As growers race to dry-sow their crops this week, they can only hope that not only it rains, but their preparations were ample.
If the preparations were good, and enough rain falls at the right times, it could still end up a good crop.
It is this unpredictability in our seasons and the associated risk this brings to farming revenue that has driven the discussion around multi-peril crop insurance.
So why hasn’t uptake taken off?
These products generally aim to guarantee a certain level of income (rather than protecting the crop establishment cost, for instance) based on past performance, and practices, as well as perceived risks relative to that growing season.
However, it comes with some gaps. For instance, the farmers who mitigate risk best through on-farm management have a good chance of a reasonable crop most years.
Therefore, the probability of them having to make a claim is low. These farmers can best afford it, but don’t really need it.
On the other hand, the farmers who present the most risk pay higher premiums, making it less attractive to adopt.
So there’s not a great carrot at either end of the spectrum, and hence why good on-farm management is still seen as the best insurance.
However, could this sort of model, with a few tweaks, have more success in livestock?
Two big risks with livestock are the price you sell and the price you buy back in.
Cattle and sheep producers have made good money for a few years now. If they had insurance in those years, it would have been profitable for the insurer.
This year, however, it would have been handy to have something that protected that historical income average.
Producers who had a history of good drought management, including selling early, would be the less risky customers with the cheaper premiums.
The insurer could pay the difference between that market price and the producer’s average for normal sales.
This would not only encourage producers to avoid risking holding on to stock too long, but put more money in their pocket to buy back in.
If there was a tax incentive for using such as tool, while also maintaining the ability to spread the tax burden of the sell-off across a number of years, it could provide livestock producers with a new tool in their drought kit.
