"Drought is something we can't get away from. We don't know how far out the next rains are."
Pasture, Rangeland, Forage, otherwise known as PRF, is a Pilot Insurance program through the USDA that allows Cattlemen to buy insurance coverage on their pasture, rangeland, and/or forage acres to provide protection against lack of rainfall. The program is based solely on precipitation, known as the Rainfall Index, and is designed to provide protection from lack of rainfall which results in increased costs. For owners of a PRF policy, not getting enough rain in their grid means receiving a check and/or a premium credit from the insurance company. Not enough rain means you get paid. It’s really that simple. Since the policy is based off of rainfall alone there is no need to turn in any production. The only verification needed is that the land covered in your policy is owned or rented by you.
Why is this policy important? In any business there are the costs you see and the ones you don't. For example, if you do not get the rain you need for your ground to be productive you may have to buy more feed, buy more hay, or sell your cattle when market conditions are not right and/or the weight is down. Those expenses are real. The PRF policy is there to offset some of those costs.
How does this policy work? Producers must choose at least two, two-month periods when precipitation is important for forage growth for their operation. These periods are called index intervals. (See bottom of page for the interval breakout.) RMA (Risk Management Agency) uses NOAA CPC data to calculate normal precipitation and deviations from normal precipitation. RMA uses NOAA precipitation data based on the Optimal Interpolation methodology. Interpolation is based on the idea that things closer together in space are generally more similar than those farther apart and it estimates precipitation for a grid using reporting stations within a search radius around the grid.
A grid is the physical area under which your operation is insured. You are paid based on the losses interpolated to the grid for the Rainfall Index, which is why it is important that you choose the right grid(s) in which your operation is located. When the interpolated precipitation falls below average for the index interval, it triggers a loss payment to all ranchers who have signed up for the program in the grid that are covered under this interval. Producers do not need to submit a loss claim or notify their agents. RMA calculates any loss and your insurance company processes any indemnity due. Losses are calculated based on whether the current year’s precipitation in a grid has deviated from normal compared to the historical normal precipitation in the same grid, for the same period. Losses are not based on a single ranch or a specific weather station in a general area.
Some folks have a NAP policy with the FSA. You are able to have both a NAP and a PRF policy. There are several advantages to a PRF policy. The biggest is how often PRF pays out. PRF pays out within two months after your interval closes. With NAP, you will have to wait until the following year. If a drought impacts your cash flow, the sooner you get an injection of cash the better.
The RI-PRF program uses NOAA CPC, gridded, daily, interpolated, precipitation data. The gridded precipitation data is obtained for the following 11 2-month time periods, referred to as index intervals, during a year for each grid ID. Historical NOAA CPC gridded data from 1948 to present is also obtained for each index interval and grid ID:
• January and February
• February and March
• March and April
• April and May
• May and June
• June and July
• July and August
• August and September
• September and October
• October and November
• November and December