19 percent of canola uninsured last year; ‘risk and hope’ philosophy alive and well on many farms
A lot of prairie farmers take a chance every year that the weather will be kind to them.
Larry Weber, analyst with Weber Commodities, compared the number of insured acres in 2017 with Statistics Canada’s official estimate of crop size and found a big gap.
Western Canada’s canola growers insured 18.5 million acres of the 22.8 million acres that were planted last year, according to data provided by provincial crop insurance agencies.
That means 4.3 million acres were uninsured, or nearly 19 percent of the crop.
Spring wheat farmers are even bigger risk takers. They insured 9.7 million acres of the 15.4 million acres planted, leaving 5.7 million acres uninsured, or 37 percent of the crop.
“That’s a big roll of the dice,” said Weber.
But he isn’t too surprised based on conversations with growers.
“Some guys that I thought would be right on top of risk management have never insured,” said Weber.
“My uncle farmed for 35 years. He never insured a thing. Nothing. And he was pissed off he had to insure his vehicles.”
Weber believes the number of uninsured acres is on the rise and that the reluctance to manage the risk has a lot to do with a 15-year run of decent weather.
“We haven’t had an absolute crop failure since 2002,” said Weber.
“I don’t think it’s going to change until we have a wreck and we’re due.”
Shawn Jaques, president of the Saskatchewan Crop Insurance Corp., thinks Weber’s numbers sound about right.
SCIC typically insures 73 to 78 percent of the acres farmed in the province. Last year, it insured slightly more than 75 percent.
But he disagreed with the premise that uninsured acres are on the rise. It tends to be fairly steady from year to year.
He said there are a number of reasons why about one-quarter of farmers don’t take out multi-peril insurance through the provincial agencies.
Some growers feel confident in self-insuring. Others only want hail insurance. Some farmers rely on AgriStability for risk management. And others choose to use the services of private insurance companies.
Grant Kosior, chief executive officer of Global Ag Risk Solutions, a private, revenue-based risk management insurance company, believes the actual amount of completely uninsured acres is about half of what Weber reports.
He puts little faith in Statistics Canada’s acreage estimates and noted that Weber’s numbers do not include hail insurance and acres insured by private firms such as Global Ag Risk Solutions, which will be taking on $2 billion of risk this year.
Kosior said there are definitely growers out there who like to self-insure.
“If you’re rich enough and you have the stomach to be able to take on the risk, then by all means that’s not a bad strategy,” he said.
Daryl Beswitherick, program manager for national inspection standards with the Canadian Grain Commission, believes one reason farmers don’t insure is size.
“Some of the farms get so large that they’re spread out so far that they generally almost crop insure themselves,” he said.
“You’re not going to have the same disaster on every piece of land.”
Kosior said it’s true that farmers try to spread out their land in a north-to-south fashion to reduce the risk of a total loss from weather that moves mainly from west to east.
But he disagrees that it is big farmers who self-insure. In fact, he said the opposite is true.
“A growing farm eats up all of its profits into the feeding of the growth,” said Kosior.
Their working capital is depleted and that leaves them more vulnerable to weather risks, so they tend to take out insurance.
It is the farms that are done growing and have stockpiled cash that consider rolling the dice and going without insurance, he said.
Canola has a much lower percentage of uninsured acres than competing crops like wheat, peas and lentils because input costs are much higher with canola and that makes it riskier to grow.
Kosior said the average farm makes a crop insurance claim once every eight years. But that doesn’t mean they can’t benefit from having insurance those other seven years.
He said one study showed that farmers in Western Canada who carry margin insurance that covers them for the cost of their inputs make an average of $21 per acre more per year than farmers who don’t.