The corporation, provincial and federal governments, and producer groups worked together to make the enhancements based on producer feedback.

The malt barley insurance will have a premium price compared to feed barley, but will provide more coverage for growers with malt contracts.

The other five program enhancements are:

• Amendments to the Annual Insurance Program to include winterkill as a designated peril for pedigreed alfalfa seed production loss insurance.
• Implementing individual coverage as part of the Bee Overwintering Insurance Program.
• Making organic producers eligible for production insurance. This new option will work similarly to AFSC’s standard production insurance programs.
• Continued changes to field pea insurance as the crop shifts to an edible end use.
• Creation of a distinct category for yellow dry beans.

Additionally, AFSC clients will pay an average of six per cent less in multi-peril Annual Crop Insurance Program premium rates compared to 2015 levels. The reduction is based on the average of all crops in risk areas, and is related to the positive loss experience in recent years. In certain risk areas, the premium reductions will be higher or lower than the six per cent average.

Clients will also see a 14 per cent increase in dollar coverage per acre in 2016. This increase is due to a combination of increasing spring insurance prices and yields.

For more information, call 1-877-899-2372 or visit afsc.ca.

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Clients wishing to pasture their insured hay acres prior to haying being general in their area will need to contact AFSC and request approval to use the hay crop for an alternate use and a pre-harvest inspection. At the discretion of AFSC the client may be given the option, to place a sufficient number of exclosures that are fenced off, and representative of the field. The placement and maintenance of these sites and associated costs are solely the responsibility of the client. When AFSC declares haying being general in an area, OFI will then complete a pre-harvest inspection and the average yield potential will be based on these fenced-off exclosures for that field.

A minimum of two sites per field and up to 40 acres is required, and a minimum of one site for every additional 40 acres is also required. Clients may build sites from material they have on hand; AFSC’s recommendation is to use eight- to 10-ft. steel panels, gates or round bale feeders. These will have to be solidly secured to the ground and, if needed, wrapped with material such as page or cement wire to protect the site from livestock grazing.

Clients with questions or concerns about the policy or procedures should contact their local branch office.

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“A lot of the nervousness we’re seeing began last fall when the U.S. drought caused corn and feed grain prices to spike, triggering a major drop in calf and feeder cattle prices,” said Dunford. “Calf prices fell from a record $1.85/lb. in February to $1.55/lb. during the fall calf run last year. That price drop resulted from significant losses that continue today for feedlot operators and backgrounders who are shouldering record feed grain costs. The impact of those losses gets passed down the chain, affecting calf prices.”

The price drop was a classic reminder that tight cattle supplies — the key driver behind today’s high calf and feeder prices — aren’t the only factors that influence prices, says Dunford, noting high feed costs have kept calf prices in the $1.50/lb. to $1.55/lb. range this spring. “Those prices could climb higher if moisture conditions in the U.S. turn around and large corn crops are harvested this fall, causing feed grain prices to decline. But with so many other question marks on the horizon, there are no guarantees.”

Minimum price insurance

All of the uncertainty has sparked a surge of interest in Alberta’s Cattle Price Insurance Program (CPIP), which lets producers insure a minimum price for their cattle, protecting them if prices fall lower while still allowing them to sell their cattle at the highest price.

“Participation has tripled in the CPIP-Feeder program this year and we’re getting substantially more phone calls and questions about CPIP-Calf which is only in its second full year of being offered,” says Stuart McKie, a field analyst with Agriculture Financial Services Corporation (AFSC). Until now, participation in CPIP-Calf has been low. “Because calf prices have been so strong, many cow-calf producers didn’t feel the need for price protection. But that’s changing,” says McKie. “Producers are a lot less confident they’ll make money on their calves this year. It’s all because of the drop in calf and feeder prices last fall that triggered payouts of up to $80 per head on CPIP-Calf and up to $195 per head on CPIP-Feeder,” he says. “The CPIP-Fed, Feeder and Basis-Only programs are still triggering payouts due to high feed costs and other factors.”

McKie points out CPIP-Calf is offered from February to May, and the deadline to participate this year is May 30. CPIP-Feeder, for producers who feed cattle to a certain weight before moving them to a feedlot, and CPIP-Fed, for feedlot operators, are both available year round.

Watch premium tables

Cattle producers who aren’t happy with the CPIP floor prices and premiums being offered today should keep an eye on the premium tables, says McKie. “Those prices change daily as markets fluctuate.” He explains the floor prices producers can insure with CPIP reflect variables such as futures markets, the price of barley, exchange rates on the Canadian dollar, and the basis — the difference between U.S. and Canadian cattle prices. “It covers all those risks in one tool.”

The flexibility of CPIP programs surprises many cattle producers, says McKie. “Especially when we tell them they don’t have to sell their cattle to collect a claim. They can sell the animal later once prices improve. Or if they insure a floor price for November but sell their calves at a higher price in August, they can still collect a payout if prices drop and trigger a claim in November, even though they’ve sold the calves already — as long as they owned the calves for 60 days during the policy.” Claims are triggered when average calf and feeder prices at auction marts fall below their insured price. “At the end of the day, CPIP is revenue protection that lets you lock in up to 95 per cent of the future forecasted price of Alberta cattle. Sometimes the price you can protect will be profitable. Sometimes it will minimize losses. It depends on where markets are that day,” says McKie.

The post Insurance available for a drop in fall calf prices appeared first on Alberta Farmer Express.

Coverage has been reduced in some areas and expanded in others. “Beginning in 2013, producers must experience a larger drop in farm income before triggering payments under AgriStability,” Chapman explains, noting the changes will not affect 2012 AgriStability claims. “Payouts under the new rules will now trigger when a producer’s margin — their allowable income minus allowable expenses — drops below 70 per cent of either their ‘Olympic’ margin over the last five years or their average allowable expenses during that time frame, whichever is lower,” says Chapman. “The trigger point for payments was previously at 85 per cent,” says Chapman. “Limiting coverage to a producer’s average allowable expenses when it’s lower than their Olympic margin is also new.”

Once payments trigger, producers will be paid 70 cents for every dollar of loss. They were previously paid up to 80 cents on losses above a zero margin, and only 60 cents on losses below a zero margin — known as a negative margin, says Chapman. “Now if farmers suffer a big hit and drop into a negative margin — where they typically can no longer cover their input costs — they’ll receive a bigger payment at that 70-cent level. The changes provide more money where losses are deepest and transfer some of what’s considered ‘normal’ business risk back to producers.”

The upcoming changes realign AgriStability coverage to provide disaster assistance when producers need it most, rather than compensating reduced profits, says Chapman. AgriStability fees are also being lowered to $315 per $100,000 of coverage to reflect program changes, adds Chapman. “It’s relatively cheap protection for the coverage it offers.” Producers with questions about AgriStability should contact a field analyst at their AFSC District Office, visit www.afsc.ca, or phone the AFSC call centre at 1-877-899-AFSC (2372) before the April 30 deadline.

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“Feeder cattle prices hit record levels in February and remain about 20 per cent higher than this time last year. Cattle futures also look strong for the second half of 2012,” says Scott McKinnon, an Alberta market analyst with Canfax. “Supply is a big factor influencing prices.”

The North American cattle herd dropped sharply in the last decade and Alberta’s cow herd declined steadily amid eight years of losses. The province’s beef cow herd sits at 1.66 million head as of January 1, 2012 — down 1.5 per cent from last year.

Many producers have sold off herds to cash in on current prices, as others retain heifers to rebuild their herds, taking more feeder cattle off the market.

“We’ll probably see at least five years of strong prices as supply slowly increases, although that may not translate into profit for everyone,” says McKinnon. Higher operating costs and increased calf prices are squeezing profitability for cattle feeders.

“The tone is definitely optimism, but there’s always something that can throw a wrench into things,” he says, pointing to the European debt crisis, volatile markets, and a sluggish North American economy.

High prices and uncertainty have triggered increased interest in CPIP price insurance among producers and lenders.

“We’re seeing producers take on risk levels not witnessed since the ’90s, as far as investment per head at today’s prices. That’s why we’re actively encouraging them to consider price insurance,” says Reg Schmidt, general manager of the Feeder Associations of Alberta (FAA). “When prices reach record highs, they’re more likely to fall than climb higher,” he says. “I worry most about farmer-feeders and backgrounders,” he says, explaining they buy high-priced calves on the spot market and sell them as heavy feeder cattle to feedlots grappling with high operating costs and price pressure from packing plants. “They could get crushed from both sides if they’re not using risk management.”

“Producers are very aware of the risks. We’re getting a lot more inquiries and writing new policies for CPIP-Feeder. We’ve also had strong attendance at CPIP-Calf information sessions,” says Brenda Campbell, a field analyst with Agriculture Financial Services Corporation (AFSC).

Because CPIP is market driven — based on forecasted Alberta cattle prices — the floor prices being offered have also climbed to record highs, reaching more than $900 on a 600-pound calf.

“I’ve spoken with cow-calf producers who are excited by the prices they can lock in,” says Schmidt, explaining in today’s volatile markets, price insurance protects them from being caught in a down cycle when they sell.

Most producers insure floor prices at the top end of CPIP premium tables to cover record-high input costs, says Campbell, “although many still choose lower-level disaster coverage to protect them from more extreme price drops when marketing their cattle.” She adds, “If average Alberta cattle prices drop lower than their floor price at the end of the policy, a payment is mailed within a couple weeks. And they don’t have to sell the cattle to make a claim.”

At the end of the day, price insurance protects even the smallest producer from a drop in market prices — something they typically have no control over, says Campbell. She adds no minimum number of cattle need be insured and producers aren’t required to insure the whole herd. CPIP floor prices and premiums change three days a week reflecting futures markets.

The post Shrinking cow herd fuels high prices — and risk appeared first on Alberta Farmer Express.

“At the moment, most of the province isn’t looking too badly for soil moisture going into the spring except for the Peace region, which is still quite dry, and a few other pockets around the province,” says Ralph Wright, soil moisture specialist with Alberta Agriculture.

Things look a whole lot better than they did at this time last year when most of the province was extremely dry and the situation appeared grim for many farmers, Wright says, noting April and May marked the turning point as the rain began to fall and it quickly became wet in many regions.

What the coming spring might bring is anybody’s guess, Wright says. “What we do know is that extreme swing in moisture that transformed the province last year – from very dry to suddenly quite wet – is not uncommon.”

Hay and pasture insurance is one option livestock producers should consider before the February deadline arrives, but there are a few other critical factors they also need to think about this year, says Grant Lastiwka, a forage specialist with Alberta Agriculture.

“While many cattle producers had amazing growth on their pastures and hay crops last year thanks to all the rain, a lot of these forage stands aren’t what they used to be,” he says. “In many cases, they’ve evolved to older hay stands that have lost their deep-rooted legumes, and older pastures that have lost their deep-rooted grasses. They’re now dominated by grasses – often shallow rooted and less drought tolerant, which can result in lower yields.”

These older pasture and hay stands will be more dependent than ever on producers’ management practices, fertility programs, and plenty of moisture throughout the upcoming growing season, says Lastiwka. “This spring, producers should consider reseeding hay and pastures back into deeper-rooted legumes and grasses that are better able to withstand drought.”

Claims up last year

Last year, more than $6 million was paid on hay and pasture claims in Alberta – mainly due to lack of moisture in the Peace region, says Chris Dyck, senior manager of insurance operations with Agriculture Financial Services Corporation. Across the province, claims were also triggered by a cool, dry spring that delayed forage growth by up to a month in some areas, as well as flooding, frost, and hail.

Dyck says producers who enrol in Perennial Insurance tend to remain in the program each year to protect themselves from unexpected risks, and to maintain premium discounts, which can add up to more than 65 per cent over time. These include an Experience Discount of up to 38 per cent for hay producers based on their claims history, a Continuous Participation Discount of up to 20 per cent, a Multi-Type Discount for insuring multiple hay varieties, and an Early Payment Discount. He adds, “The federal and provincial governments continue to subsidize two-thirds of the premium and all administrative costs to help keep it affordable for producers when they need it most.”

———

“Whilemanycattleproducershadamazinggrowthontheirpasturesandhaycropslastyearthankstoalltherain,alotoftheseforagestandsaren’twhattheyusedtobe.”

GRANT LASTIWKA

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“It doesn’t save any money to wait a few weeks. You pay the same amount for hail insurance whether you start coverage in June, July or August.”

As crops begin to grow and another hail season approaches, many farmers across the province will be casting a nervous eye at the sky, hoping their fields are spared from hail damage this summer. For the past two years, Alberta producers have suffered record levels of crop damage due to severe hailstorms.

“Last year was the worst we’ve seen in our 71 years as a public hail insurer. We paid out $73.5 million in claims through our Straight Hail program – almost doubling the record $40 million the year before,” says Gilbert Goudreau, provincial adjusting manager with Agriculture Financial Services Corporation (AFSC), the provincial Crown Corporation that provides the majority of hail insurance in Alberta.

While Environment Canada reported 66 severe hailstorms last year, down from a record 89 the year before, many storms last summer were more intense and widespread as they tracked across the province, says Goudreau. “We had 563 different areas of the province report hail, compared to about 300 areas in a normal year.”

The hardest-hit regions were southern Alberta, and a corridor along the Queen Elizabeth II Highway between Edmonton and Calgary.

It’s impossible to predict what will happen this summer, says Dan Kulak, an Environment Canada meteorologist in Edmonton. “It’s been a very dry spring across most of Alberta, but June is a critical month that often sets up the summer for hail depending on how much rain falls. If we get some real soakers, it can fuel hailstorms in July, which is typically when we see the most hail activity.”

EARLY HAILSTORMS CATCH FARMERS OFF GUARD

May and June have also been busy months for hail in the last two years, with a number of early storms catching farmers off guard, says Goudreau. “We’re urging producers to make their hail insurance decisions as early as possible this year. The number of producers calling us to buy hail insurance after their crops have already been hit has doubled. It’s unfortunate because we have to reject them for coverage if the damage on uninsured crops exceeds 25 per cent, or if the damage is too difficult to accurately assess at such an early stage of plant growth.”

“In some cases, we can defer assessment of the crop until mid-July when it’s more mature. But in the meantime, if more hail rolls through and does 25 per cent damage or more, they’re stuck without coverage for the whole season.” He adds crops with less than 25 per cent damage can be insured, but they’re charged a deductible to cover the previous hail damage.

Farmers play a risky game by waiting too long to buy their hail insurance, says Goudreau. “If they’re thinking about insuring their crops, we recommend doing it as soon as the plants emerge. It doesn’t save any money to wait a few weeks. You pay the same amount for hail insurance whether you start coverage in June, July or August.”

HAIL RATE INCREASES LIMITED

Despite back-to-back years of record hail claims in Alberta, producers across the province won’t see their hail rates increase by more than two percentage points this year, says Avery Cook, Manager of actuarial services and program readiness at AFSC. “We limit base rate increases to two percentage points every year to keep them stable and minimize the impact of heavy hail years like the ones we’ve seen lately,” he explains.

“We’re able to do this because we take a long-term approach to managing rates,” says Cook. “AFSC has been in the hail insurance business for 71 years, so we’re able to calculate rates using 25 years of hail data – one of the longest time frames in the industry – instead of the more common 10-to-15-year models.”

Cook says that longer time period spreads the impact of record losses over several years of premiums. “So producers aren’t paying it all back the next year, and it’s easier to deal with. If we used a 10-or 15-year model and removed our limit on rate increases, producers would be paying much higher rates this year.”

Hail rates are set at a township level, based primarily on the hail experience of each township and the surrounding eight townships. Less than 10 per cent of Alberta’s 4,140 townships will see a base rate increase of two percentage points. About 70 per cent will see an increase of one percentage point. More than 20 per cent will actually see their hail rates fall by one percentage point or stay the same, notes Cook.

“So if your rate is five per cent, your hail insurance will cost $5 for every $100 of coverage,” he explains, adding an adjustment is made for crops like canola that are more prone to hail damage.

“The Straight Hail program is funded entirely by premiums. As a Crown Corporation, we set hail rates to cover crop losses, and to break even. There’s no profit factored in,” he adds.

Producers can access Straight Hail coverage at any time but it doesn’t come into effect until noon the following day. For more information, producers can contact their local AFSC hail agent or insurance office, or the AFSC Call Centre at 1-888-786-7475.

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