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Pasture, Rangeland, and Forage Insurance for Cattle Producers

You can manage the risk of just about everything on the farm – except the weather.

Not so fast, says Steve Wooten. The southeast Colorado cow-calf rancher isn’t exactly controlling the weather, but he is mitigating some risk of drought.

He uses the Pasture, Rangeland, and Forage (PRF) insurance introduced a few years ago by the USDA Risk Management Agency (RMA). The goal is to give livestock producers a better way to deal with a drought, rather than wait for the disaster and hope for help. 

PRF insurance had been rolling out across the country for nine years, when in 2016, it became available for the first time in all 48 contiguous states. It is sold through crop insurance agents and subsidized by the federal government similar to other crop products. The subsidies range from 51% to 59%, depending on the chosen coverage level. The litmus test for eligibility is that the insured crop must be a perennial forage – pasture or rangeland – or any perennial hayfields.

coverage has paid off

Wooten started using it a few years ago on his Beatty Canyon Ranch, which consists of 25,000 acres owned by his family and 98,000 acres leased in partnership with another family. They had been experiencing increasing weather variability in this semiarid region, including frequent drought.

The coverage has paid off every year. “It allows us to maintain our cash flow that’s so dependent on calf weaning weights,” he says. “We have seen drought impact our weaning weights by 30 to 60 pounds. The insurance payout helps us through that reduction in income.”

In the major drought that extended from 2012 into 2013, Wooten had to sell about 200 cows due to a feed shortage. The payout provided cash flow to get through that and later to rebuild with quality replacements. “We don’t have many ways to manage for a disaster like drought,” he says. “This gives us one tool.” 

Wooten buys insurance from Silveus Insurance Group, one of the leaders in developing the PRF coverage. “We’ve been writing it since 2007 when it first came out. We’ve developed several proprietary tools allowing us to customize PRF coverage for each operation,” explains Aaron Tattersall of Silveus. 

The PRF insurance is based on rainfall that occurs within a grid that includes your acres, as measured by the National Oceanic and Atmospheric Administration weather stations. The grids represent each .25° of latitude and longitude, or roughly 17×12-mile grids in North America.

The insurance is bought as a percentage of normal rainfall based on over 65 years of actual data. You can buy coverage as high as 90% spread out over the year during two-month time periods of your choosing. 

For example, if you choose 90% coverage in the September to October period and measured rainfall is less than 90% of average, you have a claim.

In general, you can expect an annual premium to be about 8% to 10% of the crop value. If you want to purchase $10 an acre on rangeland, the PRF premium might be 80¢ to $1 per acre, Tattersall says.

One favorable thing about the program is that you sign up on November 15 for the next calendar year, but the premium is not due until the following September. If low rainfall triggers a claim, your indemnity first funds the premium, sometimes before you have to come up with any cash. 

“Some call it drought insurance, but you really don’t have to have a drought disaster to cause a loss,” Tattersall says. “Just receive below-average rainfall in your two-month window of coverage, and a loss will automatically trigger. It’s a cost-effective way to manage the precipitation risk every livestock operation faces.” 

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