MOOSE JAW, Sask. – Unless the government comes up with more beef-friendly insurance programs, the risk of increasing beef production might be too great for producers, says a Saskatchewan agriculture economist.
Morley Ayars, speaking to farmers and industry representatives at the Farming For Profit conference, said it’s generally expensive to add a livestock operation.
He and several other economists produced a study late last year detailing the costs under three different scenarios: switching from grain to cow-calf; adding grain to cow-calf; and starting a cow-calf operation from scratch. By the time a farmer could generate income in any of the cases, he would have invested a lot of money and forgone the income from grain production, Ayars said.
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One of the significant risks is forage establishment and Ayars said crop insurance programs don’t provide enough protection.
While forage establishment benefits might cover seeding costs, they don’t cover the lost income from delayed livestock production or what the producer would have earned from growing grain on that land.
The study, An Assessment of Western Canadian Beef Development, suggests both provincial and federal governments could put more money into forage insurance to provide better coverage.
The coverage received for grain is nearly double that for forages under Saskatchewan Crop Insurance Corp., Ayars said.
“We need to make forage insurance more competitive with grain insurance.”
For example, the study compared crop insurance coverage for hard red spring wheat and tame grass used for hay in Lloydminster, Preeceville and Chaplin, Sask.
In Lloydminster, in 2002, the coverage for wheat was $99 per acre and $28 for forage. The premiums were $3.99 and $2.27, respectively. Coverage selected was at the 80 percent level.
Ayars said the premium level for hay was eight percent of the coverage level, but only four percent for wheat. Beef producers would therefore have to pay twice as much for a dollar of forage coverage.
In Preeceville, wheat coverage was $103 per acre, compared to $39 for forage, and premiums were $5.18 versus $3.72.
And in Chaplin, wheat coverage was $70 per acre, compared to $47 for forage. Per acre premiums were $3.11 and $2.43.
Saskatchewan offers a rainfall insurance pro-gram for grazing land. This year, it pays out a maximum indemnity of $10-$22 per acre of tame grass, depending on the soil zone. Ayars said the indemnities paid under the study scenarios wouldn’t come close to covering feed costs in a drought year.
“This low insurance on grazing land is a roadblock for risk-averse individuals who are switching into cattle,” the study said. “On the other hand, a grain producer can insure all his acreage under SCIC programs.”
Ayars also said crop insurance officials need to look at how drought is handled. There could be a discount that would allow producers to cut crops for greenfeed and help beef producers rather than let poor crops mature.
Keith Hayward, a senior analyst at SCIC, said livestock insurance is supposed to be developed under the agricultural policy framework. He said it is “a challenging thing to do” and predicted it would be a year or two before a program was in place.
