Annual Forage Insurance Part 1: Policy Basics

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The deadline to purchase Annual Forage Insurance (AFI) is July 15 for any annual forage crop planted from August 2024 to July 2025, which is recognized as the 2025 commodity year. Producers who buy coverage will have premiums billed on Aug. 30, 2025. They are not required to secure AFI coverage for all annual forage acres they plant.

This article covers key AFI policy characteristics. Additionally, refer to this 2023 article, which discusses several AFI policy changes, advantages, and disadvantages.

A companion article in this eUpdate provides additional details on interval selection.

What is Annual Forage insurance?

An insurance product based on a precipitation (rainfall) index, AFI protects policyholders if annual forage crops yield poorly due to insufficient precipitation (this includes annual crops used for grazing, haying, grazing/haying, grain/grazing, green chop, grazing/green chop or silage). When precipitation falls below a set amount, a policy provides a payout.

Precipitation is measured locally in a “grid” roughly covering a 14- by 16-mile area. As such, a policyholder may not receive a payout for an insured field that records low rainfall if the grid has above-average rainfall. Likewise, if all of a policyholder’s insured fields have sufficient rainfall but the grid has below-average rainfall, then the policy still could yield a payment. Such variation is less likely during severe droughts when rainfall shortages tend to be widespread.

Like other federal crop insurance products, the government shares the AFI premium cost with policyholders. 

Who may want to consider purchasing Annual Forage insurance?

Nearly anyone in Kansas or other select states who produces an annual crop and feeds it to livestock as a grazing forage, grain, silage, or other feedstock can use AFI. Coverage may interest producers who (1) want to manage drought or rainfall risk and/or (2) cannot use regular multi-peril crop insurance or are looking for alternatives.

What major decisions must you make to use Annual Forage insurance?

A producer must make three major choices:

1. Coverage level: The coverage level determines the local precipitation necessary to trigger a payout. The higher the coverage level, the higher the premium and the higher the likelihood and size of a payout. You may select a coverage level from 70% to 90%. A 90% coverage level will trigger a payout when precipitation within a grid is less than 90% of the historical average. A policy with a 90% coverage level would trigger a payout if precipitation is 80% of the historical average. If a policy had a 75% coverage level, then it would not pay out.
2. Productivity factor: A producer must select a productivity factor, which ranges from 60% to 150%. The productivity figures effectively scales AFI premiums and potential indemnities down or up, by decreasing or increasing, the AFI guarantee, or the value of the forage crop that is insured. The highest productivity factor has the highest premium and the highest potential payout when precipitation is lower than normal. Producers growing a high-value forage crop may want to select a higher productivity factor that will more likely match the value of their crop and vice versa for lower-value forage crops.
3. Growing season and intervals: Producers must select what months to use AFI. The “growing season” extends for seven months beginning in the month after the forage crop is planted. For example, a crop planted in June would have a growing season from July through January. Within a growing season, the producer must select four months to six months to be covered by AFI. Known as intervals, the coverage periods can be structured as three 2-month intervals, or for select growing seasons, two 2-month intervals. Read more about interval selection later in this article.

Where is Annual Forage insurance used in Kansas?

In 2024 (commodity year)*, nearly 329,000 acres in Kansas had AFI coverage - up from nearly 323,000 acres in 2023 (commodity year) and nearly 134,000 acres in 2022 (commodity year). The total value of annual forage crop production insured (insurance liabilities or guarantee) exceeded $64 million in 2024 (commodity year). Figures 1 and 2 show relatively high AFI participation in several western and south-central Kansas counties during 2024 and 2023 and limited participation in the eastern third of the state. AFI has only been used in Kansas since 2014.

* The 2024 commodity year is still in progress. It refers to AFI policies purchased by the July 15, 2023, deadline with growing seasons that began in September 2023 and will extend through August 2024.

Does it pay?

To date, commodity year 2024 AFI payouts in Kansas total more than $5.7 million compared with about $7.6 million in producer-paid premiums. Payouts in 2024 may be lower than those in the 2022 and 2023 commodity years due to relatively higher rainfall in several parts of the state. However, several counties in southwest Kansas are currently experiencing severe drought. For the first half of the 2025 commodity year, the seasonal Climate Prediction Center outlook projects below-normal precipitation for portions of Kansas - particularly toward southwestern Kansas.

In 2023 (commodity year), $22.7 million in indemnities, averaging about $70 per insured acre, were paid to Kansas producers using AFI. Kansas producers paid about $7 million in premiums. Figure 3 shows 2023 county-level loss ratios, representing the ratio of total indemnities to total premiums, including the government-paid portion. While producer-selected coverage ratios and intervals and other factors affect loss ratios, high loss ratios in 2023 reflect low rainfall and drought in many parts of the state during the last half of 2022 and first half of 2023. Several southwest Kansas counties had loss ratios greater than 2.0, meaning total indemnities were more than double the total producer and government-paid premium. Individual producers' experiences may differ, but total indemnities were higher than total producer-paid premiums in all but two counties.

A producer who consistently uses AFI year over year is likely to receive more in indemnities than what’s paid in premiums because the federal government pays at least half of the premium. That said, producers have no guarantee for an indemnity, and several years can pass without indemnities.

What else should be considered?

• For the 2025 commodity year, the AFI sign-up deadline is July 15, 2024, and Aug. 30, 2025, is the premium billing date. You may purchase AFI coverage from a local crop or livestock insurance agent. Find one at https://www.rma.usda.gov/informationtools/agentlocator.
• As of commodity year 2024, producers are not required to purchase an AFI policy for all annual forage crops they produce.
• Premiums vary based on location, growing season, coverage leverage, and productivity factor. For commodity year 2025, a producer could pay $3 to $65 per acre. On average, the producer-paid premium per acre in commodity year 2024 was about $23. Higher premiums reflect a higher likelihood and value of a payout.
• The acreage reporting deadline — the fifth day of the month following the planting period — is important to note. If the acreage isn’t used for annual forage or other conditions are not met, then the policy may not “attach,” meaning no payouts are made and the producer doesn’t pay a premium. Producers using AFI should discuss acreage reporting deadlines with their insurance agents.
• Small grains used for both grazing and grain production have a “dual use option.” See the RMA or Texas A&M fact sheets for more information. This option is available for growing seasons 1-3 only, and the county base value is adjusted to be 40% of the full county base value. This lowers the insurance guarantee in terms of the premium and potential payouts. The dual option would be used when grazing a crop through the winter and harvesting it for grain in the summer. The producer would also purchase a separate multi-peril crop insurance policy for grain yield (i.e., a revenue protection policy for wheat).
• Indemnities are based on deviations from normal or average precipitation. If certain months are typically dry, then they would have to be even drier to trigger an AFI indemnity.

 

We gratefully acknowledge the feedback and editorial support provided by Alice Roach.

This material is based upon work supported by USDA/NIFA under Award Number 2021-70027-34694.

 

Jennifer Ifft, Agricultural Economics
jifft@ksu.edu

John Holman, Cropping Systems Agronomist – Garden City
jholman@ksu.edu

Tags:  forage forage insurance