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Looking at the new crop insurance initiative from AFSC

Farming’s never stress free, but this new crop insurance program could help


Alberta farmers: are your dreams of growing coriander stymied by the perils of farming without insurance coverage? Would you try your luck with fields of clover if only there was a backstop in case of a drought or grasshopper invasion? Then the new crop insurance initiative (NCII) from Alberta’s Agricultural Financial Services Corporation (AFSC) is for you.

In all seriousness, coriander production probably wasn’t the driving force behind this new program, but it will be eligible for coverage along with soybeans, dryland hemp seed, caraway, borage and several varieties of perennial seed, including brome grasses, wheat grass and common alfalfa and timothy.

Many of the crops covered under NCII are grown on small acreage and have access to straight hail insurance, but not multi-peril coverage. This program is AFSC’s answer to farmers who want to try growing new crops but also mitigate the risk involved.

Because AFSC lacks data yield data on these crops, coverage will be based on an average cost of production (includes: seed, seed treatment, herbicide, fertilizer, insecticide, fungicide and fuel) combined with a land opportunity cost.

Ken Handford, product development analyst with AFSC, describes the land opportunity cost as “analogous to a cash rent.”

“We look at the value of the land if [producers] were using it for another commodity,” explained Handford. The land cost is based on provincial data, not necessarily what you’re paying for cash rent in a given year. Most crops covered by NCII will also be eligible for the hail endorsement which is a significantly cheaper product than straight hail.

Where applicable, dryland and irrigated premiums and coverage will be determined separately to account for different management costs. For example, dryland soybeans will be eligible for up to $225 per acre with a premium of $8.89 and irrigated soybeans will be covered for $310 per acre at a cost of $5.36 per acre.

For producers to be eligible for NCII they need to have an active crop insurance contract on annual crops. NCII payouts will be based on the average loss producers have on all other annual crops covered by traditional insurance. So if you grow wheat, barley, canola and soybeans and average 30 per cent loss on your wheat, barley and canola, you’re eligible for $67.50 per acre on your soybeans (30 per cent of $225).

Handford noted that coverage areas are limited for some crops. For example, dryland soybeans are currently eligible for coverage in Township 50 and south (west of the fourth meridian only) and in the southern Peace region in risk areas 17, 18, and 19. Irrigated soybeans are covered in risk areas 2, 3, 4, 5 and 9.

Farmers must elect coverage under NCII by the usual AFSC deadline of April 30. Handford encouraged producers to speak to their local branch office about the options and if the crop you want to grow isn’t on the list, don’t assume the door is closed.

“We will definitely take a good hard look at other commodities that producers are growing and if it makes sense to offer coverage then we will,” said Handford. “From AFSCS’s point of view it gives us an avenue to get data on crops that we don’t have a lot of information on.”

As a producer accumulates farm data on a particular crop she will eventually be able to transition from provincial numbers to her individual records. If AFSC gathers enough information from across the risk areas, they may be able to move a crop from NCII to traditional crop insurance.

“Irrigated hemp seed is one of the commodities that we are bringing into regular production insurance in 2015,” said Handford, explaining that some crops may never be grown widely enough to be given multi-peril insurance, while others may move into the mainstream coverage quite rapidly.

It is with some personal interest that I explored this new program. We grow intermediate wheatgrass for seed and have not been eligible for crop insurance. I’m checking the details with my local branch.

John Kowalchuk farms near Rumsey, Alta. and plans to plant his first crop of soybeans in 2015. He said he would have grown soybeans regardless of coverage, but appreciates the peace of mind that comes with the program.

“I think the biggest thing for me is shared risk,” said Kowalchuk. “In the past the farmer took all the risk to test the viability of crops in new areas.”

Risk and reward: farmers need a balance of each. While insurance doesn’t add any weight to the reward side, it can reduce the burden on the risk side of the beam. Good on farmers and AFSC for working towards an equilibrium fitting of 21st century farming practices.

About the author

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Sarah Weigum

Sarah Weigum grows pedigreed seed and writes at Three Hills, Alta.

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