Cornhusker Economics July 17, 2024
Annual Forage Insurance Program Performance

By Jay Parsons

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In 2014, the Annual Forage Insurance Program (AFIP) was offered for the first time by the USDA – Risk Management Agency (RMA) as a pilot program for the states of Nebraska, North Dakota, South Dakota, Kansas, Oklahoma, and Texas.  It was expanded to include Colorado in 2016 and New Mexico in 2017. This year marks the 10-year anniversary of the program, and the goal of this article is to provide a summary of where the program is and how it is being used. We will focus specific attention on Nebraska but also provide an overview of the national picture.

The AFIP is designed to meet production risk management needs related to precipitation risk for producers planting annual forage crops for use as livestock feed or fodder. This includes but is not limited to grazing, haying, grazing/haying, grain/grazing, green chop, grazing/green chop, or silage. Like Pasture, Rangeland and Forage insurance (PRF), the AFIP is based on rainfall index data provided by the National Oceanic and Atmospheric Administration Climate Prediction Center (NOAA CPC).

Whereas PRF is for perennial forage and coverage is based on a calendar year, producers insuring with AFIP select two-month coverage intervals over a seven-month growing season commencing the month after the planting date for the annual forage. The signup/sales closing date is July 15 for coverage on annual forage planted from August 1 through July 31 of the following year. There are 12 months in which to plant an annual forage, therefore there are 12 growing seasons available for signup. Producers need to make coverage selections for any of the growing seasons for which they might desire coverage in the upcoming crop year by the July 15 deadline. The acreage reporting deadline is the 5^th day of the month following planting so a producer has until then to report actual planted acreage upon which coverage will apply for any eligible growing season.

Each county has a County Base Value determined for it by RMA that represents its annual forage productive value. In Nebraska, the County Base Value varies from $204.36 per acre in the Panhandle to $452.87 per acre in the southeastern corner of the state (Figure 1). Producers select a percentage of their County Base Value by designating a productivity factor between 60% and 150%. Wheat acres in most counties are eligible for dual use AFIP coverage (planted in the fall, grazed, and then harvested for grain the following summer). However, restrictions do apply and the base value per acre AFIP coverage is reduced to 40% of the single use forage value.

Producers select a coverage level between 70% and 90% of the Expected Grid Index to attach to their policy. As with PRF, the coverage level selected also determines the level of premium subsidy. Premium costs are subsidized between 51% and 59% as coverage levels move from 90% down to 70%. The premiums are rated on historical data and are required to be actuarial sound. Therefore, payback (or the producer loss ratio) is similar across coverage levels even though higher coverage levels are more likely to pay an indemnity each year. The producer loss ratio represents the indemnities paid out to producers divided by the premiums paid by producers after accounting for the subsidies. Most producers insure at the 90% coverage level as the data for 2023 in Table 1 indicates. For the crop year 2023, the producer loss ratio for AFIP in Nebraska was 2.19 for all policies combined.

Figure 1: Nebraska Map of County Base Values ($/acre) for the RMA Annual Forage Insurance Program (2025)

Source: USDA-RMA.