Using Pasture, Rangeland, Forage (PRF) Insurance to Manage Your Risks
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Transcript of Using Pasture, Rangeland, Forage (PRF) Insurance to Manage Your Risks
Using Pasture, Rangeland, Forage (PRF) Insurance to Manage Your Risks
Jeffrey E. Tranel, Colorado State University
National Risk Management Education ConferencePre-Conference Seminar
2013 April 2
Managing Risks With
PRF Insurance
PRF Insurance Option for forage and livestock
producers to manage potential production losses.
PRF Insurance Option for forage and livestock producers to manage potential
production losses.
Group risk plan.
PRF Insurance Option for forage and livestock producers to manage potential
production losses. Group risk plan.
The insurance coverage is single peril. RI = precipitation. VI = vegetative greenness.
PRF Insurance Option for forage and livestock producers to manage potential
production losses. Group risk plan. The insurance coverage is single peril.
Coverage is based on the long-term historical average for the same area of land for the same period of time, not actual production of individual farms or ranches.
PRF Insurance Option for forage and livestock producers to manage potential
production losses. Group risk plan. The insurance coverage is multi-peril, losses caused by natural
occurrences. Coverage is based on the long-term historical average for the
same area of land for the same period of time, not actual production of individual farms or ranches.
Can be used: As a standalone product. In combination with other risk
management strategies or insurance products.
PRF Insurance Option for forage and livestock producers to manage potential
production losses. Group risk plan. The insurance coverage is multi-peril, losses caused by natural
occurrences. Coverage is based on the long-term historical average for the
same area of land for the same period of time, not actual production of individual farms or ranches.
Can be used as a standalone product or in combination with other risk management strategies or insurance products.
Acreage enrolled in other USDA programs (CRP) is not eligible for PRF insurance.
PRF Insurance – Basic Terms
Expected Grid Index– Based on data provided by appropriate data sources.– Determined by Federal Crop Insurance Corporation.– Expressed as a percentage, such that the mean is 100.
Final Grid Index– The final grid index is a proxy (indicator variable) for pasture,
range, and hay production for a specific grid.– Based on the current index for each grid ID and index interval
during the crop year.– Determined by Federal Crop Insurance Corporation– Expressed as a percentage
• Exceeds 100 = index for the grid has an above average value• Less than 100 = index for the grid has a below average value
– Calculated soon after the close of each index interval
Trigger Grid Index– Expected Grid Index x Coverage Level
Index IntervalsProducers must select the appropriate time frames or
index intervals to apply for PRF insurance coverage.
It's important to select intervals when forage/pasture production is critical for your operation.
April-2010S M T W T F S
1 2 34 5 6 7 8 9 10
11 12 13 14 15 16 1718 19 20 21 22 23 2425 26 27 28 29 30
May-2010S M T W T F S
12 3 4 5 6 7 89 10 11 12 13 14 15
16 17 18 19 20 21 2223 24 25 26 27 28 2930 31
June-2010S M T W T F S
1 2 3 4 56 7 8 9 10 11 12
13 14 15 16 17 18 1920 21 22 23 24 25 2627 28 29 30
April-2010S M T W T F S
1 2 34 5 6 7 8 9 10
11 12 13 14 15 16 1718 19 20 21 22 23 2425 26 27 28 29 30
May-2010S M T W T F S
12 3 4 5 6 7 89 10 11 12 13 14 15
16 17 18 19 20 21 2223 24 25 26 27 28 2930 31
Important DatesJanuaryS M T W T F S
1 23 4 5 6 7 8 910 11 12 13 14 15 1617 18 19 20 21 22 2324 25 26 27 28 29 3031
FebruaryS M T W T F S
1 2 3 4 5 67 8 9 10 11 12 13
14 15 16 17 18 19 2021 22 23 24 25 26 2728
MarchS M T W T F S
1 2 3 4 5 67 8 9 10 11 12 13
14 15 16 17 18 19 2021 22 23 24 25 26 2728 29 30 31
AprilS M T W T F S
1 2 34 5 6 7 8 9 10
11 12 13 14 15 16 1718 19 20 21 22 23 2425 26 27 28 29 30
MayS M T W T F S
12 3 4 5 6 7 89 10 11 12 13 14 15
16 17 18 19 20 21 2223 24 25 26 27 28 2930 31
JuneS M T W T F S
1 2 3 4 56 7 8 9 10 11 12
13 14 15 16 17 18 1920 21 22 23 24 25 2627 28 29 30
JulyS M T W T F S
1 2 34 5 6 7 8 9 10
11 12 13 14 15 16 1718 19 20 21 22 23 2425 26 27 28 29 30 31
AugustS M T W T F S
1 2 3 4 5 6 78 9 10 11 12 13 14
15 16 17 18 19 20 2122 23 24 25 26 27 2829 30 31
SeptemberS M T W T F S
1 2 3 45 6 7 8 9 10 11
12 13 14 15 16 17 1819 20 21 22 23 24 2526 27 28 29 30
OctoberS M T W T F S
1 23 4 5 6 7 8 9
10 11 12 13 14 15 1617 18 19 20 21 22 2324 25 26 27 28 29 3031
NovemberS M T W T F S
1 2 3 4 5 67 8 9 10 11 12 13
14 15 16 17 18 19 2021 22 23 24 25 26 2728 29 30
DecemberS M T W T F S
1 2 3 45 6 7 8 9 10 11
12 13 14 15 16 17 1819 20 21 22 23 24 2526 27 28 29 30 31
Insurance Period
• Sale Closing Date• Cancellation/Termination Date• Acreage Reporting Date
Contract Change Date
Rainfall Index or Vegetation Index
Rainfall Index
Vegetation Index
Rainfall Index (RI-PRF)Allows insured forage and livestock producers to possibly obtain indemnities when a final index of precipitation for a grid (final grid index) falls below average precipitation patterns for the grid (trigger grid index).
Uses data from NOAA Climate Prediction Center Precipitation data reflect a smoothed result
of nearby weather, radar, and satellite estimates to return a total interpolated value for the grid.
The final grid index is a proxy (indicator variable) for pasture, range, and hay production for a specific grid.
Rainfall Index Utilizes weather data collected and
maintained by NOAA’s Climate Prediction Center.
The index reflects how much precipitation is received relative to the long-term average for a specified area and timeframe.
Vegetation Index Utilizes Normalized Difference
Vegetation Index (NDVI) data from U.S. Geological Survey EROS
Measurement of the density of photosynthetic biomass (greenness) on the ground.
Vegetation Index (VI-PRF)
Allows insured forage and livestock producers to possibly obtain indemnities when the final index of vegetation greenness for a grid (final grid index) falls below the insured’s trigger grid index.
Grids
Each grid segment is identified by a grid ID.
RI and VI use different grid sizes, so the grid ID will be different depending on which plan is available.
Grids
Producers must also select a reference point on the grid that best represents the location of the grazinglands or haylands they want to insure.
Property Line
GridsContiguous Acres
May be combined into a single grid, regardless of number of grids and/or counties.
May separate the acreage into separate Grids. Insured using multiple Grid IDs If acreage is in multiple counties,
a new policy for each county must be written.
Grid ID 67895
Grids
Non-contiguous acres within one Grid Insured for one Grid
Non-contiguous acres in different Grids Must use a point of reference for each
separate, non-continuous insured acreage. Must insure the properties separately.
Grid ID 67895
Expected Index Values
Historical data for each grid is used to determine the expected index value for either precipitation or vegetation greenness.
Using Grid IndicesExpected grid index is compared to the final grid index.
Producers may receive an indemnity if the actual final index falls below the trigger grid index, which is adjusted based on the coverage level.
Coverage Level
Expected Grid Index
Actual Grid Index
Trigger Grid Index= 75
(100 x 75%)
Actual result during the
index interval was lower than expected,
so an indemnity may be paid.
100%
75%
44
Display CheckboxesTo see the borders of counties and grid areas, select Counties (blue outlines) Grids (red outlines) Labels (red numbers)
Finding Your Property & Grid
Step 1: Select a Location
StateCountyGrid ID (longitude and latitude that best represents the location of the acreage the producer wants to insure. A specific code is associated with each grid)
See the Grid Locator module to learn more about how to locate the specific grid ID numbers for your operation.
Step 2: Select an Intended Use
1. Grazing area of forage established on land suitable and intended for grazing livestock
2. Haying established area of hay on land suitable and intended for haying
Step 3: Select a Coverage Level
Percentage of the county base value selected for insurance coverage.
90%, 85%, 80%, 75%, or 70%
Producers are required to insure all grids in a county at the same level.
Step 4: Select a Productivity Factor
Reflects the operation’s forage productivity relative to the average forage productivity for the grid
Varies from 60% to 150% 100% indicates the operation’s
forage productivity is similar to the average forage productivity for the grid
Step 5: Select an Insurable Interest
The operator’s share of forage production on the insured acreage
Owner shares are likely to be 100%
Producer’s share on a 50/50 crop share arrangement will be 50%
Step 6: Enter the Number of Insured Acres That Qualify for Coverage
Insurable acres are determined by policy provisions
Uninsurable acres possess characteristics precluding grazing or hay production
Producer chooses the number of acres to be insured
All insurable acres do not have to be insured
Step 7: Select the Sample Year for Insurance Coverage
Used for historical analysis.
Range of sample years. RI = 1948 – 2012 VI = 1989 – 2012
Step 8: Enter Percent of Value to be Insured Per Index Interval
Select intervals to protect against production losses. Intervals are periods of consecutive
months. RI = 2 consecutive months. VI = 3 consecutive months.
Intervals cannot overlap. There may be a minimum/maximum
percentage insurable for a single interval.
The sum for all intervals must equal 100.
RI – PRF, an example
Drought of
2001?2002!
Drought of
2010?2011!2012!
Moisture needed to grow grass.
Actual Percent Policy Total Premium Producer Index
Year Interval of Value Protection Premium Subsidy Premium Value Indemnity Mar-Apr 50 $764.00 $108.00 $59.00 $49.00 79.8 $2Aug-Sep 50 $764.00 $90.00 $49.00 $41.00 63.5 $158Policy Total $1,528.00 $198.00 $108.00 $90.00 $160Mar-Apr 50 $764.00 $108.00 $59.00 $49.00 14.3 $627Aug-Sep 50 $764.00 $90.00 $49.00 $41.00 57.4 $216Policy Total $1,528.00 $198.00 $108.00 $90.00 $843Mar-Apr 50 $764.00 $108.00 $59.00 $49.00 162.6 $0Aug-Sep 50 $764.00 $90.00 $49.00 $41.00 96.6 $0Policy Total $1,528.00 $198.00 $108.00 $90.00 $0Mar-Apr 50 $764.00 $108.00 $59.00 $49.00 52.3 $265Aug-Sep 50 $764.00 $90.00 $49.00 $41.00 65.4 $139Policy Total $1,528.00 $198.00 $108.00 $90.00 $404Mar-Apr 50 $764.00 $108.00 $59.00 $49.00 56.4 $225Aug-Sep 50 $764.00 $90.00 $49.00 $41.00 50.9 $278Policy Total $1,528.00 $198.00 $108.00 $90.00 $503
2001
2002
2003
2011
2012
Comparison of Rainfall Index Values
Vegetation Index
Vegetation Index
Comparison of Vegetation Index Values
Actual Percent Policy Total Premium Producer Index
Year Interval of Value Protection Premium Subsidy Premium Value Indemnity
2001 May-Jul 100 $51,485.00 $4,952.00 $2,723.00 $2,229.00 96.9 $0
2002 May-Jul 100 $51,485.00 $4,952.00 $2,723.00 $2,229.00 38.9 $43,154
2003 May-Jul 100 $51,485.00 $4,952.00 $2,723.00 $2,229.00 93.6 $0
2011 May-Jul 100 $51,485.00 $4,952.00 $2,723.00 $2,229.00 128.3 $0
2012 May-Jul 100 $51,485.00 $4,952.00 $2,723.00 $2,229.00 27.9 $51,485
Cost Estimator – Quick Estimate
Finding Information about PRF
www.rma.usda.gov/policies/pasturerangeforage/
See a crop
insurance
agent.