Dont understand Canadian Crop Insurance

[malleefarmer]

devils advocate can these programmes cause over production or in another term make farmers not heed market signals because they know they are going to get money one way or the other at the end of the day, regardless of price and production?

ps im way out of my depth here and not flaming anyone

[riders2010]

You know mallee I was just trying to provide my experience to you with the programs. The way I told you is the way it has played out in our area not just my farm. I know you are not flaming anyone.

I hope others contribute, if you had 10 years of good weather, then one bad it's not so bad of a program for that situation, but you've also just begun the spiral downward in coverage also.

But lets look at the case of wet acres and late seeding, if you have coverage for 350 an acre on canola and 120 for wheat, and it gets late to seed and you are more likely be in a claim because of frost in fall, which one would you pick Mallee. In years like this it totally has an influence on seeding intentions.

Some guys that never seeded canola before and have no clue how to, can have higher coverage than someone that has grown it and just had poor weather therefore no coverage. So the guy that should be seeding it because generally area is suited except for extreme recent weather leads to poor coverage so he isn't and the guy that shouldn't be might be just for the business part of insurance.

Another scenerio and it has happenned before, Let's say you seeded canola because your coverage 20 bushel acre at 10 bucks through insurance. That is 200 coverage and acre. But you managed to grow the 20 bushels so no claim therefore the market price is what you get and lets say over production leads to 5 bucks bu, your income is 100 an acre. minus the 28 premium is 72.

We've heard already on other threads guys saying this exact same thing.

Would you pay 28 dollars an acre for stabilization or would you expect decent coverage? Absurd premium for crappy coverage and the next guy gets double the coverage for half the premium?

Not sure what stubblehumper doesn't understand, he should he has connections there, but maybe that explains why it is as screwed up as it is. If we would get rid of the cheap wheat board prices maybe the insurance would not be so distorted. But it is on other crops to some degree also but not as bad.

Hopefully that helps Mallee

[charliep]

I don't think any of the provincial crop insurance programs are rich enough to distort production. At any of the coverage levels (60, 70 or 80 % average coverage yield), the best alternative is to harvest a crop and sell it. Insurance is only there to be used in years when Mother nature steps in to reduce yields/quality. The coverage in the case of production insurance is not impacted by how or when the farmer sells the crop - incentive is to do a good job of marketing.

Canadian production insurance is based on revenue replacement. The price of this equation is set process in the winter prior to seeding with potential adjustments depending on which province - Alberta a program which increases coverage prices if average levels in October increase by more than 10 %.

Yield side is based on actual yields for that farmer based on previous experience (area averages if that farm doesn't have a yield experience record). In Alberta (other provinces are different) have methods of cushioning the impact of poor production/collection years. Example in Alberta, they don't include the previous years yields in the calculation for the current year. In does start to get included in year 2. There are also limits how much crop insurance coverage can change year to year.

The production insurance programs have to be actuarily sound (realizing government does invest in the premium side and administration). The arguements as you can see are from farmers who go years without claiming losses/want better coverage for the dollars they spend and farmers who have been in a claims situation with the impact of higher risk rating/lower coverage levels.

Likely to get beat on but that is the discussion that goes on here. There is a tie in with our whole farm income stability programs (Agristability) but that is a whole new discussion.

[riders2010]

Well Charlie it's 10 june your canola guarantee is 350 and wheat is 120 which one are you seeding? Not beating you up either but not a person around here would seed wheat!

[charliep]

The idea behind crop insurance is revenue replacement in a low production/grade year. The question then is do coverage levels accurately reflect the reality on the farm in terms of revenue (best information today).

A good part of the differences in coverage/acre is price. Prices use for canola are just under $11/bu (SK). November futures today $586 at the open - put in a basis but likely easily $12.50/bu new crop. CWRS (#2) crop insurance coverage $6/bu with the fpc (yesterday) likely close to $7.50/bu for same grade/protein.

At 70 % coverage (you put in your choice), the coverage yield used in you example for CWRS would be close to 30 bu/acre (70% of 30 bu/acre times $6/bu). Canola coverage yield would have to be over 40 bu/acre. Only you can comment whether these differences in canola and wheat yields exist on your farm/area. Some of the difference is canola likely goes in early with a full package of inputs while wheat gets seeded last with whatever inputs can be afforded. Again, only farmers can comment on the economics/profit realities (best information today) of the different crops.

Way off topic but most Saskatchewan farmers should be monitoring the variable price option program. Coverage levels are likely to increase in Saskachewans Crop Insurance summer calculation.

[charliep]

I miss lead everyone on the comment on variable price option in Saskatchewan. Deadline was the same as crop insurance - March 31.

See the SCI general publication.

[URL="http://www.saskcropinsurance.com/cropinsurance/publications/guide01_e.pdf"]SCI general publication[/URL]

[riders2010]

Yes Charlie to reflect your farm is what they say the program does but it doesn't that is what the problem is. People are almost brainwashed into thinking this is the only way to do insurance it isn't. There is the max of 80% so right off the top not insuring the value of what you grow.

We had 2005 2006 part of 2007 flooding 2010 flooding and likely 2011 flooding yields that are supposed to be 1 in 50 years events, or what ever, so we have had 4 events that are supposed to happen over 200 years happen in 6 years. and crap insurance punishes your yields for it.

Point is if you compare it to car insurance what they are doing is saying your car was totalled last year the year before it was 30000 so now we can only insure your present 30000 car for 15000 at maximum 80% or 12000. Mallee can insure his 30000 car every year for 30000 as I understand what he said above. Their would be riots in the street if sgi operated like crap insurance.

As I understand it mallee can simply pick his coverage based on what is in the field, what he can actually grow, how simple no paper shuffle for 10 years back. The experts here tell us it can't be done, you know why because we don't need all them jobs, that's why.

Get rid of crap insurance the money saved on wages and severence and retirement will go a long way to pay for that program. No guessing what is in the bin or on the piles, no one hiding grain across the road, no outrageous administration.

Have some sort of agri income program on top of that if you want to catch a few that might fall through the weather program cracks. So much simpler.

There is no way someone can say that when you are seeding after june 1 even, that the level of coverage is not gonna effect seeding intentions. In the situation where you are likely to freeze out in the fall , if you don't seed the highest coverage and loose your crop, you shouldn't be farming or won't be for long.

[charliep]

Have been discussions in Alberta on your idea. Insure the cost side/revenue per acre versus income replacement. No traction to date.

[malleefarmer]

Forgot to add riders that insurance is based on a pre harvest estimate of yields then a revision closer to harvest,if you get yields wrong bad luck,then there is programme on total tonnes delivered.

There is no point putting a inflated price on the grain as its dead money if you dont claim.

Ive claimed 2 times since 1980.Many farmers do not insure

[stubblejumper]

It is also tax deductable in canada

[riders2010]

Wow what a selling point it better be a fricken tax deduction it has become as big an input as a good chunk of fertilizer and more than the cost of chemical. 2000 acre farm 56,000 crop is shit. Thanks so much Saskatchewan Party Government, maybe go to Sun news and tell us how good that tax break is gonna feel, better come with a bottle of vasalene because are asses are raw, there must be some hot dic-s in the sk ag department.

[riders2010]

You know Rider, you actually had some good points and valid arguements through out this post

But then you spoiled it by your last one

[riders2010]

More than frustrating when your ag dep gets on tv and they say they are helping flooded areas particularly when double premium and half coverage, and the only way to get inputs loan is if you have crap insurance. don't forget we already forgo 20% of coverage right off the top in a claim year so behind the eight ball going into next year already. Premium is a huge worry instead of something that should make you sleep better.

Kinda funny an NDP (stubblehumper) with ties to the program maybe is a manager there, gets on and defends these faults when a Sask Party coalition of reform and liberals is in government. Sask party tells us guys previously we are gonna fix this because the NDP didn't know how to. Looks like either Sask party is run by NDP or they don't know better themselves, either way DON'T COME OUT FOR A PHOTO OP AND SAY ONE THING, (They agreed 100% when we brought these issues up and wham when we got our crap insurance sign-up holy crap) THEN WHEN YOU LEAVE GIVE US THE FINGER!

Wonder what the liberals in the sask party think when Wall puts his nose in federal politics criticizing coalition when he wouldn't have had a sniff at premier if it wasn't for the more middle political liberals joining the party and forming a coalition, nothing like having your leader laugh in your face, turn the knife in the back eh!!!!!lol

Moderators go ahead remove the last post that offends sask99, but really should have asked for 2 bottles of vaseline instead of one!

[riders2010]

Charlie, could you tell me possible reasons why in Alberta you have as I understand it until end of April to select your crop insurance in sk we have to do it end of March? Kinda goofy since many or your producers on a normal year are almost done seeding when they can decide to have crop insurance or not. That is a huge factor for us. If I knew I could seed may 10 I'd tell them to stick it and so would alot of other guys here, but maybe that's it.

What is the participation rate there in terms of acres seeded and provincial acres?

[ajl]

Riders 2010 does capture the reality of
crap insurance. This exact senario
happened to me in 2010. Had a good crop
till hail took about half of it July
31/10. The crop harvested was 100% of
area average which paid nothing and then
there was a big premium bill due which
made the loss bigger.