SD pastures now insurable with rainfall index

News
Oct 26, 2012
by WLJ

Pasture, rangeland and forage (PRF) insurance is available for 2013 in South Dakota based on a Rainfall Index (RI). Haying and grazing needs can be covered against moisture shortages using PRF-RI, says Matthew Diersen, South Dakota State University Extension Risk & Business Management specialist.

“While producers would prefer to be paid if they did not have forage, PRF-RI relies on a close historical relationship between rainfall timing and forage production amounts,” Diersen said.

He explains that producers can guard against low precipitation during insured intervals for localized grids specific to haying or grazing needs. Rainfall is grid-level and not farm- or ranch-level when measured.

Nov. 15, 2012, is the deadline to purchase or change coverage for the 2013 calendar year.

Diersen explains that the PRF-RI coverage available in South Dakota mirrors pasture rents (per acre) for grazing.

“The coverage is constant at $204.23 per acre for haying. In the event that precipitation is low during an insured interval, producers could use indemnity payments to replace income or to purchase replacement feed,” he said. “Unfortunately, the coverage does not increase should prices move higher during the insured year.”

Encouraging indicators at the state level suggest that PRF-RI would work well to manage forage production risk. In years with belowaverage rainfall in South Dakota, the hay yield was also often below average. In particular, notable drought years in South Dakota (1976, 1988, 2002 and 2006) had sharply lower rainfall totals and hay yields.

According to the Census of Agriculture, there were 23 million acres in permanent pasture and rangeland across South Dakota in 2007. PRF has been available in South Dakota since the 2007 crop year using a vegetation index, but only 540,000 acres were insured with PRF in 2012.

“As detailed in the crop insurance provisions, catastrophic coverage is not available for PRF. Thus, producers may also purchase Noninsured Disaster Assistance Program, or NAP, coverage for the pasture, rangeland, and non-alfalfa hayland,” Diersen said.

He says it is up to producers to decide whether the insurance is necessary and valuable. “The high subsidy rate likely gives the coverage value, but there are no absolute guarantees that precipitation shortages will always line up with forage needs,” he said.

Premiums for PRF-RI vary by county, type, coverage level, practice/interval, and grid location. Producers have to pick a coverage level from 70 to 90 percent of the grid base. A default to consider would be the 70 percent level as it has the highest subsidy rate. Producers also have to pick a productivity level from 60 percent to 150 percent of the county base. This allows for intra-county variability in soil type, grade and forage type.

Diersen explains that there are many ways to allocate coverage.

“Not all acres need to be insured. Selected acres are allocated across 11 two-month intervals. Intervals cannot overlap a given month. At most 70 percent and no fewer than 10 percent of acres can be in a single interval,” he said. “Ideally, a producer will know key months that a lack of precipitation would result in less forage production.”

For more information, interested insurable parties can contact a crop insurance agent or go on-line to the Risk Management Agency website at http://www.rma. usda.gov/. — WLJ

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