As anyone who has ever bought insurance knows, it’s an exercise in “pay and pray” — that is, pray that you won’t need it. Crop insurance is certainly no different but, as climates change and localized weather patterns become predictably more unpredictable, few farmers these days can afford to be without it.
That’s certainly true in Manitoba, where over 90 per cent of farmers participate in Manitoba Agricultural Services Corporation’s (MASC) crop insurance programs. The participation rate is high in the other Prairie provinces too. In Saskatchewan the benchmark measure is insured acres, which in 2013 was 27 million acres or around 77 per cent of the total seeded acres in the province. In Alberta, around 76 per cent of eligible annual crop acres are insured each year.
Most crop insurance programs are federal programs delivered by provincial insurance agencies and cost-shared by federal and provincial governments. Consequently the programs are fundamentally the same in each province, although there are some regional variations.
Changing insurance programs
Crop insurance programs are constantly re-evaluated and re-designed to meet the changing realities of production in each province and to be reflective of markets. “We work with industry and producer associations to determine what changes are required to our programs,” says Jeff Morrow, vice-president of Saskatchewan Crop Insurance Corporation (SCIC). “We have a good relationship with our industry associations.”
A big change in some provinces, especially Manitoba, has been the rapid spread in the last couple of years of crops like corn and soybeans into areas that traditionally couldn’t grow them. With earlier maturating, shorter season varieties being rapidly introduced and grown on more acres, new crop insurance programs for corn and soybeans have been introduced in Manitoba and expanded in Saskatchewan.
“For a number of years producers outside of the traditional corn and soybean areas have been asking for insurance because they wanted to try these crops and were reluctant to do so without any type of protection,” says David Van Deynze, MASC manager of claim services. “Over time we’ve developed insurance test areas to allow producers and ourselves to get some experience with how these crops perform in what used to be considered fringe growing areas. This year is a record year for soybeans in Manitoba, and more and more producers have been trying these crops well beyond the traditional areas.”
As of 2013 Manitoba producers are able to purchase insurance on corn and soybeans grown outside of traditional growing areas. “It has provided producers with at least some level of coverage in the event of crop failure,” says Van Deynze. “Prior to this year, if they were going to grow those crops they were doing it without any kind of insurance protection at all.”
Saskatchewan introduced coverage for soybeans in the southeast corner of the province in 2010 but this year the coverage area increased, and more than half the province is now insurable for soybeans. SCIC also expanded its Corn Heat Unit program in 2013 to allow for coverage across a larger area, reflecting where farmers are growing corn in the province. As a result SCIC reports an increase of over 100,000 acres of insured corn and soybeans in 2013.
In Alberta the jury is still out in terms of whether new soybean varieties will mature early enough for Alberta growing conditions, and expansion of soybean acres is slower than in the other two Prairie provinces, but Agriculture Financial Service Corporation (AFSC), which delivers crop insurance in Alberta, is keeping a close eye on developments in this area.
“Soybeans haven’t taken off in Alberta like they have in Saskatchewan and Manitoba, but we are working closely with the Alberta Pulse Growers so that when they do become a viable crop, we will have a program in place for them,” says Chris Dyck, senior manager of research and corporate data management at AFSC.
Alberta has also expanded the number of the weather stations available for its corn heat unit programs. “There are shorter season varieties of corn coming out all the time, and the area where corn is being grown is definitely expanding, so we’ve expanded our area as well,” says Dyck. “I think we’ll probably see some new products coming in the next couple of years.”
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Insuring winter wheat
Keeping crop insurance programs in line with production realities is reflected in the changes to Manitoba’s winter wheat program. The indemnity available for re-seeding winter wheat has been reduced in Manitoba this fall to 25 per cent of coverage from the previous 75 per cent if the crop fails before June 20 of next year. As an example, in the past a farmer insuring his winter wheat at the level of $200 an acre could get $150 re-seeding benefit if the crop failed before June 20, but would now only get $50 an acre.
Van Deynze says the changes are more reflective of what actually happens in reality if a winter wheat crop fails. “If a producer planted winter wheat in the fall and had a crop failure first thing in the spring they were eligible for potentially 75 per cent of the coverage, which from our perspective created a bit of moral hazard,” says Van Deynze. “In some cases producers were willing to work down their winter wheat a little sooner than we thought they should because getting 75 per cent coverage, and planting canola on May 10 is a pretty attractive proposition for producers because they really don’t lose any yield when they plant canola at that time. Reducing the coverage to 25 per cent, if they have a winter wheat failure early in the spring, should cover seed and input costs from the previous fall. We believe it will still adequately cover producers and not be such a drain on the program.”
Crop insurance premiums and coverage levels fluctuate to try and reflect changing market realities and predicting future markets can be a challenge but is essential to provide a good program for farmers that will cover them for production losses at fair market value, says Van Deynze. “Every year we try and predict what the market will be so we have to set our prices in January based on what we predict prices will be fall of that year, so we use whatever market indicators we have to help us set that price,” says Van Deynze. “Our programs are designed to try and be reactive to what the markets are doing.”
Angela Lovell is a freelance writer, editor and communications specialist living and working in Manitoba. Find her online at www.angelalovell.ca.