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Rethink yield math: Sask. crop insurance review

Yield trending and yield cushioning are among the changes recommended in a new review of Saskatchewan’s provincial crop insurance program.

The province hasn’t yet specified what changes it will make on the basis of the review, prepared for the province by Meyers Norris Penny (MNP). But Agriculture Minister Bob Bjornerud said in a release Monday that he plans to assess the review’s recommendations and introduce changes for 2009.

Details of the 2009-10 provincial crop insurance program are to be announced in February, the province said.

Yield trending involves adjusting historical yield data to account for new production techniques, seed varieties and technologies. MNP recommends that Saskatchewan Crop Insurance Corp. (SCIC) introduce it for crops “affected significantly by new production alternatives.”

Thus, MNP said, the coverage provided to farmers would be “more reflective of actual crop potential.”

Yield cushioning, also recommended by MNP, is a system meant to help limit the “potentially negative” effects of a poor crop year on a farmer’s long-term individual yield (LTIY) and long-term area yield (LTAY).

MNP also urges the province to consider using a shorter production history when calculating LTIY for irrigated crops, “to address the length of time required to establish a relevant production history under irrigated conditions.”

It also asks that SCIC look into the indemnity of irrigated production relative to dryland production, “to assess opportunities to reduce or eliminate the increased premium under the enhanced irrigation pilot program.”

Among its other recommendations, MNP in its review also calls for:

  • reintroduction of spot-loss hail coverage “as a high-cost insurance item intrinsically linked to the multi-peril program,” in consultation with stakeholders including private hail insurance providers;
  • “enhancements” to the variable price option (VPO), to address farmers’ concerns over potential premium increases under the option (such enhancements could include an in-season pricing option and elective pricing ranges, so farmers could have “greater control and certainty” over their final premium cost);
  • revising the crop pricing model and premium structure for organic and pedigreed seed production to “more accurately reflect prevailing market conditions;”
  • either more compensation to “reduce or eliminate” costs now borne by farmers under the maximum 80 per cent coverage model, or changing the deductible to a fixed dollar amount per claim or per year;
  • reconciling the pricing process used to calculate wildlife claims with those used to calculate multi-peril program claims;
  • adding damage to fencing, waterers and tree saplings to the list of insured losses;
  • looking into the merits of a “re-insurance” approach to offset total program risk (such as the grain revenue insurance plan first adopted by grain company UGG, now part of Viterra, in 1999), including an assessment of
    re-insurance effects on program premiums and indemnity;
  • considering raising the cap on credits for the “experience discount” — which now goes to farmers who accrue at least 10 such credits, to a cap of 13 — to better protect the discount for farmers “who have reached the maximum level of experience credits and continue to demonstrate superior production performance;”
  • researching the feasibility of a full participation discount for farmers insuring all of their production, and/or a loyalty discount for long-time program users with a “positive history” in the program;
  • reviewing the establishment benefit, which “has not been adjusted in recent history… to ensure it is reflective of rising production costs;”
  • considering options to extend multiple contracts to “large, geographically dispersed production operations” where single contracts may be less than completely effective;
  • looking at options for increasing levels of coverage available under weather-based programs, plus a regional pilot study on the effectiveness of increased weather station density in increasing farmers’ use of weather-based
  • continuing to “proactively identify and evaluate” new crop types,
    subject to regulations, to bring into the SCIC program; and
  • generally reviewing and expanding SCIC’s communications strategy to
    improve farmers’ understanding of the program.

During the review process, MNP took submissions from 45 ag industry groups and over 1,000 farmers, through public meetings, surveys, written submissions, toll-free calls and its website, the province said Monday.

MNP said it recognized a balance is needed between the added benefits of its suggestions and the recovery of program costs through premiums and federal cost-sharing arrangements.

MNP also said its recommendations also consider “actuarial soundness,” as well as “green box” compliance at the World Trade Organization, though it says more analysis is needed on the recommendations’ feasibility.

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