THE CHIEF executive of a multi-peril crop insurer (MPCI) said a potential investment by the NSW State Government of $40 million into the space will create a critical mass of farmers using MPCI products.
Speaking at the Australian Grains Industry Conference (AGIC) in Melbourne last week Andrew Trotter, Latevo International, said NSW’s Independent Pricing and Regulatory Tribunal (IPART) had made a draft recommendation to the NSW Government to spend $40 million on a rebate for farmers who take up MPCI.
“I’m very confident this proposal will get across the line and it will have a big impact on the MPCI sector not just in NSW but across Australia as it brings that liquidity to the market as more people participate,” Mr Trotter said.
The IPART recommendations are for a five year subsidy program.
The money would be spent on a 50 per cent rebate for growers in the two years they used a MPCI product scaling down to a 25pc payment for the following three years.
Should it be implemented, the IPART recommended program would offer a much greater incentive for NSW growers to take out MPCI than the current Federal Government system, which provides a rebate of up to $2500 for an audit as to a farm business’s suitability and eligibility for MPCI.
Mr Trotter, who has tirelessly promoted the MPCI concept in Australia, said the proposal could be the catalyst to bring Australia’s MPCI sector, which has received much media attention but has not attracted large numbers of grower participants, to life.
“There’s no doubt in my mind we need a vibrant MPCI sector in Australia, hopefully this scheme can get farmers to participate and once they do I think they will soon find it a routine part of their yearly planning.”
Mr Trotter reaffirmed his view that the price of MPCI products, commonly called out by farmers as an obstacle to their use of MPCI, was fair.
“It works out around 3.7pc of revenue, $20 a hectare or so, the same price as some of the sprays farmers put out, so I really don’t think it is the major barrier to participation,” he said.
Mr Trotter said he thought MPCI would help east coast producers close the gap between actual and potential yields in a given season.
Citing research conducted in a joint Grains Research and Development Corporation (GRDC) and CSIRO project called Yield Gap Australia, he said farmers on the more climatically volatile east coast had a bigger discrepancy between actual and potential yields.
The project, headed up by researcher Zvi Hochman, found this was because east coast farmers did not want to spend too much because of fears of the season shutting off early.
Mr Trotter said the Yield Gap Australia project found big gains in yields in relation to potential in Western Australia over the past 20 years, with more incremental gains in Australia’s northern and southern cropping regions.
He said climate variability cast its shadow, even in the good seasons.
“In WA, in 90pc of the years, the returns from the crop are greater than 60pc of average income.”
“In contrast, in NSW, in 90pc of years that figure falls to just 35pc of average income, highlighting how much more variable the seasons can be.
“Farmers don’t have the confidence to invest because there is more chance of losing their money.”
