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PRF insurance for ranchers

PRF insurance, which stands for pasture, rangeland, forage insurance, is a program designed for ranchers to ensure the grassland that they graze cattle on and own and operate. This insurance program is subsidized through the USDA and covers moisture and rainfall index.

Ranchers can choose their coverage level, which can range from 70% to 90%. If the rainfall during a two-month interval falls below the chosen coverage level, the PRF insurance will trigger and provide indemnities to the ranchers.

The PRF insurance program is heavily subsidized by the government, with about 50% of the premium being covered by the government. The program is a small portion of the overall crop subsidies provided by the government. For example, in the farm bill, which has a total of $428 billion allotted to it, PRF insurance only accounts for 5% of the total.

The coverage provided by PRF insurance is measured per acre, and ranchers can adjust their premiums based on the number of acres they want to ensure. However, adjusting the premium will also affect the payout on the backside, meaning ranchers may receive less in return if they choose to insure fewer acres.

In terms of participation, Kansas, South Dakota, and Wyoming have relatively small portions of ranchers on the PRF program. In Kansas, about 2.9% of all PRF policies are held, while South Dakota and Wyoming have 2.75% and 2% respectively. Red Summit Advisors, insures 20% of acres nationwide, with most of their coverage being west of the Mississippi.

The coverage allocation is done through a software program that divides the country into grids. Each grid is about 2,500 by 2,500 latitude and longitude. Ranchers can allocate their acreage to different grids depending on their performance and average rainfall. The grids are predetermined and outlined, and the software allows ranchers to choose and visualize their coverage on the grids.

The software used by Red Summit Advisors, called multi-grid, allows them to run different scenarios and results to determine the best coverage for each operation. The customization of the policy also depends on the producer's risk tolerance and budget. Ranchers can customize their policy based on the premium they want to spend, with a cap on the maximum amount. However, choosing a lower premium may result in a lower payout on the backside.


Crop insurance pays premiums first

One key aspect of PRF insurance is that it pays premiums first. This means that when a rancher signs up for the program, they do not have to pay the premium upfront. Instead, the premium is deducted from any potential indemnity payments they may receive in the future.

The premium is paid directly to the USDA's risk management branch, known as RMA. This ensures that the premium is taken care of before any other payments are made. It takes RMA approximately 75 days to complete their estimates and issue checks to producers who have netted in a given interval.

By paying the premium first, ranchers are able to allocate the remaining funds as they see fit, such as investing in infrastructure like pipelines or tanks, drilling wells, buying hay, purchasing replacement heifers, or leasing more grass. This flexibility allows ranchers to make strategic decisions that can benefit their operations and help them recover from any losses.

It is important to note that the effectiveness of PRF insurance may vary depending on the state and the specific grid the rancher is located in. Some people assume the program only works in dry states like Nevada, Arizona, or New Mexico. However, it can also be effective in places like Kansas and eastern Oklahoma, where rainfall averages may be higher but still provide opportunities for coverage.

In order to sign up for PRF insurance, ranchers must submit their applications by the December 1st deadline. The process is relatively simple, with the rancher providing some basic information and completing an acreage report. The acreage report allows the rancher to specify the premium they want to pay based on their budget and needs. It is important to note that the premium for the upcoming year is not due until September of that year, giving ranchers the opportunity to see how the program works and make informed decisions.


PRF insurance is beneficial but imperfect

However, PRF insurance is not without its flaws. One of the downsides mentioned is the possibility of missing an interval that was historically dry but is now wet. This can result in ranchers paying premiums for coverage they do not actually need. Additionally, the accuracy of rain stations and their proximity to a rancher's grid can vary, leading to discrepancies in the reported rainfall and the actual conditions experienced on the ranch. This can be frustrating for ranchers who may be paying premiums based on rainfall measurements that do not accurately reflect their own circumstances.

Another imperfection of the PRF insurance program is its reliance on historical data. While looking at a 20-year projection can provide a well-rounded view of different moisture levels and intervals, it does not guarantee accurate predictions for the future. Weather patterns can change, and unexpected disruptions can occur, making it difficult to rely solely on historical data for decision-making. Even with access to a weather forecast from a reliable source, Austin still primarily relies on his 20-year history when setting up coverage. This highlights the limitations of predicting the weather and the uncertainty that comes with it.

Despite these imperfections, PRF insurance will likely stick around. The government recognizes the importance of food production and the need to support farming and ranching operations. PRF insurance is just a small fraction of the subsidies allotted to the agricultural industry. While there may be some changes to the program, such as clarifications on livestock records, the overall existence and support for PRF insurance is expected to continue.


FSA program benefits cattle producers

The FSA (Farm Service Agency) program offers several benefits to cattle producers. One of the main benefits is the ability to receive financial support in the form of loans and subsidies. This support can help producers cover the costs of purchasing and maintaining their herds, as well as other expenses related to their operations.

Additionally, the FSA program provides producers with access to resources and information that can help them make informed decisions about their businesses. This includes assistance with paperwork and documentation, such as brand inspections and livestock sale receipts. By ensuring that producers have the necessary documentation, the FSA program helps protect them from potential audits and legal issues.

The FSA program allows producers to participate in other programs, such as the NAP (Noninsured Crop Disaster Assistance Program). This program provides financial assistance to producers who experience crop losses due to natural disasters or other qualifying events. By participating in both the FSA program and the NAP program, producers can maximize their financial support and mitigate the risks associated with their operations.

It is important to note that not all producers may benefit from the FSA program. Each producer's situation is unique, and it is crucial to assess whether the program aligns with their specific needs and goals. The FSA program provides a free consultation service where producers can discuss their operations and determine if the program is a good fit for them.


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