Crop Insurance to help all farmers

[Steve]

If farmers keep asking for bailouts they'll sound like real entrepreneurs like the privatized Air Canada which went private with no debt because the taxpayers of Canada assumed it. Steve, I think you have to rethink one of your basic assumptions which is that countries are trying to reduce and eliminate subsidies. The Americans will never eliminate their payments and start every farm bill consideration assuming there has to be help for the farmer. I can tell you from my travels in Europe that the governments there will support their farmers in perpetuity because keeping farmers on the land is a social issue not an agricultural issue. They started the latest WTO round by stating that other nations should not assume farm payments will be reduced or eliminated; essentially saying, "Forget it."

Having said that, I will further say that Canadian farmers (with the exception of the politically favoured supply managed sectors) should expect little if any help because Canada is not able to do anything with such a small economy. In our operation, which is mixed grain and livestock, we operate on the assumption that we will receive nothing so that anything we do get is a bonus and gives us a competitive advantage. To get back to my opening remark don't be so hasty to jump on farmers who would like to be treated like Air Canada. That company spent all fall complaining about unfair competition from subsidized foreign airlines. It sounds like the same argument farmers have been making and one industry is probably no more deserving of help than the other.

Don

[Steve]

Steve: Did you gather that I was asking for a hand out. I hope no one else thought that. All that I'am saying is that our present insurance at $80 coverage is running at a surplus most of the time. I think that a $160 coverage per acre could also be sustainable if we apply the input receipt theory.

Your typical farmer is a good manager an needs over $150 per acre before he starts to make some money. Lets create an insurance program that could sustain this return in times of crop failures.

You can't remove government from our business but we can make it a lot cheaper for them to keep sticking their nose into it.

I don't want a gravy train, I want a sustainable program that young farmers can take to the bank. I don't think what I'am suggesting would raise land prices or land rent and would definitely not create surpluses in anyone grain because it is commodity neutral. It protects on price and yield against the real value of your direct inputs.

The Kernel

[charliep]

I apologize for an off the wall question but I thought I could pass along a head scrathcer for me.

Someone in a business directly involved in providing products/services to the agricultural sector (not a farmer). This individual is very concerned about the coming year and in particular the dry conditions going into spring.

He was asking about things that his business could do to cover this risk. The specific question was about private sector things/other risk management iniatives he could take on his own versus government.

I realize that your answer may be look after the farm community income and this will look after agri-business problems. Any other thoughts on alternatives I could provide this individual.

[dfarms11]

Steve you are missing the point! Today's crop ins. does nothing for the typical farmer these days except give you a hail ins. policy. The only farmers that benifit from it now are the ones who milk it or get a hail caim.

What we are saying is put farmer accountability into the program so they can't milk it dry. To me that is the main reason the premiums are so high and coverage so low.

I know farmers personally, who just slap a crop in, or should I say $5 /acre of seed only, and collect their profits from crop ins.

With accountability on our part I believe we could have better rates on premiums and a little better protection.

[TOM4CWB]

charlie,

On the risk management issue,

1. How much drought premium do you believe is actually in the market now?

If a full blown drought occurs, would the purchase of Call options WCE create a risk offset for a drought?

If a wet spring were to occur on the other hand, would Put options help offset poorer prices that would follow as the drought premium disappeared from the market?

Canadian Dollar Options, would these be beneficial for reducing currency risk? (see thread on currency)

Would a astute business decision be to give discounts to farmers who have valid risk management strategies, or conversely charge higher prices to farmers who do not have risk managment issues under control?

It is clear to me that we are in a currency deflationary period, how did people in the 1930's or 1960's deal with these issues?

Next is to try to get the federal government back under control, Ottawa seems totally out to lunch fiscally speaking!

The Canadian Dollar will continue its slide if real leadership does not take hold of management matters!

A nation without a vision will..., and Canada is as close to the cliff as Argentina was 5 years ago!

[Steve]

dfarms11

You are missing the point and trying to call crop insurance--- Income insurance.
You and the Kernel are proposing a guarantied Income insurance plan that can be milked.

[Steve]

Steve, I think you're right on that one and every time payouts are made the assistance gets capitalized into land prices because the more efficient farms just have that much more money for expansion to test the limits of the economies of scale.

[Steve]

Steve: I don't think dfarm11 and I are proposing to milk the system. Lets go through it slowly so even you and jend can understand this one. Governments don't subsidize farms and corportations, they subsdize jobs and consumers. As and industry we pay a huge amount of taxes, 40% on fuel,fertilizer, chemical and machinery. Employees have unemployment insurance which is self suffient and corporations have publicly traded shares and other markets to raise capital and protect their investment.
Now what we propose is a crop insurance that will protect to a more realistic value of input cost.
I believe that the governments are putting a very small amount into are present crop insurance. The acre coverage is some were between $60 and $100. I BELIEVE THIS IS FARMER PREMIUM SUSTAINABLE. If not sustainable then half of Western Canada better give up grain and oilseed farming today and you can decide which half.
What we are saying let us pay a premium to cover our direct input cost (fert. chem and seed), say up to $100 per acre but you must produce receipts for this coverage. Added this coverage to our present program.
This insurance would help good managers through bad times. I don't think it going to help the poor manager who doesn't help himself in being a progressive farmer.
My farm has been grossing between $225 and $350 per acre for the last few years I can stand a bad year but I have to young farmers farming with me that need a premium paid protection or they could be done in one bad year. My program is not milking the system in my estimation but it will make a sustainable industry for young farmers.

Otherwise get a job in the service industry, can everybody eat that stuff?

The Kernel

[Steve]

Kernel then the answer is simple. Set up revenue insurance and make the premiums sustain the program. If you want subsidized premiums (which we already have) then you are looking for a bigger handout. I don't necessarily disagree with that but let's be clear on the objective and the mechanics.

[Steve]

Kernel

I understand your proposed crop insurance plan ( guarantied income )but maybe you should slow down and read my proposed plan, because it accommodates most of your ideas with more stopping blocks for fruad.

I am having a problem with my computer and as soon as I fix it (*%#(^$@9%^ I will write more.

Regards Steve.