vious similar situations relative to the projected condition of the ONI. The National Weather Service
makes long-term predictions. Go to
weather.gov and search for Cli- mate Prediction Center. Once you have reached National Weather Service Climate Prediction Center page, navigate to Outlooks (Fore- casts) in the left column and click on Products. There are also other free and
paid forecasting services. However, the farther out a prediction, the less reliable the forecast. Beyond 6 months in the future, the prob- ability of above- or below-normal precipitation is usually equal. Insure the intervals with the
highest probability of having be- low-average precipitation based on reputable forecast and the historic effect of ONI on the index value for the grid in which you are interested. Insuring all intervals evenly will
slightly decrease the risk of paying a premium in a single year but greatly decreases the long-term net return. PRFI helps to protect livestock
producers from lost income as a result of drought that reduces car- rying capacity and livestock sales. It does not protect the producer from the vagaries of the market which often work against producers who have been forced to liquidate live-
stock because of drought in a down market. However, PRFI when used to
offset lost income as a result of light- to-conservative stocking rates can reduce exposure, because reduced stocking rates decrease the need to sell animals in a drought. Using this strategy, except dur-
ing exceptional drought, producers should be able to maintain their herds with little additional feed cost and receive an insurance pay- ment that would compensate for reduced income as a result of hav- ing a smaller herd. In above-average rainfall years
they can use the additional forage for range improvement. Or they can purchase stockers or lease grazing to other producers and use the in- come to pay the premium. PRFI is a good investment that
can be made better by wise deci- sions regarding the coverage level, protection factor and distribution of coverage across intervals. It can help reduce management
decisions and exposure to down markets often associated with a drought. Finally, and perhaps most im-
portantly, it can help justify a range management program that will maximize the benefi t of every drop of rain that falls on a ranch.
Simple Guide to Pasture, Range and Forage Insurance Stock lightly and buy PRFI
• Distribute acreage according to expected rainfall, particularly as that distribution is usually affected by anticipated El Niño or La Niña conditions.
• Coverage level is like the deductible on a homeowner’s policy and ranges from 70 to 90 percent of normal rainfall. Higher coverage levels have higher premiums and lower subsidy rates.
• Choose the coverage level that matches the level of risk you want to assume and the amount of premium that you can afford to pay.
• Protection factor is like the valuation of the property on a homeowner’s policy and ranges from 60 to 150 percent of the county average.
82 The Cattleman October 2013
thecattlemanmagazine.com
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