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Posted by: Sarah Drollette on Jul 26, 2011

Vegetation Index Pilot Program for Pasture, Rangeland, and Forage

By Sarah Drollette and Dillon Feuz

A new risk management tool has become available to Utah agricultural producers for pasture, rangeland, and forage.  The Vegetation Index pilot program for pasture, rangeland, and forage was available in many counties of neighboring states for the 2010 crop year, but was not available to any Utah counties.  Starting with the 2011 crop year, this program has been expanded to all counties in Utah and preliminary studies show this may be a useful tool for Utah producers.

The Vegetation Index utilizes satellite remote sensing data obtained from the U.S. Geological Survey Earth Resources Observation and Science data center.   The data, called the Normalized Difference Vegetation Index (NDVI), essentially measures the greenness of the vegetation in pre-defined grids approximately 4.8 by 4.8 miles.  The Vegetation Index uses historical NDVI data since 1989 to establish a normal NDVI.  Current values are then compared to the normal NDVI to determine losses for the grid.

The insurance can be purchased for three-month time periods called index intervals.  Producers can select one or more index intervals that best match his growing season and individual management practices.  Current NDVI data is collected for each index interval and compared to historical data for the same intervals.  If current NDVI values deviate from historical values, an indemnity payment would be paid based on the differences.[i]

For producers who previously have not had many insurance options for mitigating risks relating to pasture, rangeland, or forage production losses, this may be a beneficial program.  However, it is important to note that the Vegetation Index is an area-based program.  It insures against vegetation losses across a grid, not losses to an individual producer.  Hence, it is important for producers to review the historical indices relating to their individual farms or ranches when deciding if the Vegetation Index a useful program for their operation.   

Although the insurance program has only been around since 2008 in some pilot counties, NDVI has been measured since 1989. Using that data, and using the same premiums for every year, the total premiums paid, and the total indemnity payments received were calculated for a typical ranch in western Wyoming grazing on Bureau of Land Management range.  If this insurance program had been available since 1989, the model ranch would have received far more money through indemnity payments than they would have paid in premiums.

At the 70% coverage level, the typical ranch would have received a 300% return from the insurance.  In other words, for each dollar spent on insurance premium for the pasture, rangeland and forage insurance, the ranch received $3 in indemnity payments over the historic time frame. For the Western Wyoming ranch, the 80% and 90% coverage levels had returns of 244% and 169% respectively.  If the Utah range data is similar to the western Wyoming data, then this insurance product may be very attractive to producers.

 



[i] For more information about the Vegetation Index Pilot Program, visit the RMA website (www.rma.usda.gov) or contact an insurance agent (Agent locator:  www.rma.usda.gov/tools/agent)

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