Insurer, reinsurers, and lenders have been urged to develop weather risk products that would enable farmers to better manage their exposure to weather impacts.
The call was made by Dylan Hirsch, 2018 Nuffield scholar and Latham grain farmer, at a recent annual Nuffield WA sponsors' lunch.
Hirsch said the current multi-peril crop insurance (MPCI), which requires a crop to fail and be assessed before insurers pay out, did not work effectively for many farmers. He encouraged the industry to come up with “derivative” or “index” insurance products that trigger quicker pay outs without assessment when predetermined criteria are reached or threshold levels of yield loss occur, Fairfax Media reported.
He also proposed that the farmers’ adoption of derivative or index tools to reduce exposure to variable weather and adverse events be factored into the cost of agribusiness loans to encourage risk aversion uptake.
Hirsch added that “unnecessary” government taxes should be scrapped from MPCI products, and urged agronomists and agribusiness consultants to “upskill” in relation to derivatives or index insurance to “fill the void” of independent financial advisors with specific expertise in agriculture, Fairfax reported.
To help develop these products, Hirsch said the Grains Research & Development Corporation should invest in industry performance data, including weather station networks, radars, remote sensing, and regional grain production reporting.
He also cited the need for the Australian Bureau of Agriculture and Resource Economics and Sciences to adapt surveys for capturing data similar to that captured by private farm benchmarking groups and the United States Department of Agriculture to provide a coordinated industry database of weather impact on production, Fairfax reported.
