The Importance of Farm Produce Insurance
Crops are farmers’ biggest asset. With the changing threats posed to farmers, protecting your assets is more important than ever. The fruits of your labour can be threatened at any time, making farm produce insurance a must for Canadian farmers. Farm produce policies are built to cover all potential risks or can be designed for specific perils. Farmers can face many possible woes from weather challenges to trade threats. Here is why it is so vital to have farm produce insurance.
As countries such as China make it more and more challenging for Canadian farmers to import their produce, dips in revenue are becoming more of a reality. Some common issues for trade include canola, durum and pulse crops.
Statistics Canada reported that net farm income fell 45.1 percent in 2018. There hasn’t been a drop of this size since 2006. When compared to 2017, when farmers’ net income decreased by only 2.8 percent, it is clear there is a good reason for concern.
Rising Operational Costs
Farmers also face increasing operational expenses, including fuel, seed, labour and interest costs. When pitted against stagnant sales, more farmers are finding themselves in the red. These costs will continue to rise, while commodity prices might not. Farmers can hope for the best with prices at least rising as high as their expenses. However, 2018 did not find this to be the case.
Many farmers will have to make decisions such as cutbacks in certain areas. This might include fertilizer and chemicals, while others might consider repairing equipment that requires replacement. An attempt to keep farms operational at a reduced cost can raise other issues for farmers who might not be able to maintain their fields with limited resources.
Drought can also form issues that can keep money tight for farmers. Without the right amount of moisture, farmers face issues with their crops’ roots getting deep enough to remain healthy. A lack of rain impacts soil conditions as without rain, topsoil cannot be replenished. Dry fields mixed with strong winds are a formula for disaster.
Although crops emerge well in good conditions, the fears of a strong drought or winds affecting crops are always there for farmers. However, the weather is not only about growing produce, but it also involves other aspects of farming. For example, shipping produce can be affected when the weather is not cooperating.
In Canada, warmer weather could lead to livestock dying from heat related illnesses.
Agriculture on a Downturn in Canada
Many organizations are trying to solve the issues climate change will bring to the country. The Canadian Senate agriculture committee has been working with experts to try and come up with a solution. Climate change has a significant impact on the frequency of extreme weather events which reduce crop yields by at least 50% while they’re occurring. Researchers have theorized that an increase in temperature would be beneficial for longer growing seasons in the prairies. However, the issue is that these warmer temperatures do not bring with them more rain. With less rain and more heat the crop yields from the prairies will be devastated. Water is required for all crops to grow; without it the prairies are just a giant pile of dirt.
The agriculture industry in Canada is different than it once was but it is still a huge part of our economy as we also export a large portion of the crops. Ideally more money being put towards technological innovations could help with the issues that climate change brings with it. Each year Canada loses billions in GDP due to the effects climate change has on the agriculture industry.
Canadian farmers are being forced to innovate new farming practices in order to reduce their impact on the land and their need for water to farm. One innovation being worked on is using the biomass already being produced on the farm from animals to help replace fossil fuel use on the farm. If the farmers could power part of the farming process with biomass already found on the farm it would be a huge step towards more sustainable farming. Otherwise the Canadian government hasn’t outlined any specific plans to assist with the impact climate change is having on agriculture.
Why is Insurance Important?
Crop insurance is a farmer’s primary risk management tool. It allows farmers to get financing for their business while providing a survival plan in the case of a major catastrophic event. The risks are growing every day for farmers today. There are more and more issues that can force farmers to take major hits that will greatly reduce or even abolish their annual income.
Historic droughts and flooding, rising fuel costs and the constant threat of trade agreements failing all contribute to the risks farmers face. Sustained droughts can wipe out an entire generation of farmers’ crops, making it impossible for them to cover their losses and plant a new crop the following year.
Produce insurance provides funding for farmers faced with such catastrophes offering an affordable way for them to protect their assets. Farmers now have choices to make provisions specific to their needs, so they are paying for the coverage that makes the most sense for their business.
Farming is already risky enough without the new challenges posed by climate change, trade and rising operational costs. If the commodity market is also hit, farmers will be even more hard-pressed to earn the revenue required to make ends meet. There is a drop in new farmers which also means the people of North America depend on for food could continue to drop. Incentives to keep farmers interested in their business is essential to help keep future generations interested in continuing the family business.
Produce insurance can reduce risk, protect assets and continue to provide financial support for farms to grow and remain operational. If you would like more information on produce insurance, speak to our team of experts by calling 613-224-1455.