Multi-peril insurance may end 'nervous' cropping

31 Mar, 2011 07:32 AM
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SOME WA growers might sleep a little better this year after the launch of a multi-peril crop insurance (MPCI) program that will become available for selected farmers from April 4.

In launching the new crop insurance scheme at the WAFarmers grains conference, CBH chief risk officer Rob Maurich said the MPCI was a discretionary mutual fund that offered insurance type products to farmer members.

Mr Maurich said the vehicle for the crop protection cover - CBH Mutual - was designed to minimise grower production risks and cover production costs for wheat and barley crops in years where yields fell below specified levels.

CBH Mutual was developed by CBH Group and Willis International insurance brokers in consultation with the WAFarmers risk mitigation committee.

Mr Maurich said only a limited number of farmers would be selected for the first year.

"This year is a trial basis and we are not trying to cover the whole State," he said.

To gain access to the scheme farmers will provide a history of yield data of up to 10 years across a farm's paddocks to produce an average to calculate the underwritten yield.

"This will apply on an offer basis and just because you apply doesn't mean you will get it," Mr Maurich said.

"You express an interest and we give you an offer based on that.

"We will look at our growers' total wheat and barley production so it is not paddock by paddock but overall production of wheat and barley.

"Participating farmers would be selected on best practice from throughout the State."

Mr Maurich said growers could select levels of cover at 30 per cent, 40pc, 50pc and 60pc of the underwritten yields.

"What we are doing up front is saying we offer you a product whereby you can take out cover to cover your cost of production and that may vary from grower to grower but the option is there for 30pc, 40pc, 50pc and 60pc cover," he said.

In one example for Lake Grace, the cost of covering 500ha of wheat at 1.5t/ha and 500ha of barley at 2t/ha with a benchmark price of $250/t at 60pc cover, was $14/ha and provided a payout of $274,000 for total crop wipe-out.

"The final price will depend on the applicant's circumstances," Mr Maurich said.

"CBH has committed $10 million of capital risk to get this off the ground and behind that there will be re-insurance to help make that work as well."

He said the insurance covered all perils, such as fire, hail, frost and moisture, based on the cost of production levels chosen.

Mr Maurich said it was too difficult to determine on a grower basis what constituted an exact cost of production, which was why it was left for growers to choose their own cost of production and their own risk.

Risk mitigation committee chairman Bob Iffla said the launch of the insurance program was a history-making event that had its beginning in a 1998 frost in the southern region.

Mr Iffla said the committee was formed after last September's Kulin crisis meeting attended by more than 300 farmers and Agriculture and Food Minister Terry Redman refusing to subsidise a MPCI in WA.

"We came up with CBH providing the best opportunity of all," Mr Iffla said.

"CBH is a co-operative and if there are any benefits they would go back to farmers and the important point is CBH is a co-op and is sales tax-exempt so we save about 11pc against somebody else doing it.

"The security it is going to give to the farmers is well noted.

"It is security that's needed to plant crops, confidence when planning and comfort to us.

"At the moment we are very nervous about putting in crops, especially with the high inputs and we don't seem to do too well with exceptional circumstances."

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