Time to buy range insurance is nowWritten by Jennifer Womack
Newcastle – Landowners interested in purchasing Pasture, Rangeland and Forage (PRF) insurance, a USDA Risk Management Agency program offered by approved local crop insurance agents, have only a month to finalize their plans and make their purchase for the year.
“With the passing of the 2009 Farm Bill it is now required for all producers to insure 100 percent of their property whether its sugarbeets, corn or rangeland,” says Clyde Bayne, a rancher and an insurance agent with Mountain West Farm Bureau’s Newcastle office. “Without insuring 100 percent they will not be eligible for disaster payments going into 2009. Producers who wish to participate need to have insurance through the federal crop insurance plan or the Farm Service Agency.”
Requirements to purchase the insurance are coupled with a subsidized insurance rate. “A producer will pay 49 percent of the true premium,” says Bayne. This marks the second year the insurance program has been available in Wyoming. It was approved in May 2007, but wasn’t funded until September of last year. Bayne says that left agents with only about three weeks to get it “on the ground.” He’s hopeful more producers will learn about the program and be able to take advantage of it for the 2009 crop year.
Shawn Miller with Buffalo-based Hub International says landowner response to the insurance has been strong in his community. He says most of his customers have made the switch from the old program to PRF.
PRF is a group risk policy that covers livestock grazing and forage land. It is based on a Vegetation Index. The Vegetation Index uses the Normalized Difference Vegetation Index (NDVI) data from the U.S. Geological Survey Earth Resources Observation and Science data center. The NDVI is an alternative measure of vegetation greenness and correlates to vegetation conditions and productive capacity. In general, healthier plants are given the higher NDVI value. Losses calculated using the Vegetation Index are indemnified based on the deviation from normal.
“Satellite images are used to detect the greenness of grids which closely correlate to the vegetation conditions in those grids,” says Bayne, noting that each block in the grid is 4.8 square miles. “When the grass is green we have plant growth. When it turns brown we do not have plant growth, what a simple concept. The grids are independent of other grids in the producer’s county. The plant growth that is in the foothills of a county will be independent of the growth in a dryer area of the county. Basically a producer is judged on what happens on his grid and a producer 20 miles away is judged only on his grid. This will create indemnities that accurately represent what happens in their grids.”
“I like that individuals are not making the decision if we’ve had losses,” says Miller of the more science-based approach that minimizes the chance for human error.
Bayne says producers who participated for the 2008 growing season are seeing the program function as intended. Producers with diminished production received a payment for the first growing index of April through the end of June. Those in northern Wyoming, he says, where conditions were favorable this past spring, did not receive payment. With second growing index payments due out soon Bayne anticipates more indemnities.
“I would encourage all producers, regardless of who they go to, to buy the 90 percent trigger,” says Bayne. “That means that at a 10 percent deviation from normal you start to receive payment back. The whole point is to minimize impact and risk.” Bayne says the quicker producers see payments come back the more beneficial the program becomes. Comparing it to a low deductible on home or car insurance, Bayne says, “Let RMA or the insurance contract absorb as much risk as possible.”
Cost, says Bayne, varies by county but begins at less than a quarter an acre. Producers leasing grazing land can purchase the insurance on leased land if they have a written lease. He says that includes state leases and some federal leases.
As to the value of the insurance, Bayne uses his own ranch as an example. “On my place I would have had $400,000 more to work with if they’d have had this program in 1999. That’s on a 12,000-acre ranch.” Bayne adds, “One bad year in 10 like we had in 2004 will pay over 10 years worth of premiums.”
“Don’t wait until Dec. 1,” says Bayne. “Depending on the size of your property it has sometimes taken me up to six hours to write a policy.” Renewals, he says, are fairly simple to put forth.
“This is what ranchers have needed instead of averaging the entire county,” says Bayne of PRF. “I am seeing the program doing what it was intended to do — providing an accurate measurement of the rangeland on each individual rancher’s property. This is what ranchers have needed instead of averaging with their entire county.” The averaging approach, in 2005 under a different program, left drought-stricken Johnson County ranchers without the risk management they believed they had in place.
“It’s a better program,” says Miller. “It’s more accurate and focused at the producer level.”
“I believe this program has the potential to be one of the most powerful risk management tools because of its flexibility for each individual rancher,” says Bayne.