has established an average rainfall history for each grid. You insure the rainfall in the grid(s) where your land is located.
• How precipitation is determined – NOAA weighs the input from the 4 daily-reporting weather stations nearest to the grid. Greater weight is given to the nearest stations. Actual rainfall on your ranch is not a factor in determining precipitation for PRF.
• Acres – You can insure up to the number of grazing or perennial hay acres that you own or lease, including Forest Service and BLM acres.
• Determine which months to insure – You select at least two, 2-month periods where precipitation is important to your operation. You can insure up to six, 2-month intervals.
• Timely payments – When the percent of precipitation inside the grid(s) where your land is located falls below the coverage level that
you chose, an indemnity is paid. The indemnity is meant to compensate for losses due to the lack of precipitation.
PRF covers a single peril, lack of precipitation. Coverage is based on the experience of the entire grid. It is not based upon individual farms or ranches or tied to any one specific weather station in the general area.
Learn How PRF Would Work for Your Ranch
In a perfect world, crop insurance would be based upon your operation’s haying and grazing production, PRF does not do that. But it uses dependable data from the local area that is correlated to the conditions on your ranch. PRF has proven to be a reliable program that helps during short-term drought conditions.
PRF is based upon historical rain/snowfall data which allows you to find out how much assistance it would have provided historically during dry periods. Learning how it would have performed in the past will help you make an informed decision regarding how it will work for your operation in the future.
Growing up I saw how our ranch’s bottom line suffered when things turned dry. Whether it was lighter lambs, coming off the summer range early, or less hay, it impacted already tight margins. Lack of rain/snow is one of the primary risks facing ranchers and PRF can provide significant protection.
I encourage sitting down with a crop insurance agent this fall to learn how PRF would have worked for your operation in the past and options for 2018. PRF must be purchased no later than November 15th for 2018. If you would like to learn more please call me at (435) 213- 0463.
About the Author: Brandon Willis worked in Washington, DC for the past 11 years. He was an agriculture staffer for former Senator Max Baucus on Capitol Hill for three years and then worked at USDA where he oversaw farm programs at the Farm Service Agency, served as a Senior Advisor to the Secretary of Agriculture and Administrator of the Risk Management Agency where he oversaw the federal crop insurance program. You can reach Brandon at brandon@ranchersinsurance.com or (435) 213-0463.
