Australian Agriculture is risky but our use of risk management solutions is incomplete with only one per cent of farmers in Australia currently taking up multi-peril crop insurance (MPCI) cover.
“Australia is one of the riskiest agricultural country in the world in terms of agricultural production,” said Mr Jay Horton, an agribusiness consultant with Strategis Partners.
“We have to be very good at risk management in all of its forms and we could do better.”
A paper presented by Strategis Partners at the Agribusiness Outlook Conference in Sydney states digital technologies and insurance innovation can help fix the problem. For all businesses across the agri-supply chain – financiers, input suppliers and processors – risk management itself is a growing business opportunity.
He added that farm production risk is not just the farmer’s problem: it’s a supply chain problem, reported the ABC news website. “If the farmers don’t do well, the input suppliers don’t do well, the buyers of grain and livestock also don’t do well.”.
Mr Horton suggested that supply chain partners to the farm enterprise become involved.
“What if the input suppliers were to say to the farmer customers ‘No need to pay in full for the seed we supplied you this year.’
“Or the buyers of crops could say, ‘You weren’t able to supply the target volume, we will give you an income to cover this year’s costs anyway!'”
He said banks could waive interest on a loan, and farmland owners leasing land to young farmers could reduce rent for a year.
That would be backed up with an insurance policy and risk management, he said.
Multi-peril crop insurance cover is still very new and a handful of companies offer it. Some companies have made big payouts for failed crops, which is unsustainable unless more farmers come on board to spread the risks across the regions.
Mr Horton said the emergence of big data, from weather stations, markets and on-farm operations, about prices, soil fertility and moisture, would help to provide objective information.