Ranchers are no strangers to praying for rain, but updated insurance options may help them sleep a little easier in those seemingly endless dry months.
Steve Redd, owner of Redd Summit Rangeland Insurance, gave an overview of Pasture, Rangeland and Forage Insurance during the 2021 Kansas Cattlemen's Association Convention.
“Speaking generally, as ranchers we’re independent,” Redd said. “We believe in digging ourselves out and we’re not interested in handouts. That said, we like playing at a level playing field.”
Despite being independent by nature, Redd said ranchers are not on an island, and can be significantly impacted by things like global trade negotiations.
“So the question is are we really playing on a level playing field, and are there tools available to help level it just a bit?” Redd asked.
Redd said while options like the Noninsured Crop Disaster Assistance Program through the FSA are good for catastrophic years, they are not game changers like PRF insurance.
“It’s a totally different animal,” Redd said. “What makes it different from insurance products is the consistency of it. It’s not just for disasters. Over the last 15 years, coverage for most of the counties you live in would have paid you 80% of the time.”
While these consistent payouts wouldn’t be viable for traditional insurance companies, USDA’s involvement in the PRF program makes them possible.
The PRF program sets a base value per acre for grazing area, and allows ranchers to buy between 60-150% coverage. Rainfall for ranchers’ land is determined through a smoothing process across a roughly 12 acre by 17 acre area, based on rainfall reports from four National Oceanic and Atmospheric Administration weather stations. Ranchers can buy coverage in two-month intervals.
“You’re not insuring the whole year,” Redd said. “You can have insurance that covers the whole year, but it's more like having many tiny policies. So for instance if February to March is dry below 90% of the 70 year average, it will trigger a payment. Let’s say from April on it was really wet. That doesn’t erase the fact that it was dry and triggered a payment earlier. That’s one of the major things that makes it work.”
Redd said that while there are 17 million acres eligible for PRF insurance coverage in Kansas only 11% is actually insured.
“Per acre over the last 15 years, the average ranch in Kansas, if you lumped all the counties together, would come in at just under $5/acre payment to them,” Redd said. “So if that was a 1,000 acre ranch, it's $5,000. But if it's 10,000 acres it’s $50,000, right? The lowest county is Ford. The highest at the moment is Phillips. That just has to do with USDA determining how much your grass is worth in each county. So the average ranch in Kansas that was 5,000 acres would net $2,300 by being a part of this.”
While in some years ranchers may not see a return on investment, more often than not they will.
“This is not a hand out,” Redd said. “It’s only available to those willing to put a little skin in the game, but it is an awful lot like owning 8 or 9 horses in the race.”
PRF insurance is available to the person with production risk for cattle, regardless of if the land is owned or rented.
“This was designed for cattle producers, not to make landlords rich,” Redd said. “The idea is for cattle producers, the people who actually have the risk. It doesn’t matter whether it’s state, federal, or tribal land.”
Ranchers interested in coverage for 2022 must sign up by the Dec 1 deadline.
“The difference for me, personally, is when I was looking at my own cattle operation in the markets, the chart on my ranch was much more consistent than my financial past,” Redd said. “Some people will go into this blind thinking they’re taking a big risk, but we can show you exactly what you’re getting into. You’re not taking anything but a well-defined risk that’s heavily stacked in your favor.”