The farming industry was left hanging last week after expectations of an announcement on multi-peril crop insurance at the Drought Summit in Canberra were not met (also see facing page).
However, former New England MP Tony Windsor says the industry has to get away from seeing multi-peril crop insurance as just a tool for managing drought and better understand its broader applications.
“The key word is peril, not drought. Drought is one of the perils,” he said.
“You can insure for flood, pig damage, fires, fungus in chickpeas,” he said. “It’s not all that far from being a viable product on its own.”
Mr Windsor said it was important that if a tax incentive were to be introduced - such as the 150 per cent offset that was the focus of last week’s speculation – that the policies it supported ensured a farmer did everything they could to grow a successful crop.
Related: How the tax credit would work
He said the right policy had the ability to “incentivise and improve management … it’s about making it a better business and minimising risk”.
“We need to get away from welfare and have a business approach to this.”
David Taylor, Coonabarabran, who sold his farm in 2016, but had used multi-peril crop insurance, said the suggested 150pc tax offset would help overcome the cost barrier.
“It’s been expensive, and the further west you go, the more expensive it becomes,” he said.
However, he said anything that provided an incentive to be more proactive in managing risk was beneficial.
Tottenham farmer Paul Adam said his operation was able to continue to improve through the use of multi-peril crop insurance.
“This year was one of our worst rainfall years, and we would have harvested grain if it wasn’t for the hail storm,” he said.
“We’ve never seen it as dry as it was this year – probably the driest 18 months on record for us, and then we got a hail storm in October.
“We’ve had three extreme weather events and yet we’re not going to lose a lot of money.”
Mr Adam has taken out multi-peril policies for four years, and made claims for the past two.
Last year he got hit by frost on August 29. His wheat was stem frosted when the crop was in early head, and his canola was hit while in pod.
“(The frost) just frazzled that,” he said.
His claims process only took three weeks. This was handled by a third party, Crawford Ag of Toowoomba.
“It was the best claims process I’ve ever done,” Mr Adams said. That was for $240,000.
That claim allowed Mr Adam to plant this year’s crop, which, as luck would have it, got wiped out by hail and is now in the claims process.
The former Nuffield scholar had also previously been to North America and Europe on his scholarship.
“I realise they’re subsidised, but the subsidisation is built into their crop insurance,” he said.
He said this had allowed for practices like no-till and stubble retention to be introduced via their insurance policies.
What he saw in the northern hemisphere also made him question whether Australian growers were missing yield opportunity due to our more conservative approach, and he questioned the flow-on to machinery and technology upgrades.
Now he has this insurance as a backstop, he was “having a bit more of a go”.
He used a Latevo policy for the first two years and for 2017 and 2018 has used SureSeason.
“And it’s good for our communities because we can still spend the money and put the full inputs in, rather than cut corners after a series of no seasons,” Mr Adam said.
Mr Adam runs the property Dysart, where grows wheat, canola, lupins, lentils and faba beans across 2000 hectares of owned and leased country.
In this year’s policy he was covered for 50pc of expected revenue, based on his five year running revenue average for each crop type.
Next year, because he has had two poor seasons, his five year average yield will decline, but he is hoping improved grain prices will help counter that loss.
At 50pc revenue coverage, his 2018 premium was $13.50/ha (plus GST), which bought him about $250/ha of insurance with a successful payout (minus the value of any grain that is harvested).
“It essentially means we don’t have a significant hit to our business … we meet all our commitments,” he said.
“People should be seriously about looking at it – it’s less than the cost of one spray and it’s protecting your business… I think a 150pc tax write-off would be good because it will make some people have a serious think about this.”
He said these policies had the ability to be tailored to a business.
“We’re trying to stay as a low cost business and only trying to protect against our loss,” he said.
“I think that’s that’s where the big gap lies at the moment, is people are trying to compare it with hail and fire (policies) – you’ve got to take hail and fire out of your head and approach it with a different mindset.”
Mr Windsor said by taking out the losses, farmers didn’t have to go back to the bank to plant the following year’s crop.
He said this would also bring farmers back into the tax system faster – “nobody’s doing modelling on this”,
“If you run models over a five year period, some of the numbers that feed back into the tax system are quite interesting – and the premiums become quite affordable,” Mr Windsor said.
“What would a bank do to the risk assessment if they knew the business wouldn’t make a loss – and what would this do to the interest?”
It essentially means we don’t have a significant hit to our business … we meet all our commitments.
- Paul Adams, Tottenham