Farmer Focus: Drought insurance has saved our year

What are things really worth in agriculture? This is a question I have been thinking about frequently in the past few months. 

A bushel of grain, a bred heifer, a new tractor; with the internet and instant price discovery, these things can be found in seconds. 

But what about the intangibles? What is a big rain in a drought worth? 

One of the largest strokes of luck I have had since returning to the ranch was to buy rain insurance for 2018. I honestly didn’t know it was a thing, but a good bull customer sells it and approached me about buying some. 

See also: Business Clinic: Contract farming insurance advice

The level of coverage is really up to the buyer. I bought a plan that begins to pay out if you receive less than 85% of a seven-year annual average.

You buy areas in two-month blocks to balance out for different crops and grasses.  

The premium when we signed up last autumn came to US$50,000 (£37,814). We could have had a better plan but that was a psychological number we just couldn’t cross.

Now it is July and we are in a terrible drought that has stretched the whole year. This insurance will literally save our year. 

To return to my opening, it has really made me question the true value of rain. Now that I get a monthly production loss report, with the current drought I would pay $50,000 for a good rain right now.

The difference in rain being “important” and rain being worth “X amount of dollars” really changes the way you look at it. 

We all know a late freeze costs a lot of money some years. What is that actually worth in dollars? 

What about an extended period of too much saturating rain in the English countryside? What is the real value of sunshine?

I wouldn’t be surprised if these questions start getting solutions in the coming years as computer models allow for the predictions and values. This year has taught me just how valuable these tools will be in the future.