Grain producers have been able to protect their crops with insurance since the 1930s.
Now, forage producers have a similar tool.
During a March 7 forage production workshop, Andrew Frankenfield, an agronomy educator with Penn State Extension, talks about insurance programs for pasture, pasture and forage that are based not on yield, but on rainfall in a given area. The program allows producers to select a two-month time period throughout the year and if the area’s rainfall — as determined by the grid — is less than 90% of the average, a payout is issued.
Frankenfield said premiums are partially subsidized by the federal government, and although the program has existed for several years, it doesn’t appear to be widely used.
“It’s unique but I don’t have a good feeling about what’s holding it back. Maybe it’s because of a lack of awareness,” he said. “This is an easy program because you don’t have to count or report yields, which can be hard to do with hay.
“You’re insuring against the average rainfall in an area during different periods of the year.”
The lower the average rainfall over a given two-month period, the higher the payout. If the rainfall for a period is not less than 90%, no payment is issued. Frankenfield said producers can also select two-month segments that fall outside of the growing season.
The application deadline for 2023 is November 15, 2022, but manufacturers may consider applying next year.
While yields don’t have to be tracked under the program, Frankenfield says producers can adjust the range of their insured forage values. He said 100% to 150% of the crop value can be insured, which is beneficial for adjusting different types of forages if the county’s base value does not reflect the actual crop value.
“If we increase the value, that means higher premiums but also potentially larger payouts,” said Frankenfield. “If you think your alfalfa acreage is of greater value than the county’s baseline value, you can choose to insure up to 150% of its value.”
When choosing which two-month segment to list, Frankenfield says producers can review historical rainfall data to determine which period triggers the most payouts over time. Coverage area is defined by a 17 by 17 mile grid on the map.
While the protection is beneficial, there are still risks.
Frankenfield cites his own experience with the program and says in 2020 there was a lot of rain in the coverage period he chose, so no payment was accepted.
“It was not a good year for insurance because all the index values I chose were above 90%. But you had a good production that year, so you don’t worry about it too much,” said Frankenfield.
“I looked at the last 20 years’ worth and the number of times we had a trigger (less than 90%). Some period, August-September, half of the time we will have claims.
The insurable area must be perennial, hay or grazing areas, and federal subsidies cover nearly 60% of the cost of the premium, he said.
“It won’t make you whole, but I’d take a ton or two of extra hay on a good year instead of trying to collect insurance payments,” says Frankenfield. “But it is localized and can help in dry years. There is no work on your end once you sign up. There are no notes, bales or weights to count. It’s all about the rain.”