Farmers to insure against Australias natural disasters

By FWi staff

SYDNEY – GOVERNMENT-funded disaster packages could be a thing of the past in Australia, with the Federal Government looking to introduce a national crop-insurance scheme for cereal and horticultural farmers.

The Federal Government – tired of bailing out agricultural regions hit by freak weather damage – has conducted a feasibility study to determine the pros and cons of such a scheme.

Australian farmers, whove watched government-funded disaster packages dwindle over the years while their US competitors insure on average up to 80% of plantings each year, are throwing their support behind the study.

Australian farmers may be able to take out insurance policies on their crops as soon as this year if the big agricultural insurance companies – GIO, Commercial Union, QBE and Wesfarmers – sign off on the deal.

The insurance companies, fearful of being hit for claims of more than A$1 billion (£390m or US$633m) in the first three years alone, are more likely to approve the plan if the Federal Government agrees to underwrite the scheme.

Federal Agriculture Minister Mark Vaile told Stock and Land: “The bottom line is going to be the affordability of the policies, but its a standard risk management tool that is available to every other business in Australia and should be available to the farming community.”

James Ferguson, chief executive director of the Western Australia Farmers Federation, told the paper that the premium should be kept below 5% or it would be too expensive.

He said the scheme should be viewed only as a “catastrophe policy” to provide enough money for farmers to replant their crops in the event that they are wiped out, not to cover what would have been a good crop.

Australian farmers would prefer the North American models, under which the Canadian and US governments subsidise crop insurance.

But this is unlikely to gain approval simply because yield risks are greater in Australia.

The Federal Governments current exceptional circumstances scheme (disaster relief) costs taxpayers more than A$100 million a year. The Government has paid out A$100 million a year over the past six years for drought assistance alone.

There have also be criticisms levelled at the fairness of the current scheme, with some farmers receiving support because their properties fall within designated disaster areas, while equally affected neighbours miss out.