Australian crop insurance covers a wide range of plants, growing methods and perils that match local agricultural practices. As a crop insurance broker, a key part of your business plan is ensuring you offer cover for the types of plants your farmers are growing, and the risks they face. If your products don't offer what they need, farmers won't buy.
So, it's crucial you get a good understanding of how Australian farmers manage their farms and businesses, and build your product offering and knowledge base into something that sells. You need to know what economic pressures farmers deal with everyday, and how each region varies.
What do Australian farms produce?
Australia comprises of a staggering 85,681 farming businesses, according to the Australian Bureau of Statistics (ABS). New South Wales is home to a third of the country's farms, while Victoria and Queensland follow close behind. Meat and animals are the most-produced commodity, while grains, oilseed and pulses are in second place, according to a report compiled by the National Farmers' Federation (NFF).
The country's meat industry centres around beef, chicken, pork and lamb, along with seafood like prawns and salmon. Meanwhile, the dairy export industry is worth $3 billion, say Australian Government figures. Yet, despite the size of the export market, over 90 per cent of fruit, vegetables, milk, eggs and meat products consumed in Australia are grown domestically.
Farmers in Australia grow a significant range of edible crops including grains, fruits and vegetables – enough to feed 600 people per farmer, reports the NFF. They also grow industrial crops, such as cotton and sugar. Grains and oilseeds alone produce around $9-13 billion worth of crop annually, while sugar and cotton bring in $1 and $2 billion respectively.
Sugar is primarily grown in Queensland, with almost 34.5 million tonnes produced annually, according to an NFF report. Queensland also provides the majority of large-scale vegetable production. Sheep and wheat farming is fairly even amongst NSW, WA, SA and Victoria. Beef, meanwhile, is mainly limited to Queensland, NSW and Victoria. NSW manages most of the poultry farms.
How has Australian farming progressed?
Advances in technology have changed the face of Australian farming, and still continue to do so today. The introduction of pesticides, herbicides and fungicides in the twentieth century saw production increase rapidly. However, the cotton industry was almost entirely wiped out when the most dangerous pest, boll worm, became resistant to the chemical used. The industry fought back by breeding resistance into the plants and is now back on its feet.
Meanwhile, interest in organic produce and environmental concerns has increased over recent years. Just over 2,000 businesses in Australia's farming industry are now organic, reports IBISWorld. Meanwhile, Landcare Australia is a not-for-profit organisation that works to ensure farming practices are sustainable, and properly manage our natural resources. Over 93 per cent of Australia's farmers practice Landcare techniques, such as combating soil erosion and salinity, according to the organisation.
In recent years, farmers have started to make use of even more advanced technology to ensure they get the best out of their land. Computer modelling software, drones and satellite data help farmers to make informed decisions about risk prevention and best practice on a case-by-case basis.
Artificial intelligence and machine learning means greenhouse temperature control can be automated, or outdoor crops can be spray and watered as the weather dictates. There's even an iPad app for assessing soil quality, as well as real-time data about water supply to support irrigation and sophisticated tools for mapping yield profit available from industry leaders like Csiro.
Challenges faced by Australian farmers
As well as trying to balance the needs of production against environmental and human health concerns, farmers also face challenges from the economic world and unpredictable weather patterns.
From one year to another, farmers don't know what price they'll receive for their grain. Higher or lower than average yields in other countries, natural disasters or unusual weather patterns in any part of the world could send grain prices plummeting. Alongside this, demand can change due to consumer preferences and trends, changing the level of supply required and resulting in wasted crop.
Australia's climate is also unpredictable, with weather patterns varying from frost and hail to severe drought. Farmers need to protect their farm from different threats according to different seasons and years, meaning they must have a number of risk management plans up their sleeves at any time. They have to be prepared to deal with 'climate shocks', where weather changes unexpectedly, and the frequency of these events is only expected to increase over time.
Additionally, many of Australia's farms are remote, with limited connectivity to implement new technology and improve their planning and risk management.
In many parts of the world, the farming industry is heavily subsidised, yet Australia remains one of the least funded countries. Across all states, farm income is comprised of a maximum of 1 per cent grants and funding, with many farms reporting no income at all from these types of sources, indicate ABS stats. There is much debate about the responsibilities of the Australian government in ensuring our farmers are protected.
The importance of crop insurance for Australian farmers
Agricultural insurance is a key part of risk management for Australian farmers. Farm incomes varies substantially from year to year, in part due to fluctuating weather patterns. Because of this, farmers cannot rely on a set income each year. With little in the way of subsidies available, it's down to farmers to find other ways to protect themselves, and the industry as a whole. Insurance can help them do this, as well as even out their income over the good and bad years.
Crop insurance is typically split into categories covering certain types of grains – such as broadacre, or viticulture. Policies are designed to cover the most common risks affecting the specific crops, and typically only cover one or two potential perils. This type of crop insurance is referred to as named peril insurance, which accounts for around 75 per cent of policies in Australia, according to Deloitte. It's most popular with broadacre farms, followed by industrial crops and viticulture, the report found.
However, multi-peril crop insurance is now back on the scene in Australia, covering farmers against several types of risk, from drought and hail to damage caused by wildlife or arson, all within one policy. It's still showing relatively low rates of adoption, mostly blamed on high premiums farmers are unwilling to pay for cover they may not need. It's a key part of the debate in Australia, about how the government should support the unpredictably faced by our farmers.
To improve your crop insurance offering, partner with Primacy Underwriting. We provide a wide range of products, catering to the needs of Australian farmers across the country. Check our broker information page for further information.