Business & Policy
SPONSORED CONTENT: Farming is a risky game, but you don’t have to gamble on your crops
Every day farmers make difficult decisions. The farming business needs swift action, flexibility and the ability to adapt. Just think about what one big storm can do to a carefully planned growing season.
April 24, 2018 By Global Ag Risk Solutions
What happens after the rain starts can drastically impact an operation. And, say the rain just keeps falling, making your crop a breeding ground for fungus. Generally, a farmer might have to make a decision at that point to just assume that crop won’t produce and move on. The cost of another pass of fungicide is too great to risk. But, finding the right balance and nurturing your crops is a part of the business. The weather is unpredictable but it doesn’t mean farmers should have to give up on their crops at the first sign of adversity.
A Saskatchewan company, Global Ag Risk Solutions, saw the need for more flexibility and freedom for farmers. Traditional crop insurance just isn’t enough. Technology in equipment, genetics and chemical are all progressing and evolving to serve farmers better by producing superior yields, so why not insurance too?
Production Cost Insurance is next-generation coverage for next-generation farms. Simply put, it’s a multi-peril insurance that insures a farm’s three major inputs: seed, fertilizer and chemical, plus a specific amount of gross margin per acre.
Let’s say a 10,000-acre farm purchases $225 per acre of coverage, plus 100 per cent of the $200 per acre he spends on crop inputs of seed, fertilizer, and chemical. Production Crop Insurance would insure $425 per acre of revenue. The farm now has $4.25 million of full farm revenue protection. If input costs rise, due to a higher input crop seed cost, more fertilizer or more fungicide needed, the coverage will increase, with no additional premium.
Now, with the rise in input costs, the farm has spent an additional $50 on inputs. The farmer is now looking at $250 of inputs + $225 gross margin coverage which equals $475 per acre of coverage. On this 10,000-acre farm, they now have $4.75 million of insured revenue. If the revenue falls below the insured level, we will top up the difference. So, with $4.75 million in insured revenue, and farm revenue at only $3.25 million due to flood, for instance, Global Ag Risk Solutions would pay the farm $1.5 million.
“If you’re a producer that puts everything that you can into your crop, 110 per cent, then this is a program for that producer,” says Blake Brownridge, owner of Hire Yield Ag Solutions in southeast Saskatchewan. “I’m rewarded for what I do on my farm. As my gross margin increases or decreases my coverage fits in with my farm.”
And that’s just one part of the business. A secondary, but equally important aspect of farming is adaptability and innovation. With innovation, comes risk. It’s risky to try something new—like diversifying into larger input crops, or trying a new technique. Take straight cutting canola, as an example. It’s suggested that a straight cut crop will yield 10-30% more than swathed canola. But, the technique can be a big risk and a stressful wait to see if the crop will mature the way it needs to. With traditional insurance, the risk might not be worth the reward if the crop doesn’t mature. Production Crop Insurance, however, allows more freedom. Farmers who want to innovate or try something new don’t have to worry because they’re insured on their inputs and revenue, not the crop itself. They can do what they need to get the crop going, with no change to their premium.
This freedom to farm the way farmers want sets this product apart from the rest.