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, spoke about an insurance program for pasture, rangeland and forage that is based not on yield, but rainfall in a specific area. The program allows producers to select two-month time periods throughout the year and if the rainfall in the area — as defined by a grid — is less than 90% of the average, a payment is issued.
Frankenfield said the premiums are partly subsidized by the federal government, and although the program has been around for a few years, it doesn’t appear to be widely utilized.
“It is unique but I don’t have a good sense of what’s holding it back. It could be a lack of awareness,” he said. “It’s an easy program because you don’t have to calculate or report yields, which can be difficult with hay.
“You’re insuring compared to average rainfall in an area during different periods of the year.”
The lower the average rainfall is during a particular two-month period, the higher the payment. If the rainfall for a period isn’t less than 90%, no payment is issued. Frankenfield said producers can choose two-month segments that are outside of the growing season as well.
The sign-up deadline for 2023 was Nov. 15, 2022, but producers can consider enrolling for next year.
While yield doesn’t have to be tracked under the program, Frankenfield said producers can customize the value range of their forage that is insured. He said 100% up to 150% of the crop’s value can be insured, which is beneficial to fit a variety of forage types if the county base value doesn’t reflect the true worth of the crop.
“If we increase the value it means a higher premium but also a potentially larger payout,” Frankenfield said. “If you think your alfalfa acreage has a greater value than the county base value, you can choose to insure up to 150% of the value.”
When it comes to choosing which two-month segments to enroll, Frankenfield said producers can review historical rainfall data to determine which periods trigger the most payouts over time. The coverage areas are defined by 17-by-17-mile grids on a map.
While the protection is helpful, there is still risk.
Frankenfield cited his own experience with the program and said in 2020 there was ample rainfall in the coverage periods he selected, so no payment was received.
“That was not a good year for the insurance as all index values I selected were above 90%. But you had good production that year, so you don’t really worry about it,” Frankenfield said.
“I look at the past 20 years of values and how many times we had a trigger (less than 90%). Some periods, August-September, half the time we would’ve had a claim.”
Insurable acreage has to be a perennial area, hay or grazing, and the federal subsidy covers almost 60% of the premium cost, he said.
“It’s not going to make you whole, but I would take an extra ton or two of hay in a good year rather than trying to collect the insurance payment,” Frankenfield said. “But this is localized and can help in a dry year. There is no work on your end after you sign up. No records, number of bales or weight to calculate. It’s all about rainfall.”