Webinar: What's Your Drought Risk? Data-Driven Pasture, Rangeland and Forage Insurance

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FBN Network

Oct 20, 2021

Hero Image: What's Your Drought Risk? Data-Driven Pasture, Rangeland and Forage Insurance

Don Moody and Gerold Stephens from FBN® Insurance discuss how Pasture, Rangeland, and Forage (PRF) insurance can help manage your forage needs and the perils to your operation from a lack of precipitation.

What you'll learn about PRF Insurance

In this webinar, Don and Gerold discuss:

  • What is PRF?

  • What are the different coverage options?

  • How does PRF work?

  • When does PRF pay out?

  • What tools exist to make PRF elections?

  • New updates to PRF

Watch now

Speak with an agent

Speak with an agent today to learn more about how PRF insurance could benefit your operation.

Webinar Transcript

Don Moody:

Hello, everyone. Welcome to a presentation brought to you by Farmers Business Network®. What we're going to talk about today is how to manage your forage needs and the peril of not enough precipitation.

With us today is Gerold Stephens. Gerold is an agent out of west central Missouri and he knows a fair amount about PRF pasture range, land forage, and also produces livestock himself. So he knows what we are talking about when we bring these things up. 

We're going to go over who we are. We're going to get into detail about what PRF or pasture rangeland forage protection is  and we’re going to talk a little bit about different coverage options, how they work, when a potential indemnity may occur and what would trigger it and what tools exist. 

So you can make an informed decision for your ranch. Never, ever accept a one size fits all unless it's a free ball cap.

There are always those infamous disclaimers. You need to know who we are and what we're liable and responsible for. Farmers Business Network was created several years ago to put farmers on a level playing field with the folks that buy our products. 

People in row crops are very familiar with us. That's where we got our start – Iowa, Illinois, Indiana, South Dakota, Nebraska places where row crops are very prevalent. 

We just started really getting serious about ranching. This last winter, we brought on one of the major players in pasture range, land and forage protection. On the insurance side, we also brought in a pharmaceutical company and a nutrition company, because again, we realized that agricultural production is a whole lot more than corn and soybeans. We really depend on cattle and the animals that graze our vast pasture lands within the continental U.S..

Specifically, we're the largest farmer to farmer agronomic and business network. We take a hundred percent anonymous data sharing and unbiased benchmarking. We do use the data on purpose and intentionally to develop better programs for you.

The producer also makes sure on the pricing side of things, which is not what we're going to talk about today at all. It's another part of our house, but that you are receiving fair prices for your commodities. Also paying fair prices for your inputs. 

We provide insight on farm practices, seed performance, and what's relevant today is maps and weather. We're doing everything we can to leverage network demand, to decrease input costs. We are available again for online purchasing but that’s another topic for another day. We're trying to come up with creative, innovative marketing options for farmers.

Look for more to come in the livestock arena. And we are local. There are more than 500 employees scattered across the lower 48 and we are also expanding into Canada. There's strength in numbers. It's not a new thing. Bargaining power. Think of your local ACE hardware store. 

The reason folks belong to that is because they can make better purchases controlling their bottom line and passing that on to consumers. We really are not that much different. If you look at some of our key partners, both on the retail wholesale side, both on the input in the marketing side is we try to do our best to best position you, the producer purchasing what you need to do, what you do to make a living, and then also get a better price for that. 

Please make the world your test plot, if you will. This was developed for probably a corn or soybean, but it's very, very applicable to ranch land. The weather is one of our main make it or break it's. It produces our yield and our yields. 

It's the pounds of beef produced per acre or the pounds of lamb, depending on what you utilize. Your forages for vegetative indexes are important. Crop moisture is important in some areas. Fertilizer is a very important thing to maintain the nutrition and the volume in the forages, and then the different things that go with it. 

This is where our membership currently is scattered. You know, we've talked earlier about the fact we started out in row crops that pretty much shows in the concentration through the ice states down in the Platte river valley and on up into, through the Dakotas, Montana and up into Canada. But as we get into livestock, you'll see this heat map change as we get into the plain states, Wyoming, Utah, New Mexico, Idaho, Nevada more than the Dakotas.

So we have agents scattered around the lower 48 to assist you with your risk management assessment and coming up with ways to address those risks. Again, today, we're going to listen to Mr. Stevens in just a moment. He covers a pretty good swath of real estate, but can't cover the whole lower 48. So this is kind of where our folks are our specialists, if you will, within crop insurance, PRF, LRP, DRP.

Gerold, thanks for bringing my attention to our map that we have our agent of the service maps. So we do have insurance professionals specializing strictly in crop forage and livestock insurance. You'll see where they're located, where our processors are located, where our managers are located. We have several agents that are licensed in the lower 48 covering from Pennsylvania all the way out to California, Oregon, Washington, Montana, Idaho, Wyoming. 

We have a gentleman in Arizona that ranches, actually two, that are very knowledgeable on the things mother nature can bring to in Nevada, Arizona, New Mexico, Utah. We are licensed and we are able to assist you wherever your need might be in the lower 48.

Gerold Stephens:

My name is Gerold Stephens. I'm a crop insurance agent with Farmers Business Network from Western Missouri. And we are going to talk about PRF. I'll take a chance here to say that PRF stands for pasture range, land and forage. It's a rainfall index insurance program that the RMA puts out and we're using rainfall as our yield and everything is based on historical data all the way back to 1948, where Noah has gathered rainfall data and for each weather grid across the entire lower 48. 

And that is how we come up with what your area should receive and rainfall on this slide. We're going to go through the PRF basics. We're going to keep it pretty high level. 

Step 1

First of all, in step one, we want to identify the acreage and whether it qualifies for this federal program which means that it has to be grazing ground or haying ground.

You're going to talk to your agent about what kind of intentions you have for that ground and whether we can sign it up in this PRF.

Step 2

We're then going to decide what coverage level is right for you in your operation. For example, if you pick a 90% coverage level, and I know Don's going to go through an example here in a few minutes, but if you pick a 90% coverage level, any rainfall underneath 90% in a two month interval is going to trigger a payment. 

Step 3

We're going to be looking at a really nice feature if you will, for this program, it's a multiplier. So then we can really adjust the type, adjust that coverage level and how much we're going to cover it anywhere from 60 to 150%. So, that again is pretty high level. Your agents can take care of you on that. 

Step 4

We're going to choose at least two, two month intervals and coverage. And it's important that we now mention that we make those two elections and have a signed application by November 15th for the 2022 crop year. 

And finally just hitting this lightly if any indemnity payments are to be after the premium is paid. Those payments are triggered 60 to 90 days after that interval ends. And that's, that's really nice because we're not waiting for the end of the year to get our insurance payments. If we're owed money, we're going to get those pretty close to the time that we actually experienced the lack of rainfall.

Don Moody:

That's a good point. Another nice point is you're not built for the coverage until barreled. It is August 1st, the bill is sent out, it's due September 1st and must be paid by November 15th.

Gerold Stephens:

If I remember correctly, September 1st and due by September 30th or must be paid by November 15th. 

Don Moody:

Thank you, sir. And again, the point being there is that it coincides when a lot of folks are selling their spring calves on the fall market. Absolutely.

Gerold Stephens:

This slide refers to the intentions that I was referring to earlier. The only two types of ground that we can use this program on is grazing ground and haying ground. It's important to note that all grazing ground is that you need to actually own the livestock to qualify for this. It's ground that you run him over and over and bail it, bail it up. 

And what the reason we have to identify one or the other is that the county-based values that RMA puts out that helps us, helps us determine how much we are insuring. Hay ground has worked a lot more than grazing ground. 

Don Moody:

Thanks, Gerold. Each county has a county-based value. That's set by the RMA based on university information, typically on what an acre of grazing or an acre of hay land is valued at in that county. And again, that's used to determine the coverage per acre. 

From there, we can do a production factor and really, if you take a step back and look at it, it's based on your land's ability to produce be it hay, or be it grazing, we can choose 1% factors from 60% to 150%. 

An example I give is I grew up in the Sandhills in Nebraska. The stalking rate on high hill ground out there can be as high as 20 acres per cow calf unit. If you've got metal ground that could drop down to five to 10 based on sub irrigation levels and this and that, and some different factors.

So there's quite a difference in, in acres ability to produce. And that's why that factor is there again, Gerold did a brilliant job talking about the coverage levels, if you will, those are your risk tolerance levels. It's what you want to self-insure, which would be your deductible. 

If you look at it that way, what do you want to defer to the insurance company? 90% is the highest level. So anytime as Gerold talked about the normal average precipitation in that selected interval falling below 90%, it would trigger an indemnity. 

You can select that all down to way to 70%. The point with it is there's two points, actually one, you have options. And two, the program ought to be a plan that works for you. It's definitely not one size fits all. We have a rate example there from Vernon County, Missouri, as an example, the county based value there's $270 an acre.

If you used a selected 90% of coverage level with 150% productivity factor, your coverage per acre would be $364 and 50 cents. That would be the indemnity I would receive if it did not rain at all. And we've got an example coming up, typically how it works. Every year the RMA announces new county-based value rates. We have lobbied as an example in Wyoming, the county-based value for irrigated hay land is not high enough to protect what you have at risk. 

We've lobbied aggressively for that. I don't know if we're gonna win or lose. We haven't seen the new kind of base values for 2022 come out yet. But the point being is that those do change up and down based on the information received by the RMA. Next, you'll talk about selecting the interval. You have to be into something that can't overlap.

You can't do January, February, February, March. You can't double down on a mat in a month, but you do have to have at least two intervals. There are tools and resources out there, again for you to make the best decision. You have to have at least 10% in an interval with no more typically than 50. 

In some areas, you actually can go up to 70%, but that would be a specific county and a specific state. Again, that's something your insurance professional would know and could show you. But again, you want to put the plan together that best protects the two things you depend on in forage production, which is haying and grazing. That's what this program is intended for. 

Here's an example on hay coverage, and we're going to keep way up in the weeds on this, on purpose there. This is an example of the formula that is used to determine your actual coverage. 

You know, the county-based value in this example, $116. The producer selected a 90% level. It's good, good ground produces well. So they select a production factor of 150%. And then their 50% plan would equal coverage of $78.30 an acre. You can do this by hand. It's tedious, it's painful. We have tools available as most agents do to make it an automated process, but you'll see in a moment it's still very visible or visual. 

Again, this would would be what potentially would trigger an indemnity. The average rainfall is 3.6 inches for that interval that was selected. They receive 1.6 which is roughly half that's where that 50% weighting came in from the previous slide. 

We have a protection of $78.30 acres. So you would apply the deficit of rainfall times the protection, which was $78.30 would leave you an indemnity of $34.80. It's applied towards  the premium first. And then after the premium is satisfied, it is applied or sent out to you in the form of indemnity. Next slide please. So we utilize data-driven elections. And what we mean by that is the RMA has been collecting average rainfall for each interval since 1948. There is a massive, massive amount of numbers out there.

Earlier, we showed you an example of how, since some things can be done longhand and they can, but it's far easier. In this example, we're looking at the state of Texas. These individuals grazing within the state of Texas they're in Sherman county and their ranch is actually predominantly in grid 1 9 6 1 4. Remember Gerold talked earlier, grids are 17 by 17 miles at the equator. 

They get smaller as you move north based on latitude and longitude. This particular individual decided to go with a 90% coverage level, 150% productivity factor. And then from there, this is how they split their coverages out. As you can see on the slide, they pick March, April, which might be a month when it's very much dependent on moisture to develop their grasslands for the upcoming grazing season. They also picked May June, July, August and those were the three animals they picked.

My hunch is it was based on when they have the need for precipitation to make or break their grazing year. And then from there, it tells us how that would work out. You know, their total indemnity potentially for this example would be $24,650. 

We have the ability to take the average rainfall, the different productivity factors, the different coverage levels and tailor make a program for you. And any agent that has the proper tools at their disposal.

But the point with it is, it is to make an informed decision based on the data that exists that best protects your forages, which is what you depend on to sell your lands or your cattle, depending on what you do. And given the fact, this is cattlemen, my hunch is it's probably going to be cattle. 

PRF updates the program changes every year. And what I mean by changes is every year the army analyzes their programs to see what could be done better. What's working, what isn't working and providing clarity. 

One of the things that's very important about an update that came out a year ago is you have to own the cattle or have an absolute interest in the production of the cattle. This program is for livestock producers, not investors, not real estate brokers.

It is for cattlemen, cattlewomen, to protect what they have. You have to make sure that things match up that the person that is utilizing the ranch land or grazing land also owns a cattle or has an interest in them. Things are based off. Locations are based on points of references.

For those of you that may farm you're used to use common land units to show where the land is. You're insured with PRF. We are in some states where the grazing lands are so vast. It's actually based on a point of reference on latitude and longitude. They've made some changes to continuous land, different grids, and different weather experiences. 

And a lot of ranches will straddle 1, 2, 3, 4 grids. If and again, we'll get into the weeds on a one-on-one, we're going to keep it high level, but the point being is there are ways to manage your risk there's ways to assess your risk. The RMA, that's almost a tongue twister, the RMA recognizes this and makes appropriate changes to it.

Again, to make it work legitimately best for the producer, but continuous land just simply means that you could have ranch land that starts in Cherry County, Nebraska, and goes across the state line up into Todd County, South Dakota.

We all know that mother nature does not pay attention to where state lines end and begin. And so if your home ranch and the predominant acres you produce are in Cherry County, Nebraska, and the land continuously goes up into Todd County, South Dakota, you would have the ability to pick the grid in Cherry County and cover the land up in South Dakota, where that would be an entirely different grid because they do start and stop on state lines. So anyway, more to come on that we can get into the weeds with. 

Again, this goes back to reporting land. If it is available the RMA and the different AIPs, which are approved insurance providers, are insurance companies approved by the RMA to provide the insurance for pasture range, land forage. 

If common land units are available or resource land units are available, that is what they would like to have. Some of you have to pay attention to native sod rules, Iowa, Minnesota, Montana, Nebraska, the Dakotas. But you're familiar with that. If you've been working with your FSA offices, there are times when you will be audited, and it's not like an IRS audit. It's actually called a compliance review. 

And what the RMA is wanting to do is to establish that (A) you do have an interest in the livestock and (B) you do have the legal right to utilize the forage production, be it hay, or be it pasture. And to do that, it's easily done feed receipts, sale barn receipts. Leases, it's not cumbersome. It's not a problem. It's not a bother, but again, it's something your licensed insurance professional. Mr. Stephens can help you with.

We kept everything at a very high level and reach out to Gerold on his email and his phone number (see slide). And those would be for folks in the state of Missouri, if you don't reside in the state of Missouri, we will have a toll free number for you. 

A live person will answer or call you back. We can put you in contact with an insurance professional in your region that can get into the weeds with it. But please remember it's a program brought to you by the RMA, which is part of the USDA. The RMA stands for the Risk Management Agency. They've been around forever. Typically they are known as the folks that provide multi peril, crop insurance, but a need was recognized about 12 years ago to provide risk protection for folks that depend on forages or on forages for their livelihood.

And that was the advent of pasture range, land forage production. If you live in South Dakota, North Dakota, Nebraska, Kansas, Oklahoma, Texas, New Mexico, there's actual annual forage production available.

Again, the premise is the same. You depend on acres for haying or grazing off annual forage as you plant there's protection available for that PRF is for perennials. That's going to be your perennial native grasses, typically on grasslands or improved pasture, but one's an annual perennial. 

Today, we talked specifically about the perennial coverage, but with that, hopefully we instilled some questions. We are here to help the programs be developed for your needs. And with that, I thank you for listening.


The purpose of the following material is to promote awareness of risk management concepts and to highlight risk management products, features, benefits and availability. This presentation does not provide full details of policy provisions or approved procedures. Producers should consult with a local agent for specific details and program requirements. Copyright © 2014 - 2020 Farmer's Business Network, Inc. All rights Reserved. "Farmers Business Network", "FBN", “FBN Direct”, "Farmers First" and the Farmers First flag logo are registered service marks of Farmer's Business Network, Inc.

We are an Equal Opportunity Provider. FBN Crop Insurance services are offered by FBN Insurance LLC (dba FBN Insurance Solution Services LLC in Texas, and FBN Insurance Solutions LLC in California and Michigan) and are only available where FBN Insurance LLC is licensed. FBN membership is not required to purchase through FBN Insurance LLC, but certain features are only available to FBN members. FBN Crop Insurance is currently offered in the following states: AL, AR, AZ, CA, CO, FL, GA, IA, ID, IL, IN, KS, KY, LA, MI, MN, MO, MS, MT, NC, ND, NE, NM, NV, NY, OH, OK, OR, PA, SC, SD, TN, TX, UT, VA, WA, WI, WV, WY.

Avatar: FBN Network
FBN Network

Oct 20, 2021