The financial outlook for the Saskatchewan Crop Insurance Corp. is
going from bad to worse.
Corporation spokesperson Gloria Visser-Niven said crop insurance
payouts – already expected to reach record highs this year – could
climb even higher thanks to widespread rains that hampered harvest
operations across much of the province.
“Once producers have completed harvest, we’ll have a much better idea
(of total liabilities),” Visser-Niven said last week. “But quality is
certainly becoming an issue.”
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In addition to yield guarantees, multi-peril crop insurance offers a
quality guarantee that can trigger additional payouts.
It’s too early to say whether payouts will be significantly affected by
quality concerns, but Visser-Niven said there are some worrisome signs.
The Sept. 9 Saskatchewan Agriculture crop report said crops across the
province were being downgraded due to bleaching, staining, sprouting
and moulding. In some areas, wind and rain scattered swaths, lodged
crops and shelled canola, making an already bleak harvest even more
disheartening.
As of early last week, only 12 percent of crops had been combined, well
below the five-year average of 56 percent.
Ray McVicar, special crops expert with the province, said cereals and
pulses, especially those in the southeastern and southwestern regions,
are showing significant damage due to sprouting and bleaching.
Pea crops that have been lying in the swath since early August are
sprouting in the pod and will likely be downgraded to feed quality, he
said.
About 26 percent of the spring wheat harvested so far is expected to
pass for No. 1, compared with the 10-year average of 52 percent.
McVicar said second growth is common in most crops and will likely
result in samples with a lot of green and shrivelled kernels.
Quality losses will almost certainly increase if the harvest is delayed
by more rain, he said.
Doug Matthies, general manager of the Saskatchewan Crop Insurance
Corp., said reports of grade reductions are becoming more common, but
he declined to say how that would affect crop insurance payments.
“We’re really not going to be in a position to calculate a dollar
impact until after the harvest is finished and the crop is in the bin
… but the anecdotal evidence is that quality will be affecting
payouts,” said Matthies.
“We’ve been predicting that we’re going to be in the $1 billion range
and that estimate is predominantly associated with yield losses. With
the wet weather in August, I think it’s fair to say there’s room for
that number to go higher.”
The crop insurance program, which covered more than 26 million acres of
cropland in 2002, began the year with about $286 million in reserve.
Premiums from producers and government will add another $234 million to
the kitty, but with payments possibly exceeding $1 billion, this year’s
liabilities will easily be the largest ever experienced by the
corporation.
If the program depletes its reserves, it must cover farmer claims by
borrowing from the provincial and federal governments.
Matthies said the corporation’s imminent debt will probably result in
higher farmer premiums next year.
It could also help determine the fate of the annual crop rainfall
program, a pilot program that offered additional coverage of $10 per
acre based on the amount of rainfall received throughout the province.
