Kevin Laliberte
Editor, Smoky River Express

As Falher-area farmers turn the page on another calendar year, AFSC expects many will be pleased to hear major changes to crop insurance are being unveiled for 2008. Farmers asked for changes “Over the last few years, farmers have been asking us to change the way their crop insurance coverage is calculated. We’ve consulted with hundreds of farmers province-wide, including across the Peace Region, and they tell us it’s too complicated,” says Chris Dyck, Manager of Program Development for Agriculture Financial Services Corporation (AFSC), the provincial Crown Corporation that administers crop insurance in Alberta. “One of their biggest complaints is that crop production on neighbouring farms affects how much insurance coverage they receive. Producers want crop insurance based only on what is produced on their own farm – no one else’s,” he explains. “We are now announcing a new program for 2008 that answers those concerns for annual crops.” Neighbours’ yields no longer affect coverage The new program – called Individual Coverage – is quite simple, says Dyck. It takes a producer’s average yields for each crop (over a five to 15-year period) and uses that to set their insurance coverage. “If their yield has been 40 bu/acre for the last 15 years, we will give them coverage based on that number. We no longer factor in the yields of other farmers in their area.” The old system – called Indexed Coverage – was much more complicated, says Dyck. It compared a producer’s crop yields to the average yields of farmers in their “Risk Area”. The province is divided into 22 Risk Areas – each spanning dozens of townships. “So for example, if a farmer produced 10 per cent more than the average yield in their Risk Area, we gave them an Index number of 1.1. We then used a complex formula to create a “normal” long-term yield for each Risk Area and multiplied that number with each farmer’s Index.” Old system was confusing “Most farmers find the old Indexing system very confusing,” explains Dyck. “Many feel it dragged their crop insurance coverage far below actual production levels on their farm. They argue that’s because the “normal” yield in their Risk Area averaged in farmers with poor crop yields.” Peace Region farmer Ken Vreeling agrees. “There are guys who take crop insurance who have more claims than the rest of us. That hurts everyone because the above-average producers get indexed to the below-average producers and it drags our coverage down,” says Vreeling, who grows 7,000 acres of canola, wheat and barley in the Manning area. “The below-average producers end up having their crop insurance coverage levels buffered up by the guys who are above the curve,” he adds. “We’ve been asking for change up here for years.” Eighty-seven per cent of farmers want change AFSC has heard similar comments while meeting with producers across the province. Dyck says 87 per cent of those farmers requested Individual Coverage because it links more directly to their own production. AFSC expects coverage will increase slightly or stay the same on two-thirds of crops insured under Individual Coverage. (Watch next week’s issue for part two) No coverage on any crop will drop more than 5% or increase more than 15% during the first year of transition to the new program, says Dyck. Higher Yields = Higher Coverage Ultimately the new system gives producers more control over their own risk, says Risk Management Specialist Ted Darling, with Alberta Agriculture and Food. “I think farmers will see this as a good move. By personalizing their coverage and making it more responsive to what each farm produces, it encourages producers to adopt the most advanced farming techniques to increase their yields.” They’ll be motivated by the fact that higher yields now lead directly to higher coverage, says Darling. “It can cut both ways, but we all want to be better than average and we want to be treated better than average.” That appeals to Vreeling who feels the current system doesn’t recognize farmers who invest more in their operations to boost yields. “Some of us spend considerable dollars on seeding equipment to conserve moisture and increase yields, but that isn’t reflected in our insurance coverage. Once we move to Individual Coverage, things should be fairer.” Two important features of the old Indexing system will remain under Individual Coverage: cushioning and trending. “Farmers asked us to cushion their yields during natural disasters like drought and hail to reduce the impact on coverage levels,” says Dyck. “If you have a wreck and get a zero yield, we’ll replace that zero with 70% of your normal yield to keep your coverage levels stable.” Trending means AFSC will boost the older yields in a farmer’s average yield records to account for advances in technology and new seed varieties. Risk Area Boundary Lines Producers who farm on two sides of a Risk Area boundary line are looking forward to Individual Coverage, says Dyck. “Under Indexing, some had fields in two different Risk Areas and ended up with two different coverage levels for the same crop. The difference could be 30 bu/acre of coverage on one field, and 40 bu/acre on another field. It all depended on the yields of other farmers in each Risk Area. With Individual Coverage, those boundary lines are no longer an issue.” Farmers who grow a new crop or buy crop insurance for the first time won’t get Individual Coverage right away, adds Dyck. “We don’t have yield records for them yet, so we’ll start by basing coverage on the normal yields in their township. Each year, we’ll blend their new yield records into the formula until we have five years of their records on file. Then we’ll set coverage using only their production numbers.” Producer Meetings in New Year AFSC is putting the final touches on the new program and will post more information on its website at www.afsc.ca in January. AFSC staff will hold informal meetings about Individual Coverage for producers who request it once crop insurance renewal packages for 2008 are mailed out. Falher-area producers can sign up for a meeting by contacting their local AFSC office. Cutline for Attached Photo: Crop insurance in Alberta is about to change, says Chris Dyck, Manager of Program Development for the Agriculture Financial Services Corporation (AFSC). Falher-area farmers will receive crop insurance coverage based on what is produced on their own farm – not their neighbor’s. Until now, a farmer’s coverage was influenced by the average yields of other farmers in the same “Risk Area.” Boundary lines, like the road in this photo, divide the province into 22 Risk Areas. Now, those boundary lines will no longer impact coverage.

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