The Pasture, Rangeland, and Forage Rainfall Index (PRF-RI) stands as a significant crop insurance offering that has been somewhat overlooked by Illinois livestock and forage producers. With only 6% of eligible acres insured in 2024, it presents a valuable opportunity for those in the Midwest. This index insurance is heavily subsidized, offering a potential return of $1.29 for every $1 in producer-paid premium over time.

Unlock the Potential of PRF-RI for Illinois Livestock Producers

PRF-RI Use in Illinois

Since 2016, PRF-RI has been available as a risk management tool for Illinois producers. According to the 2022 USDA Agricultural Census, the state has a substantial amount of pasture and hay production land. Roughly 742,000 acres are dedicated to pasture, and 473,000 acres are harvested for hay. However, in 2024, only about 70,000 acres were enrolled in PRF-RI, indicating that less than 6% of eligible forage land is taking advantage of this subsidized program. As shown in Figure 1, this participation rate is notably lower than in states west of the Mississippi River.Only around half of Illinois counties have any forage acreage enrolled in PRF-RI, as depicted in Figure 2. The top five counties with the highest enrollment rates include Hamilton (27%) and Jefferson (24%) in southern Illinois, Kendall (27%) and Grundy (23%) in northeast Illinois, and Hancock (20%) in western Illinois.Figure 3 reveals the total acreage enrolled in PRF-RI by coverage level in Illinois. The 85% and 90% coverage levels are the most popular, with the 90% coverage level experiencing the largest growth in acreage. Of the 70,000 acres enrolled in 2024, 74% were at the 90% coverage level.

How PRF-RI Works

PRF-RI is designed to safeguard livestock and forage producers against below-average rainfall that can reduce forage production. It covers perennial pasture, rangeland, and forage but not annual forage. This index insurance operates based on a grid system, where each policy is tied to a specific 0.25° latitude by 0.25° longitude grid (approximately 17 miles by 13 miles in Illinois). Rainfall index values are calculated using a weighted average of nearby National Oceanic and Atmospheric Administration (NOAA) weather stations and are compared to historical average rainfall in that grid.Producers have several decisions to make when participating in PRF-RI. They must choose the number of acres to insure, whether it's for haying or grazing (with different premium costs and potential indemnity payments). If choosing hay production, they also need to specify if the acreage is irrigated or Certified/Transitional Organic. The coverage level determines when an indemnity payment is triggered, with options ranging from 70% to 90%. Higher coverage levels come with higher premium costs and different subsidy levels. Producers can adjust the covered value of their forage by setting a productivity factor between 60% and 150%, which adjusts the coverage level relative to the county base value.For example, if the county base value is $100 per acre, a 90% coverage level and a 125% productivity factor would result in a protection amount of $112.50 per acre. Additionally, producers must choose two-month intervals for insurance against low rainfall, and the percentages of value placed in each interval must sum to 100. This helps minimize risk by reflecting the importance of different month intervals for forage production.

PRF-RI Performance

Figure 4 showcases the producer gain ratio over premium for PRF-RI from 2016 to 2023 in Illinois and the total U.S. The producer gain ratio is calculated by dividing total indemnities by total producer-paid premium. An average ratio of one means producers receive the same in indemnities as they pay in premiums. In Illinois, producers received $1.29 in indemnities for every $1 spent on premiums, which is lower than the U.S. average of $2.18. However, it's important to note that the ratio varies from year to year. In fewer than half of the years, Illinois producers paid more in premiums than they received in indemnities.

Summary and Further Information

PRF-RI insurance is a subsidized product with potential benefits for Illinois livestock and forage producers. It provides a chosen level of protection against precipitation loss. While it's not a standalone risk management strategy, it should be used in conjunction with other practices like forage diversification and improved grazing management.PRF-RI insurance can be purchased through authorized crop insurance agents. The enrollment deadline is December 1 of the prior year, and the premium payment deadline is September 1 of the following year, so premiums don't need to be paid upfront. The USDA Risk Management Agency offers more information and an interactive decision tool for exploring grids, policy options, and historical rainfall indices.Pasture, Rangeland, and Forage Rainfall Index Insurance: An Insurance Product for Illinois Livestock and Forage Producers was originally published by Farmdoc.