WA-LIBERAL Senator, Dr Chris Back, believes a new Multi Peril Crop Insurance scheme, released by WA grain giant CBH yesterday, is one of the most significant initiatives for WA agriculture “in a generation”.
CBH has described the product as the first of its kind in Australia and is offering it to WA growers through CBH Mutual; a discretionary mutual fund established exclusively for the insurance cover’s purpose.
It will insure a significant portion of growers’ production costs for crops damaged by drought, hail, flood and other seasonal disasters.
Dr Back said this form of insurance cover was not available to Australian farmers previously; despite it being a common form of protection for farmers in Canada, the US, South Africa and Europe.
He said those jurisdictions typically had some form of government assistance in underwriting their crop insurance schemes.
“While this is a leap of faith for CBH and farmers, it reflects a determination to press on with support for the broadacre farming sector, in the face of failure by governments to provide concrete support,” he said.
CBH Group Chief Risk Officer, Rob Maurich, has been integral to the product’s development and made the announcement at the WAFarmers annual conference in Perth yesterday.
Mr Maurich said the Cost of Production cover product was developed by CBH and Willis Australia, part of the Willis Group, a leading global insurance broker, following extensive consultation with the WAFarmers Risk Mitigation Committee.
"Growers have been asking for this type of product for years," Mr Maurich said.
"And we've just experienced one of the toughest harvests yet due to drought - seeing first hand the devastating impact that adverse weather can have on growers.
“While CBH Mutual can't make it rain, it will be an option for growers to help mitigate some of their production risk.
“CBH Mutual will create value for growers through the provision of a risk cover option that is currently not available and ability for growers to mitigate their risks."
Dr Back said the new insurance scheme would underpin much needed confidence in Australian agriculture.
He said the WA grain handling co-operative was giving growers the opportunity to take out insurance covering up to 60 percent of their production costs.
Dr Back said such a safety net was essential to maintain the confidence of farming families, especially younger farmers, to remain and invest in the industry.
“Without this protection, I fear we will see more farmers sell up and move away from agriculture,” he said.
“Once established, this scheme could be extended to grain producers across Australia and to other agricultural activities including horticulture, viticulture and pastoral operations.”
Dr Back said with the cost of putting in a crop in the WA wheatbelt potentially a lot higher than $1million, the insurance would provide the confidence needed for long term investment and protection in rural communities.
CBH says the cover will be available from April 4, giving growers the ability to insure their total wheat and barley production costs for the 2011-12 season.
Mr Maurich said the cover would not suit all growers so they would need to consider the Product Disclosure Statement before applying, where they would be individually assessed.
The RMC Chair and long time Multi Peril Crop Insurance advocate, Bob Iffla, also a Lake Grace farmer and well known grains industry lobbyist, said the farm lobby group could not ignore the repeated calls of its members so it established the RMC last year, to explore potential affordable commercial options to mitigate seasonal risk.
To ensure an industry-wide approach, he said the Committee expanded to include representatives from banks, farm consultants and members of parliament.
Mr Iffla said the Committee was an outstanding example of growers, industry and government working together to deliver an affordable product which would give growers, banks and rural communities more security into the future.
Mr Iffla has lobbied the WA Government for financial support to underwrite a MPCI scheme.
However the government’s position has been to support the development of a suitable crop insurance product that acted as a commercial instrument but did not want to underwrite the scheme using taxpayers’ money.
Agricultural Region MLC, Jim Chown, said although he would like more detail on the insurance cover, he congratulated CBH for investigating it on behalf of growers and developing and releasing what seemed like a viable commercial scheme, to help mitigate growers’ production risks.
“I congratulate CBH for putting forward, at this stage, what looks like a viable, MPCI where hopefully it will be up to growers to voluntarily take up the offer in April, if they wish to mitigate the risk of drought, hail, fire and frost,” the former Dalwallinu farmer said.
“I would assume the premiums will reflect the risks involved and as such it will be up to each individual grower to do due diligence in regards to their own input costs, in comparison to the likely premium payments, to give them comfort for adverse weather events that impact on their crop production.”
Mr Chown said he agreed with Dr Black’s assessment that the new insurance scheme was one of the biggest initiatives to hit WA agriculture for some time.
“This will hopefully prove to be the greatest advance in agriculture from a cropping security perspective for many decades,” he said.
“The cropping industry in WA has been seeking a solution to our contrary weather for many years.
“I’m extremely hopeful that this proposal by CBH will alleviate the seasonal stress that growers experience, at times when weather conditions severely impact on their considerable investment in serial production in WA.”
Mr Iffla thanked members of the WAFarmers RMC with special mention to Mr Maurich, committee advisor, Eric Hall of Planfarm, and the WA Department of Agriculture and Food.
Senator Back congratulated the CBH Board and management for its vision in underwriting the scheme.
He also praised the hard work of WA farm management consultant, David Falconer, the WAFarmers executive and Upper House colleagues, Nigel Hallett MLC, Brian Ellis MLC and Phillip Gardiner MLC for support achieving the outcome.
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