Risk Mitigation in the Cattle Industry

Published on Mon, 07/24/2023 - 11:16am

Risk Mitigation in the Cattle Industry.

 By Maura Keller.

 Predicting the future is like forecasting the weather. You think you know what’s going to happen – then it doesn’t. Within the cattle, ranching and agricultural industries, challenges such as weather-related issues can make or break a producer’s bottom line. So, to what extent do producers have to pay attention to risk management, asset protection, as well as crisis prevention? Quite a bit, say the experts.

AgRisk Advisors, based out of Denver, Colorado works with farmers and ranchers across the western United States in managing risk across various areas of their operations.

“We work with producers on the Pasture, Rangeland, Forage (PRF) program, which protects against a lack of average precipitation on their native rangelands,” says Aaron Kravig, AgRisk Advisor. “We also provide Livestock Risk Protection (LRP) to protect against market price declines for marketable cattle for producers across the West.” Specifically, AgRisk’s LRP program is available for feeder cattle, fed cattle, and swine. In addition, AgRisk Advisors offers a wealth of other risk insurance programs including Pasture Fire, Margin Protection (MP), Annual Forage (AF), and Crop Revenue Protection (RP).

“As a part of Silveus Insurance Group, we operate in the west as AgRisk Advisors, and that’s how we view ourselves - as advisors to producers across the West. We want to help producers mitigate the risk that we all face every single day – whether it’s price or whether it’s lack of precipitation,” says Kravig, who is a producer himself and a fifth-generation rancher in Colorado. AgRisk Advisors’ goal is to educate and advise producers on all options available to them, geared toward their specific needs.

“Our number one goal is to educate everybody about these resources. These are great tools, great policies, and great programs to have in your toolbox,” Kravig says. Many different programs are available to help producers through times of need.

One key program that AgRisk Advisors offers producers is the Pasture, Rangeland, Forage (PRF) program, which focuses on feed replacement for livestock producers who may be suffering forage losses due to the lack of precipitation. Livestock producers can insure any leased or owner/operator ground (haying or grazing) important to their operation. Producers may select from a variety of coverage levels, productivity factors, and two-month index intervals to personalize their plan.

As Kravig explains, the Rainfall Index program uses weather data collected by the National Oceanic and Atmospheric Administration (NOAA) to estimate precipitation in each rainfall grid. This historic data has been collected since the 1940s. When the final grid index falls below a producer’s trigger grid index, they may receive an indemnity.

The AgRisk Advisors’ team looks closely at each producer’s entire operation, whether they are on BLM,  Trust lands, private land that the producer owns, or private land that they are leasing from someone else.

“Every time I sit down with a producer to talk about their risk management strategies, the very first thing I always bring up is that we’re going to talk about your budget later on, as part of our fact-finding mission,” says Jason Aiken, AgRisk Advisor and third-generation rancher from Cedar City, Utah. “Initially we start with what it looks like if we insure them with every risk management tool that we can and then we cater each one of those risk management tools to what their budget can afford. Too many times I have seen producers who have signed up for a risk management program that they simply couldn’t afford. I’ve heard horror stories of producers over insuring and not being able to pay for the insurance products that they’re buying. And so that’s always a very, very important topic that I like to bring up with my producers – to make sure that they are going to be willing to talk about their budget and we’re going to build their insurance program to fit that budget.”

Using a proprietary software program, AgRisk Advisors determines where the best place is for a producer to put their coverage.

“What areas are more valuable?” Aiken says. “What areas are more volatile from a precipitation standpoint? Some areas are more volatile than others. And that’s what we’re insuring – the volatility of the precipitation. We might take a second look at those areas with very consistent rainfall or areas that have recently experienced increased precipitation compared to historical data.

As indicated, the rainfall index grids used by AgRisk Advisors are based on average rainfall amounts that have fallen since 1948.

“We are using a nearly 80-year running average,” Aiken says. “It’s a very good tool to utilize and can provide insights into how their operation was run by previous generations. For third- or fourth-generation producers, it is a tool they can appreciate because of the length of the average that we are using.”

The deadline to sign up for the PRF program is December 1 of each year. Each fall AgRisk Advisors sits down with producers to evaluate their acreage, review the long-range forecast, and work with several meteorologists to help identify the areas of concern. Suggested coverage is then developed in grids based on certain intervals throughout the year according to thoroughly defined and predicted rainfall amounts.

“In the end, we are educators, so we want to educate people on what our products entail,” Aiken says. AgRisk Advisors has developed a series of YouTube videos, and podcast episodes that are beneficial for first-time users or even producers who have been part of the PRF program for years.

AgRisk also offers a “real-time” tool for producers to track the rainfall data used within the PRF program to evaluate how it works and to see how their precipitation levels are lining up, and the indemnities that may be allocated as a loss. All of this information can be beneficial to producers looking to manage their monthly, quarterly, or annual cash flow.

“These resources are second to none. And we have some of the most cutting-edge software available that is dialed in to help us make the best decisions possible with the producers,” Kravig says. “We can help them make the absolute best decision in terms of how the program is going to work for them. It’s a benefit for us as agents because we can do so many more scenarios and it speeds up our efficiency. But, more importantly, it gives producers knowledge and security knowing that their agent has run over 5,000 or 10,000 scenarios identifying the best way to set their policy up.”

For more information about AgRisk Advisors and the insurance products they offer, visit www.AgRiskAdvisors.com or review the library of helpful resources on Pasture, Rangeland, Forage at www.AgRiskAdvisors.com.