Insurance builds farm resilience

The emotional and physical toll of drought and floods on Australian agricultural communities is costly, but the financial toll is forever front of mind for those in primary production – especially when it comes to insurance.

But thanks to researchers from the University of Southern Queensland, a new Drought Resilience Innovation Grants project led by the Queensland Farmers’ Federation and funded through the Australian Government’s Future Drought Fund, plans to transform how index-based insurance and optimal crop management can be used to reduce financial risk and improve income stability.

The project will see the Queensland Farmers’ Federation collaborate with the University and will offer access to crop insurance so farmers can take better-informed risks.

Queensland Farmers’ Federation CEO Jo Sheppard said expertise provided by the University of Southern Queensland will assist them, as the lead project institution, to ensure that the targeted insurance products are deliverable.

“The ability for farmers to self-manage risk is an important part of building resilience and sustainability in their enterprises.

“The impact of prolonged drought and severe flooding events can be catastrophic on the viability of a farming business and the sector is working hard to develop ways in which farmers can plan for and mitigate this risk where possible.

“It is important that research is conducted closely with industry and the opportunity to collaborate with the University’s Centre for Climate Sciences on this important work is welcomed.

“The issue of being able to access effective and affordable crop insurance has been raised many times by industry as a gap in terms of farmers being able to self-insure against risk.

“This project will bring research and industry together and enable further work to be undertaken to seek commercially viable solutions for farmers in managing risk.

Professor Shabaz Mushtaq from the University’s Centre for Applied Climate Science said currently, it’s common practice for farmers to plant earlier or later in the season in an attempt to reduce the frost risk, for example. Planting late can expose crops to more severe heat and drought events later in the growing season. Alternatively planting early to avoid heat stress exposes crops to frost.

“This makes sense however while those strategies might reduce weather impacts it does compromise yield, and income, because they’re not planting at the best time for their particular crop,” Professor Mushtaq said.

“Ideally, the farmer needs to plant in that optimal window and they’re more likely to do that if the risk of doing so is covered by insurance.

“Through this process, we want to explore optimal strategies and identify those key risks to better inform the grower so they can strategically use insurance to get higher yields and high-income outcomes.

“Ultimately, we want farmers to use insurance as a risk management strategy through offering credible research to show them how it can be done.”

Professor Mushtaq said by developing ‘fit for purpose’ affordable insurance projects and an industry discretionary mutual fund as a cost-effective channel for wider distribution and adoption, the project will grow the self-reliance and performance of the agricultural sector.

“There’s also the case that this strengthens the well-being and social resilience of rural, regional, and remote agricultural dependent communities too,” he said.

“For example, if insurance money was triggered within the week post a disaster event (flood, drought, or heatwave), this will help growers to get back to their feet quickly. This then can have an immediate positive impact on the communities connected to the farms affected.

“By reducing farmer risk and creating viable insurance options that shift the burden from the public sector to the insurance sector, there’s also the likely outcome of reducing public costs of drought and flood assistance.”