Rainfall Insurance Supports Sustainable Forage Production

By Scout Nelson

Rainfall plays an important role in pasture growth, forage production, and livestock management. When rainfall levels fall below normal, producers may face limited forage supplies, higher feed costs, and financial challenges. To help manage these risks, the United States Department of Agriculture (USDA) offers the Pasture, Rangeland and Forage – Rainfall Index (PRF-RI) Crop Insurance Program.

The program is designed to help producers manage rainfall-related risks and protect their farming operations. Whoi Cho, Assistant Professor of Applied Economics, and Matthew Diersen explained the program's coverage options, payment system and guidelines for South Dakota producers. The research highlights how producers can select insurance coverage that matches their pasture conditions and forage production needs.

Understanding the Rainfall Index Insurance Program

The PRF-RI program is a single-risk insurance policy offered through the USDA Risk Management Agency (RMA). It provides payments when rainfall measurements in a selected area fall below a coverage level chosen by the producer.

The program uses rainfall information from the National Oceanic and Atmospheric Administration's (NOAA) Climate Prediction Center (CPC) and National Centers for Environmental Information (NCEI). The information is used to calculate a rainfall index for different geographic areas, known as grids.

If the rainfall index for a producer's selected grid falls below the chosen coverage level, the insurance program may provide a payment. The payment is based on rainfall measurements in the grid where the insured land is located. It does not depend on the actual forage production or losses on an individual farm.

South Dakota has offered the PRF-RI program since 2013. Producers use it to manage the financial risks associated with low rainfall and reduced forage availability.

The program has provided favorable results for many South Dakota producers. From 2016 to 2024, producers received an average of about $86 in insurance payments for every $100 in total premiums. This represents a loss ratio of 0.86.

However, producers do not pay the full premium because the USDA provides premium subsidies. At the 90% coverage level, producers pay less than $49 for every $100 in total premiums. This means that every dollar paid toward premiums returns about $1.75 in average insurance payments.

Despite these benefits, only about 38% of South Dakota's forage land is insured in 2026.

How Producers Can Select Insurance Coverage

The PRF-RI program allows producers to create coverage based on their farm's needs. They must make three main decisions when selecting a policy: coverage level, productivity factor, and rainfall intervals.

The coverage level determines when an insurance payment may be triggered. Producers can select from five options: 70%, 75%, 80%, 85%, and 90%.

For example, when a producer selects a 90% coverage level, a rainfall index below 90 may trigger an insurance payment. If the index remains above 90, the producer receives no payment for that interval.

The second choice is the productivity factor. Producers can select a factor between 60% and 150%, in one-percentage-point steps. This factor adjusts the amount of protection based on the productivity of the insured land compared with the county base value set by RMA.

The third choice involves selecting rainfall intervals. The program offers 11 two-month intervals throughout the year, including January–February, February–March and other periods through November–December.

Producers must follow two important rules when selecting intervals. First, the total weight assigned to all selected intervals must be equal to 100%. Each interval can receive between 10% and 70% of the total weight. Second, overlapping intervals are not allowed. For example, producers cannot select both January–February and February–March because February appears in both periods.

These choices create many possible coverage combinations. While this flexibility helps producers customize their policies, it can also make the selection process difficult. Some producers may avoid enrollment or choose simple coverage options that do not fully match their farm's risk-management needs.

Premium Subsidies and Coverage Strategies

For 2026, the USDA provides different premium subsidy rates based on the selected coverage level. Producers receive a 59% subsidy for the 70% and 75% coverage levels, a 55% subsidy for the 80% and 85% levels, and a 51% subsidy for the 90% coverage level.

One possible strategy is to select coverage options that are expected to provide higher insurance payments. Under the current subsidy system, this approach may offer financial benefits.

For example, producers selecting the highest coverage level of 90%, the maximum productivity factor of 150% and two relatively dry intervals, such as January–February and November–December, may receive expected insurance payments greater than their out-of-pocket premiums.

However, this strategy depends on the availability of premium subsidies. If subsidy rates decrease or the subsidies are removed, producers may have to pay more toward premiums and receive lower expected net returns.

More information about coverage rules and premium rates is available through the USDA RMA website: https://www.rma.usda.gov/policy-procedure/general-policies/rainfall-index.

Choosing Coverage Based on Farm Needs

The PRF-RI program is designed to support long-term risk management rather than simply increase insurance payments. Producers should select coverage based on their actual forage production and grazing needs.

One approach is to spread selected rainfall intervals across the months when pasture growth, forage production or livestock grazing takes place. This can help provide protection during different periods of the growing and grazing seasons.

Producers should also choose a productivity factor that reflects the actual productivity of their pastureland compared with the county base value provided by RMA.

Selecting suitable coverage options can help producers manage rainfall risks and make better financial decisions for their operations.

Important Enrollment Information

The sales closing date for PRF-RI insurance in South Dakota is December 1, 2027, for the 2028 insurance year. Producers should review the program guidelines and discuss their coverage choices with a crop insurance agent before enrolling.

The information provided is for educational purposes only. Each farming operation has different forage production needs, rainfall risks, and financial goals. Producers should work with an insurance agent to select the coverage level, productivity factor, and rainfall intervals that best match their operations.

For additional details, producers can review the USDA's Pasture, Rangeland, Forage Pilot Insurance Program guidance document: https://www.usda.gov/sites/default/files/guidance-documents/RMA.Pasture%2C%20Rangeland%2C%20Forage%20Pilot%20Insurance%20Program.pdf.

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