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Forage insurance a useful risk management tool

Pasture Rangeland Forage (PRF) crop insurance is a group risk policy that covers livestock grazing and forage land. In Texas PRF is based on a Rainfall Index. This insurance coverage is for a single peril—lack of rain.

An insurance tool introduced a few years ago to help manage risk associated with drought or a lack of rainfall in pastures and rangeland has the sales closing dates for the upcoming year set for September 30, 2011.

 Pasture Rangeland Forage (PRF) crop insurance is a group risk policy that covers livestock grazing and forage land, and in Texas it is based on a Rainfall Index. The Rainfall Index (RI) uses National Oceanic and Atmospheric Administration (NOAA) data and reflects how much precipitation is received relative to the long-term average for a specified area or grid and time frame.

Each grid covers an approximate 12 x 12 mile framework. You must select at least two, 2-month time slots where rain is important to your operation and your area. These time slots are called index intervals. Your insurance payments will be calculated based on the actual rainfall in the grid and how it differs from normal rainfall within the grid and index interval(s) you have chosen to insure.

When the final grid index falls below your “trigger grid index” (coverage level multiplied by the expected grid index), you will receive a loss payment. This insurance coverage is for a single peril—lack of rain. Coverage is based on the experience of the entire grid, not on individual farms or ranches or specific weather stations in the general area.


 

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