What Producers Need To Know About Rainfall Index And Pasture, Rangeland And Forage Insurance

The USDA Risk Management Agency developed the Rainfall Index Pasture, Rangeland and Forage (PRF) insurance program to provide coverage against lack of rainfall. 

Available in the 48 contiguous United States, PRF insurance was created because ranchers and hay producers were historically unable to insure their forage grown for grazing and haying. Given the high correlation between rainfall and forage production, PRF insurance indemnity payments to producers are intended to help producers offset the cost of purchasing replacement feed in the event that insufficient rainfall inhibits their ability to produce sufficient forage.

(Note that this type of insurance covers only established stands of perennial forages intended for either grazing or haying.)

[RELATED: Do You Need Annual Forage, PRF or LRP Insurance Coverage?]

What Is the Rainfall Index?

Unlike other crop insurance coverage options, PRF insurance coverage is based on rainfall rather than yields. This is because of potential discrepancies that may arise when trying to accurately measure forage production and the varying management practices that affect forage production and yield.

PRF insurance coverage is not based on how much rain a producer receives in their rain gauge. Instead, it is guided by the Rainfall Index, a measurement of how much precipitation a region receives compared to the long-term precipitation average for that area during a particular time frame. The Rainfall Index is based on rainfall totals and other weather data collected and maintained by the National Oceanic and Atmospheric Administration (NOAA) Climate Prediction Center. 

To measure rainfall totals at a producer’s operation, insurance providers will use precipitation data within the nearest applicable NOAA “Grid,” which measures 0.25° latitude by 0.25° longitude or about 17x17 miles.

The Grid used for coverage is based on where the producer’s acres are located and the acres allocated by intended use.The Grid’s Rainfall Index value is calculated based on rainfall data gathered at four NOAA climate reporting stations nearest the GRID’s center. Precipitation data is collected daily. 

Why Is the Rainfall Index Based on NOAA Data Instead of U.S. Drought Monitor Data? 

While the Rainfall Index is based on NOAA precipitation data, other rainfall measures and national drought assessments are tracked by  the U.S. Drought Monitor. A national map released weekly to show the latest drought locations and severity,  the U.S. Drought Monitor assesses drought conditions based on factors beyond just precipitation, including:

  • Soil moisture

  • Temperature

  • Vegetation health

However, although the Drought Monitor is a valuable tool, it doesn’t provide the specific precipitation data needed for PRF insurance calculations. PRF insurance assessments rely on NOAA data to provide consistent and reliable rainfall measurements, allowing farmers to receive payouts based on actual precipitation levels in their area.

How Does PRF Insurance Work?

To ensure lack of rainfall protection through the upcoming year (January - December), producers must select coverage by December 1 of the current year. 

Coverage is based on: 

  • Selected two-month intervals (also known as mini insurance periods)

  • Specific coverage levels 

  • County-based values, which are determined based on the intended uses for grazing and haying

Producers can choose insurance levels on individual PRF policies for coverage as high as 90% of the long-term precipitation averages for their area during their selected two-month intervals. They can also increase the county-based value by up to 150% to increase their forage value.  

Each county, rainfall Grid and two-month interval are individually rated and influence the program’s cost, as do the coverage level and productivity factor chosen by the producer.

Rainfall Index values are calculated and published about six weeks after the end of each two-month time period. An insurance indemnity is due if the Rainfall Index for a given grid triggers and the 2-month interval is below the producer's selected coverage level.

Indemnities are applied towards the producer owed premium. Once the premium is covered, a check is sent soon after Index values are announced. If premium is owed, premium is billed in September of the coverage year.

No loss adjustment is associated with the PRF insurance program because NOAA collects the rainfall data, and losses are not based on forage yields. Indemnity payments are paid more quickly than most crop insurance policies.

Watch Now: How Does the Rainfall Index Work?

In this video, FBN® Head of Livestock Mike Fanning, Ph.D,  PAS, explains:

  • How the Rainfall Index works 

  • Coverage timing

  • Indemnity payments 

Who Sells PRF Insurance?

The PRF Insurance program is sold by private insurance agents; coverage is guaranteed by private insurance companies and the USDA.The USDA also provides premium assistance by covering between 51% and 59% of the premium costs based on the producer’s selected coverage level.

[READ NEXT: What Is Margin Protection Crop Insurance?]

Learn More About PRF insurance

FBN Insurance agents have access to a privately developed PRF analysis tool to assist producers in determining optimal coverage and display the historical performance of a Grid. They can help you develop a comprehensive PRF insurance policy to protect your operation. And, because most FBN insurance agents are also livestock producers, they understand the unique challenges producers like you face.

To learn more about PRF coverage from FBN Insurance, complete the form below, click here, or call (866) 878-7133 to speak to an insurance agent today. 

The purpose of these materials 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.

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We are an Equal Opportunity Provider. FBN Insurance services are offered by FBN Insurance LLC (dba FBN Insurance Solutions Services LLC in Texas, and FBN Insurance Solutions LLC in California and Michigan). FBN membership is not required to purchase through FBN Insurance LLC, but certain features may only be available to FBN members. FBN Crop Insurance is currently offered in all U.S. states.

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