It is a pretty typical practice to develop a strategy position on crop insurance. Some people fully insure all crops every year. Some people always partially insure, perhaps choosing only some paddocks or some crop types or under insuring their maximum yield or price. Some never insure, in effect self-insuring, the money saved in premiums hopefully offsetting potential crop losses in the long term. Those for whom cropping is only a small part of their mixed farming business may have the option of grazing hail damaged crops and therefore offset losses to hail.
All strategies have pros and cons and all can be justified due to different businesses situations and the risk tolerance of the operators. Setting a strategy makes decisions easy, however set and forget strategies don’t work when situations change.
This year, it might be time for a rethink. Risk is a combination of likelihood and consequence. Likelihood of a hail event or fire might not be any different this year than any other year, however higher yields and the possibility of a wet harvest may extend harvest time and make your crop more vulnerable.
The possible consequences of total or significant crop loss to hail or fire may have changed this year. Lower stocking numbers and higher in paddock feed may limit your ability to make the most of damaged crops. Is your business more vulnerable this year due to a number of difficult seasons, a recent expansion or higher debt levels? Is an ownership transition on the cards that could be put in jeopardy by a significant crop loss.
This is by no means an advertisement for crop insurance but an encouragement to rethink your strategy and see if it fits this year. Shop around for insurance, prices vary significantly and loyalty and claims history make less difference than you would like to think.
