New revenue insurance option worth considering

A private revenue insurance program called Global Ag Risk Solutions is gaining traction across Western Canada. More grain producers are considering it for the upcoming year. 


Of course, dropping grain prices have everyone concerned about their margins. 


GARS now has a software program that allows producers to see the support that would flow from Crop Insurance, AgriStability and GARS in various price and yield scenarios. 


Farmers need to have at least five years of accrual-based financial statements to be considered for GARS insurance. The premium is based on how well they have performed financially. 


GARS covers the three big input costs — seed, fertilizer and chemicals — as well as a margin of the farmer’s choice over and above the input costs. The margin can be $25, $50, $75 or $100 an acre. 


Farmers’ historical input costs per acre are calculated, which are automatically covered if they go as much as 40 percent above them. 


In my specific case, the seed, fertilizer and chemical costs for the crops I’ve been growing, plus the 40 percent allowance, means I have coverage of up to roughly $160 per acre. 


On top of that, I’m considering a margin of $75 an acre. With that, my coverage will amount to whatever I spend on the three big inputs plus $75. I could choose a margin of $100, but it would cost about $4 an acre more. 


In my case, the price tag is roughly $11 an acre with the $75 an acre margin. Remember that everyone’s premium might be different.


I had GARS coverage last year. Like any insurance product, you hope you don’t collect. 


This year, the company can provide a much clearer picture of how the program functions in relation to the government safety nets. It punches in a farmer’s crop insurance numbers, seeding plan, projected input costs and the AgriStability reference margin to show what would happen in the event of yield and/or price shortfalls. 


My best coverage net of premiums is from staying in AgriStability and buying GARS, which provides better support than crop insurance, in my case. 


It’s important to note that AgriStability benefits are reduced by payments received from GARS and crop insurance. However, farmers who rely solely on AgriStability without having either crop insurance or GARS would see their AgriStability trimmed back if they were in a negative margin situation. 


AgriStability still seems to provide good support and its premiums are cheap, even with recent cuts. However, confidence in the program is low, and it is notorious for being slow to make payments. 


Even though the numbers show that I’ll be better off buying GARS and dropping crop insurance, I’m not likely to do so entirely. Its premiums drop dramatically at 60 or 50 percent yield coverage. 


I’ll likely stay in crop insurance at some minimum level to maintain the establishment benefit and the coverage for unheeded acreage. 


Having GARS will also change my hail insurance needs. I’m in an area with high hail premiums and my land is all in a block. Although my thoughts may change through the summer, depending on how the crop looks, I’ll likely start out with little or no hail insurance.


Each producer has different circumstances, insurance needs and appetite for risk. GARS won’t be a fit for everyone, but it’s worth considering.

Kevin Hursh is an agricultural journalist, consultant and farmer. He can be reached by e-mail at kevin@hursh.ca.