Pasture, Rangeland, and Forage

1

• Pasture, Rangeland, and Forage
• Rainfall Index Insurance

Jayson K. Harper Professor of agricultural
economics Department of Agricultural Economics
and Rural Sociology The Pennsylvania State
University Penn State is committed to
affirmative action, equal opportunity, and the
diversity of its workforce
2
Multi-Peril Crop Insurance (MPCI)

• Objective - provide protection options that will
  make it possible for producer to survive a
  disaster and return to profitability
• USDAs primary risk management program
• Highly subsidized by USDA (about 2/3 of total
  cost)
• Flexible program designed to meet the needs of
  individual farming operations

3
Crops covered by MPCI in Pennsylvania

• apples (43)
• barley (54)
• processing beans (10)
• cabbage (1)
• corn (grain and silage) (66)
• forage production (29)
• forage seedling (13)
• grain sorghum (57)
• grapes (1)
• green peas (10)
• nursery (67)
• oats (66)

• peaches (23)
• pears (1)
• potatoes (10)
• soybeans (49)
• fresh-mkt. sweet corn (67)
• processing sweet corn (12)
• tobacco (3)
• fresh-market tomatoes (4)
• processing tomatoes (12)
• wheat (57)
• winter squash (2)

4
Insurance Products Available

• Actual Production History (APH)
• Catastrophic (CAT) Coverage
• Crop Revenue Coverage (CRC)
• Index Income Protection (IIP)
• Dollar Plan (Dollar)
• Whole-farm revenue coverage (AGR-Lite)
• Group Risk (GRP)

5
Rainfall Index Pilot Program

• Group Risk Program available in select counties
  in Colorado, Idaho, Texas, North Dakota, South
  Carolina, and Pennsylvania

6
New in 2007Pasture and Forage Pilot Programs

• Rainfall index- Southwestern PA
• Vegetation index- Northeastern PA

7
Pasture, Rangeland, and Forage Rainfall Index
Insurance-- Program Overview

• GRP program
• Goal utilize an existing policy type
• Capitalize on current program familiarity
• Increase marketability and effectiveness
• The resulting design is based on the principles
  of the existing GRP program

8
Rainfall Index

• Why use an index?
• Lack of actual producer/industry production data
• No consistent and sound methodology for measuring
  production for the crop
• The deviation from long-term normal precipitation
  is used to establish the index
• SINGLE PERIL COVERAGE
• Precipitation has a high degree of correlation to
  forage production

9
Data for Rainfall Index

• NOAA data
• Primary index difference
• Based on NOAA data and NASS county yields
• Widely used and dependable source of
  precipitation information
• Long data history since 1948
• Consistent and universal coverage through a
  uniform grid system
• Grid boundaries vs. county boundaries

10
Choice 1 Forage Types Covered

• Pasture/Grazingland
• Established acreage of perennial forage
• Intended for grazing by livestock
• Acreage must be suitable for grazing
• Hayland
• Established acreage of perennial forage
• Intended for haying
• Acreage must be suitable for haying
• Program covers all types of grazing and haying
  forage (i.e. not just for alfalfa)

11
Choice 2 How much acreage can I cover?

• Not required to insure 100 of acreage
• Forage utilized in the annual grazing or hay
  cycle can be insured without insuring all acreage
• All acres within a property may not be
  productive, e.g., rocky areas, submerged areas
• Provides additional flexibility for the insured
  to design the coverage to his specific needs
• Because the program is a group program and other
  programs are not available, there is no
  opportunity to move production

12
Advantages of Program

• Flexible- separate index intervals
• Covers predominant peril- rainfall
• Timely payment of indemnities- individual loss
  adjustments not needed
• Easily understood Index
• Production records not required

13
Choice 3 Index Intervals

• Multiple intervals offered 6 (starts in
  February/March)
• Crop year divided into 6, 2-month intervals for
  each grid
• Similar cropping practices
• Ability for producers to manage appropriate
  timing risks
• Match individual growth patterns and production
  seasons
• The 2-month intervals provide for greater
  reaction to precipitation events vs. a yearly
  average

14
Index Intervals

• INDEX INTERVALS START DATE END DATE
• Index Interval I February 1 March
  31
• Index Interval II April 1 May 31
• Index Interval III June 1
  July 31
• Index Interval IV August
  1 September 30
• Index Interval V October 1 November
  30
• Index Interval VI December 1
  January 31

I
II
III
IV
V
VI
15
Choice 4 Coverage Levels

• Percentages available 90, 85, 80, 75, and 70
• Consistent with other GRP programs
• Catastrophic Risk Protection (CAT) not currently
  available
• Producers are still eligible for NAP coverage

16
What you need to do Find your insurance grid

• Area of insurance 0.25 grids
• Grids vs. County
• Grids are approximately 12 x 12 miles in size
• Provides for a consistent program across the
  United States
• Counties vary in size, but the grids do not
• Grid size reduces basis risk vs. county size
• Allows for closer correlation to individual
  experience
• Grids will cross county and state lines

17
Determining Grid ID(s) Basic Steps
http//prfri-rma-map.tamu.edu/

• Type in the city and/or county name where your
  property is located
• Select the city or county from the possible
  matches, a topographic map for the area will be
  displayed
• Narrow the search by selecting an area near the
  actual location of your property
• Once you have located the general area, it is
  recommended you continue to refine the search by
  switching to the photo maps
• Using the topographic map, photo map, or
  combination of both, choose an appropriate
  resolution for proper identification of the
  property boundaries and corresponding Grid ID(s)

18
Topographical Maphttp//prfri-rma-map.tamu.edu/
19
Photo Map (http//prfri-rma-map.tamu.edu/)
20
Determining Grid ID(s) Additional Steps
http//prfri-rma-map.tamu.edu/

• Select one point of reference on your property by
  moving the cross marker () to that location
• Grid ID is listed at the top of the screen (and
  on the map itself)
• A Print Icon is in the lower right hand corner of
  the screen
• This printed map can be used as a record to
  verify the Grid ID
• Once printed, the property boundary can also be
  outlined and initialed by the insured for
  verification purposes
• To obtain insurance you must certify the point of
  reference

21
PRF - Rainfall Index Decision Tool
http//agforceusa.com/rma/ri/prf/dst

• Not required to buy insurance
• Provides estimates
• Values are based on current information to derive
  historical estimates of indemnity, premium, and
  subsidy numbers
• May not match the official figures released by
  FCIC in past years
• Contact a qualified insurance agent for actual
  premium quotes

22
Decision Tool Examplehttp//agforceusa.com/rma/r
i/prf/dst
Selections made by by user ?

• Data on
• county base
• value and
• subsidy

Acreages assigned by user ?
? Data on Insurance cost and indemnities
23
Should I buy crop insurance?

• Yield variability
• Cash flow requirements
• Self insurance
• CAT coverage
• Premium discounts for higher levels of coverage
• Whole-farm coverage (AGR/AGR-Lite)

24
Sales closing dates

• JANUARY 31-- AGR insurance
• MARCH 15-- spring seeded crops
• MAY 31 nursery crops
• JULY 31-- forage seedings
• SEPTEMBER 30-- fall seeded crops
• NOVEMBER 20-- fruit crops
• NOVEMBER 30-- GRP insurance
• For more information, visit the
• Penn State Crop Insurance Education Web Site
• http//cropins.aers.psu.edu