Does Crop Insurance Influence Acreage Decisions?

[charliep]

Will let others go on the other topic.

A question I have been asked directly is whether crop insurance programs as
they are designed today influence farmer decisions around acreage allocation
and production intensity to different crops. The specific reference to the
question was around sustainability (a new buzz world farmers should get used
to) and benefits from the new eco economy (ecological goods and services).

The reference was many crops (wheat and I think canola) are compensated for
grade loss. Other crops are not. Some crops are compensated for human
quality levels (2CWRS, 2CWAD). Others are insured at a base grade (1CW feed
barley in Alberta - Saskatchewan has a proportion allocated to malt. Other
crops are compensated at combination of feed and human consumption -
peas (could be discussion around proportion but will let happen).

Are the base grades right? With a target of sustainability, are some crops
getting penalized/market signals being muted?

Discussion went one step further on winter wheat. Likely will be more acres
seeded as a result of too wet/flooding and for environmental reasons. Do risk
management programs today do an adequate job of meeting the challenges of
this new reality? Is the market place ready for more winter wheat supplies
starting with doing a better of developing the milling market end of quality
and providing farmers adequate compensation for the product being
produced?

[TOM4CWB]

Dear Charlie,

A very good question!

If I can insure Spring Wheat for $250/ac... yet can only get Winter Wheat coverage for $150/ac... if a wreck happens our farm is out $100/ac.

How often can I absorb this risk and loss?

I chuckle about Hard Winter and Hard Spring markets.

In the real world... they are interchangeable... protein... falling #... the world grows winter wheat on the vast majority of wheat acres.

Only a marketing system that is designed to justify protection of Hard spring of high protein values... discounts hard winter (WW) with the same high protein.

If Portland prices are monitored... there is no way the CWB can justify the give away policy it has adopted... as it creates a self fulfilling scenario... if growers do not get paid for WW protein... the CWB will not get it.

Blending WW into spring wheat... the opportunities are endless for any one with an imagination when they know the value is real...

So the CWB WW prices are used for crop insurance... bingo... Spring wheat is King. Just as the CWB wants it to be.

If we were to be given 'no cost' export licenses... watch the CWB change!

THis is affecting the environment...

Present Crop Insurance; Production neutral?!

I call it a distortion. NO WAY.

Triticale, Rye, and Oats are similar... often sucked up in the same 'feed wheat/barley' CWB vortex of 'discount marketing' that plagues 'designated area' grain growers.

Good topic!

[charliep]

A little off topic but I note lesm comments about seeding $9/lb canola seed on June 17. I assume Saskatchewan and as a result of the extension to crop insurance seeding deadlines.

Would management decisions have been different if the seeding deadline hadn't been extended? Would the farm have grown a shorter season (or perhaps lower cost) crop?

[TOM4CWB]

Charlie,

Ask the question again...

'Does Crop Insurance Influence Acreage Decisions?'

Reduced risk, better return; why not grow it?

[skhadenuf]

Absolutely it affects cropping decisions especially when conditions or time constraints start to enter the picture. I get a kick out of some of the guys that thought the extended deadline was a real gift to them from crop insurance, when the reality is crop insurance is really not wanting to pay the 50 bucks, coverage is so shitty at least in our area that if you harvest a bit of crop at all they likely will be paying way less than the 50 bucks plus as in the case of the high premiums brought in by the current government they are way money ahead to have someone try seeding all the way to the end of June.

[bucket]

Crop insurance has influenced people not to use it.

I am talking to neighbors that I thought for sure would be enrolled but most have said they could spend the premium money better. Which is true, but on a year like this, its gotta be nerve racking.

[skhadenuf]

You're right Bucket, same thing here, also surprised how many are out of the cais thing most saying all they get out of it is a bill and a big waste of time, one guy had a fu-- up at cais end up costing him a full blown audit by revenue canada, he wasn't doing anything wrong but they treated him like Al Capone. The revenue canada thing is done but cais is still at appeal for their own error, this is 2006 year what year is it now!