By Matthew Diersen
Earlier this summer, the USDA’s Risk Management Agency announced major changes to hay insurance for many states. The affected product, Forage Production, has historically insured against yield losses on alfalfa and alfalfa mixes in dairy states. Beef producers have been able to use the product too as it covers the hay crop and not cattle. The change adds revenue insurance to forage (hay) in many states.
In the June Acreage report, USDA’s NASS estimated there were 50.0 million acres of hay expected to be harvested nationwide in 2026. Alfalfa was estimated at 15.0 million acres while other hay accounted for 35.0 million acres. Forage Production insurance covered only 1.4 million acres. Of those, there were 0.5 million acres insured in South Dakota, 0.4 million acres in Montana, 0.1 million acres in Wisconsin, and 0.1 million acres in North Dakota.
Beginning with coverage for 2027, the revenue feature means that Forage Production will include Revenue Protection (RP) for selected counties in the following states: California, Idaho, Iowa, Michigan, Minnesota, Montana, Nebraska, North Dakota, Pennsylvania, South Dakota, Washington, and Wisconsin. RP should be familiar with crop producers and insurance agents, as it is commonly used for corn, soybeans, and wheat. RP ties the projected and harvested price for hay, through a formula or equation, to a combination of futures prices for corn, soybean meal, and Class III milk. Hay prices in the affected states have positive correlations with the futures prices for the past two decades. The correlation tends to be the highest between hay prices and soybean meal futures, reflecting the protein content of alfalfa. The correlation is slightly lower between hay and corn futures. In non-dairy states, the correlation is often weaker between hay prices and milk futures in some of the states.
Source : osu.edu