by Don Preusser, CEO VANE
Agribusiness Weather Risk – What’s your Risk Management Strategy?
Preparing for the next Big Event
Weather exposure to row crops and specialty crops, is a risky environment. From excessive moisture to severe drought conditions, large areas of farmland can, and are often impacted, causing millions of acres annually to go unplanted or cause crops to be destroyed by various weather perils during the growing season.
Without crop insurance, farmers would struggle to survive the volatility and more recently, increased frequency and severity of weather events impacting their farm income. Should Agribusinesses providing products and services insure their revenue from weather caused losses just like a farmer does with Federal Crop Insurance? Seems like a good risk management strategy, right?
So why don’t agribusinesses protect their revenue exposure to weather events like their farmer customers? The simple answer it that “Agribusinesses” are not eligible to participate in the federal crop insurance program. Moreover, few options exist in the commercial agricultural insurance market to protect agribusiness revenue loss from weather events. As a result, most agribusinesses go without insurance to protect their revenues and instead adopt other risk management strategies to reduce their exposure to catastrophic weather loss. But is it enough?
A key risk management strategy for many agribusinesses is to diversify its products, services and geographic market territory. A common strategy is to “spread” risk over large geographic areas to help minimize the impact of localized weather events. While this strategy can be important, severe and widespread weather events can still create large economic losses to agribusinesses. For agribusinesses operating in smaller geographic territories, the risk of catastrophic loss is much greater due to limited geographical diversification.
Interested in learning more about your unique risk exposure and options to protect your Agribusiness? Give Vane a call. We can provide your agribusiness with an exposure analysis specific to your business. We also have unique and customized insurance solutions to protect your revenue from weather caused loss of products and services you provide to your farmer customers.
