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Annual Forage
Annual Forage (AF) is a policy backed by the Risk Management Agency (RMA). AF covers annually planted forages such as wheat, triticale, rye, corn silage, sorghum silage and haygrazer. AF uses a Rainfall Index (RI) to determine losses as indemnities are triggered when rainfall is below a trigger for a particular time interval.
How Does AF Work?
The AF policy uses the same grids as the Pasture, Rangeland, and Forage (PRF) policy. These grids are approximately 17 miles north-south by 14 miles east-west. To be exact, that is a 0.25 degree square of latitude and longitude. Rainfall inside the grid is used to determine if an indemnity is to be paid. The rainfall is compared to the long-term average for that grid over a certain two-month time period for a particular season.
AF coverage is divided into 12 growing seasons for each crop year with the first one being August and the last being July. Inside of these growing seasons, coverage is divided into six intervals which are two-month periods. Depending on the state and growing season, either 40% or 50% can be the maximum coverage available for a certain interval. The intervals for a growing season cannot overlap.
How Much Am I Insuring?
RMA publishes County Base Values (CBV) for each grid and county in the AF program. A producer can choose to insure from 70% to 90% of the CBV in 5% steps (70, 75, 80, 85, 90). The coverage level also determines the trigger for the indemnity. So a 75% coverage level would trigger at 75% or below of the average rainfall for a two-month interval while a 90% coverage level would trigger at 90% or below of the average rainfall. Since the 90% level would trigger quicker, it is more expensive. A producer also chooses a Productivity Factor which allows the CBV to be multiplied between 60% and 150%. This allows the producer to dial in the coverage amount for each growing season as both the coverage level and productivity factor can be changed from season to season.
The total coverage for each growing season would then be:
Coverage per Acre = CBV x Coverage Level x Productivity Factor
How is a loss calculated?
Losses are calculated for each chosen interval inside each growing season. If the rainfall received in that interval is below the trigger level (coverage level), then an indemnity will be paid. The Current Index is the actual rainfall received in the interval compared to the long-term historical average.
The indemnity is calculated as follows:
Indemnity = [(Coverage Level – Current Index) / Coverage Level] x Coverage Per Acre x Interval Percent
How is AF Unique?
AF has some unique characteristics compared to traditional MPCI products offered by RMA.
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Not all acres have to be covered - a producer chooses from season to season whether to insure the acres planted in the growing season. A producer may insure between zero acres in the season to all eligible acres planted in the season.
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Dual use - the dual use option allows producers to cover wheat with a MPCI product as well as AF. If dual use is chosen, then the coverage and premiums are at 40% of the standard AF values on grain-graze wheat acreage.
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Double cropping - producers can double crop annual forage acres depending on the growing seasons without prior history and regardless of irrigation practice.
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Impacts on the following crop year - producers need to watch interval selection since the same acreage cannot be insured in the following crop year unless planted after the start of the last interval of the current crop year’s insured season
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Zero acreage reports are not required - producers don’t have to submit acreage reports for each growing season - only the ones in which they wish to insure planted acreage.
What are the Key Dates for AF?
The first key date is July 15. That is the sales closing date for applications for the upcoming crop year. The second key date is the 5th of the month following the planting season. That is when acreage reports must be signed if a producer wants to insure acres in the growing season.
Why SCIS For Your
Annual Forage Coverage?
SCIS has been a leader in the industry for utilizing AF for our clients since it was introduced in 2014. SCIS has proprietary tools to optimize interval selection for each season and works with producers to build out a personalized risk management portfolio. Click here to download our AF brochure. Click here to contact an agent.