Rear-View Reflections: Planning for a legacy year
by Global Ag Risk Solutions
How to expand your coverage beyond perils.
The unpredictability of this growing season, along with the challenges of fulfilling contracts last season may make confidence in this year’s farming decisions that much more difficult. Seemingly driven by the uncertainty of this season, because of a looming drought in a widespread area, markedly more expensive inputs, and fluctuating markets, some may be saying “Why make moves if the crops aren’t going to be good anyways?”
It’s almost impossible to not feel cautious this year or to not make decisions that seem prudent early in the season. For farmers with provincial or peril insurance only, this approach or hesitancy likely feels safest. Despite the uncertainty, however, the biggest risk this year isn’t drought or not hitting yield targets. We think the biggest risk this year is not doing everything within your control to possibly make this the harvest of a lifetime. The farmers who have de-risked and protected their bottom line, beyond peril and yield, will be able to capitalize on the occasion presented this year due to high grain prices and a hot market.
To illustrate, last year amid unrelenting drought in one of the worst hit parts of Saskatchewan, a client of ours seized opportunity, instead of shying away. His bottom line was covered, and he was able to adapt his agronomic decisions despite the drought his farm was experiencing. Armed with the guarantee of his floor revenue, and the coverage to purchase and use inputs exactly as needed, his ag lender had the confidence they needed, and his farm family had the peace of mind and working capital to expand by 10 quarters.
Yield thresholds and peril will always be a consideration in farming decisions. Provincial or peril insurance is a great option for covering those considerations, but they’re not the only option available to you. Innovations in insurance have been helping farmers see new ways to make business decisions and protect the whole farm, and not just the crop. Global Ag Risk Solutions has been a leader in this area – creating insurance products that change how you farm, and support or wrap around provincial insurance or AgriStability.
Our most popular option is Production Cost Insurance. This insurance product protects your bottom line by ensuring revenue, no matter what mother nature or the markets throw at you. For farmers, this means being able to take advantage of every opportunity in front of them, and this year, that could be the difference between surviving and thriving.
Our licensed Advisors work with you to learn about your farm, your short- and long-term plans, and your cost to operate to develop a profile unique to your needs. With Production Cost Insurance, you will know how much of your farm revenue is protected, before seeding. No other insurance product can give you that number.
Our insurance covers the cost of seed, fertilizer and chemical, plus a gross margin of your choosing over and above those costs. As an example, let’s say you want to spend $150/acre on inputs this year. We take those actual costs as the baseline. From there, our Advisors work with you to get a picture of your cost to operate by considering other costs, like fuel and land. Together, you decide to insure an extra $150/acre of margin coverage, making the total plan set at $300/acre. A 5,000-acre farm, for example, can move into the year with certainty and $1,500,000 in floor revenue before seeding. Because we cover actual costs, if input costs go up – let’s say you want to top dress – coverage goes up, but your premiums do not.
This year, farm like it could be the crop of a lifetime. To do that, we recommend protecting your farm with the insurance you need to be able to make moves, like locking in contracts with these surging grain prices. Weather and inputs can cause uncertainty, but with the right understanding of risk and clear understanding of your floor revenue, this year could not only be a success story, but also a legacy building year for your farm and your generational plans.