Cultivate risk reduction

Transcription

1 Production Insurance Plan Overview Forage Rainfall Cultivate risk reduction Connecting producers with programs

2 What you need to know about protecting your forage under Production Insurance. As an agency of the Government of Ontario, Agricorp works with partners to contribute to a vibrant and sustainable agriculture industry. We deliver programs that help producers manage risk and remain financially secure. About PRODUCTION INSURANCE Agricorp administers Production Insurance on behalf of the Government of Ontario and Agriculture and Agri-Food Canada. Production Insurance is available for 90 commercially grown crops in Ontario in the following sectors: Forage Fruit and honey Grains Oilseeds Vegetables Seed corn, sugar beets, hemp and tobacco About this publication The purpose of this overview is to provide general information about the forage rainfall plan available under Production Insurance. It includes plan-specific features, customers responsibilities, and general deadlines. This overview contains general information only and does not represent an insurance contract. Information contained within it is subject to change. Refer to the following for additional information about the Production Insurance plan for forage rainfall: 1. Contract of Insurance 2. Production Insurance information sheet for forage rainfall for the current plan year For copies of these documents, visit or call Agricorp at Plan overviews are also available for the following crops: Fresh market vegetable production Grains and oilseed production Honey New forage seeding production (see flip side of this publication) Seed corn production Strawberry production Tree fruit and grape production

3 Table of contents Why should I have Production Insurance?... 2 How do I get Production Insurance coverage?... 2 New applications... 2 Renewals... 2 What are my responsibilities?... 3 What are the plan details?... 4 Insurable crops... 4 Insured perils... 4 How is Production Insurance coverage determined?... 4 Forage crop value... 4 Chosen coverage level... 5 Example I: Calculating crop value and maximum eligible coverage... 5 Rainfall collection station... 5 Coverage options... 6 How are Production Insurance premiums determined?... 8 Customer base premium rate... 8 Cost sharing... 8 Example II: Calculating annual premium... 8 How are claims determined?... 8 Example III: Excess rainfall option only... 9 Insufficient rainfall claims Example IV: Calculating a claim payment How do I resolve a Production Insurance dispute?

4 Why should I have Production Insurance? As a producer, you have to deal with many factors that are beyond your control, such as the weather. Production Insurance adds a measure of predictability to an unpredictable business. It protects your business from yield reductions and crop losses caused by insured perils. More than 16,000 Ontario producers with more than 5 million acres of farmland enjoy the financial security provided by Production Insurance. Production Insurance helps you: Maintain your cash flow in poor crop years with claim payments that compensate you for crop damage or low yields. Manage your operation with a more predictable cash flow. Provide collateral required to secure loans. Stabilize your AgriStability program reference margin over time. Gain affordable peace-of-mind by paying tax-deductible premiums that are cost-shared with government. The AgriStability and Production Insurance connection AgriStability, which protects your farm against large margin declines, and Production Insurance are complementary programs that address different risks faced by Ontario producers. Participating in both AgriStability and Production Insurance lets you maximize the benefits of the government risk management programs available to you: Production Insurance claim payments count as income in calculating your AgriStability reference margin. Depending on weather and/or market conditions, in a given year you could receive an AgriStability benefit, a Production Insurance claim or both. How do I get Production Insurance coverage? New applications If this is your first time applying, or if you are adding a crop to your account, contact Agricorp at The deadline to apply is May 1. An Agricorp representative may visit you to review your coverage and complete your application. Renewals If you are already enrolled, you will be automatically renewed with the same coverage as the previous year. Renewal notices are mailed to producers in March. If you want the same coverage as the previous year, no further confirmation is required. However, if you want to make changes or cancel your contract, you must contact Agricorp by the deadline outlined in your renewal notice. Applications and renewals (including any changes to existing coverage) must be completed by May 1. If you decide to cancel your existing coverage, contact Agricorp by April 1. 2

5 What are my responsibilities? Important dates To ensure that your Production Insurance contract remains in good standing, please note these important dates and deadlines in the annual cycle of your insurance contract: Deadline Date Last day to cancel existing coverage. April 1 New applications for insurance coverage. May 1 Make changes to your existing coverage, including changes to your rainfall collection station. May 1 Pay your premium. May 1 Report any questions, concerns, errors, or omissions on your coverage confirmation. Within 10 days of receipt. Changes to your business structure If you make changes to your business structure, including changes to name, address, or shareholders, you must report them to Agricorp by May 1 of the insurance year. 3

6 What are the plan details? Insurable crops This plan uses rainfall as an indicator of quantity and/or quality for forage. This plan does not measure individual yields or quality. The Forage Rainfall plan offers coverage for your established hay and pasture. This includes hay, intensively managed pastureland, improved pastureland, and unimproved pastureland. Insured peril The forage rainfall Production Insurance plan provides protection against drought and/or excess rainfall, depending on which option(s) you select. How is Production Insurance coverage determined? You can choose to insure your forage for insufficient rainfall and/or excess rainfall. Your coverage depends on: Total value of your forage crop Your chosen insurable value (applied coverage) Rainfall collection station Rainfall threshold (excess rainfall only) Intended harvest window (excess rainfall only) Coverage type (insufficient rainfall only) Forage crop value Agricorp representatives will work with you to determine a crop value for each forage stand. Producers have the option of insuring up to the expected value of their harvested forage. The value per acre will reflect standing forage as well as cutting, conditioning and harvesting costs. Forage is valued on a per acre basis, and is categorized into the following land types: Improved tillable land, includes: Hay Intensively managed pastureland Rotational grazing pastureland Forage valued between $100 and $640 per acre As a guideline, dry hay can be valued as high as eight cents per pound and haylage as high as four cents per pound. Improved rough land, includes: (For insufficient rainfall option only) Non-tillable pastureland Pastureland improved by using good farm management practices Forage valued between $25 to $160 per acre Unimproved rough land, includes: (For insufficient rainfall option only) Non- tillable pastureland Pastureland that is in or near its natural state Forage valued between $25 to $40 per acre 4

7 Forage crop value for the excess rainfall option: Only improved tillable land (for hay/haylage) is eligible for coverage (pasture is not insurable). The forage value of improved tillable land (for hay/ haylage) will be the same for both the insufficient rainfall option and the excess rainfall option. If a customer enrols in both the insufficient and excess rainfall options, the total forage value may differ since pasture is also insured under the insufficient rainfall option. Chosen coverage You may choose to insure your forage from a minimum of $2,000 up to a maximum that is equal to your total forage crop value. If you are enrolled in both the insufficient and excess rainfall options, you must select the same coverage for your hay/haylage. As a result, your coverage for insufficient rainfall must be either equal to or greater than your coverage for excess rainfall. Example I: Calculating crop value and maximum eligible coverage Lee-Sing Hay Farms has hay and pasture forage. The estimated production per acre they expect to harvest this year is as follows: Field Acres Production/acre 1 $/lb $/acre 2 Value/field Hay 40 7,500 lb (188 small bales or round bales) $15,000 Pasture 45 5,000 lb $3,375 1 In this example, it is assumed that small bales weigh 40 pounds, and 4 5 bales weigh 1,000 pounds. 2 Value per acre cannot exceed the guidelines for forage crop value. The maximum eligible coverage for excess rainfall is the sum of the hay value since pasture is not insurable. For excess rainfall coverage, Lee-Sing Hay Farms may choose to insure from $2,000 up to a maximum of $15,000 of hay production. The maximum eligible coverage for insufficient rainfall is the sum of the hay and pasture values, or $18,375 in this case. For insufficient rainfall coverage, Lee-Sing Hay Farms may choose to insure from $2,000 up to a maximum of $18,375 of forage production. Lee-Sing Hay Farms must insure the same value of hay if they enrol in both options. For example, if they choose maximum applied coverage of $10,000 for excess rainfall, they must choose coverage of at least $10,000 for insufficient rainfall. Rainfall collection station Agricorp contracts a professional weather service to provide rainfall data from a network of 350 rainfall collection stations across Ontario. The rain stations have built-in backup systems to provide accurate information. Rainfall samples are collected twice a month. To verify accuracy, the samples are compared to surrounding stations and Environment Canada records before the data is sent to Agricorp. 5

8 When you enrol, you can select up to three rainfall stations to base your coverage on. You then allocate a percentage of your coverage to each station you choose and they must add up to a total of 100 per cent. For example, you may choose to select two stations and allocate 30% of your coverage to one station and 70% to a second station. Forage claims are calculated for each station you chose using the coverage allocated. If you chose more than one station the claims are added together. You can select stations in the geographical township where you produce forage, or in an adjacent geographical township. If there are no station(s) in either of these locations, you may select the closest station to your forage production. Agricorp will post monthly rainfall data on agricorp.com approximately 15 days after the month ends. Refer to agricorp.com for historic average rainfall amounts. Rainfall is collected from May to August at the rainfall station(s) you select. Rainfall caps (insufficient rainfall only) Maximum daily and monthly rainfall caps are applied to the rainfall data to recognize that the benefit of increased rainfall has a limit. Rainfall is collected in 0.2mm increments. The daily cap is 50 millimetres of rainfall and the monthly cap is 125 per cent of the monthly historic average rainfall. Minimum daily rainfall (insufficient rainfall only) Days with less than 1mm of rainfall will be counted as 0mm towards the monthly total to recognize small amounts of rainfall lost to evaporation. Coverage options Since your rainfall requirements depend on your farm type and management practices, the forage rainfall plan offers two coverage options: Coverage for insufficient rainfall during May, June, July and August Coverage for too much rainfall during your intended harvest period for first cut Excess rainfall coverage options: The excess rainfall option is based on the concept that rainfall received during harvest negatively affects the quality of your forage. Excess rainfall coverage is limited to your first cut harvest period. Pasture is not insurable under this option. Customers can select a rainfall threshold of 5mm or 7mm. If there are no consecutive five-day windows in the selected harvest period with less rainfall than the chosen threshold, a claim will be paid. This choice affects premium levels and claim rate. Intended harvest window (Excess rainfall option only) Customers choose one of the following harvest period options based on when their first cut typically takes place. Only one harvest period can be selected from the options below: May June 1-10 June June July

9 Insufficient rainfall coverage options: The insufficient rainfall option is based on the concept that hay and pasture production are dependent on timely rainfall during the growing and harvest season. If you do not receive enough rainfall, you will not be able to produce an adequate stand for your needs. The forage rainfall plan protects your hay and pasture in the event that seasonal precipitation is below the long-term average. Claims are determined by the rainfall received at your selected weather station. If the measured rainfall at the station you choose during the insured period is less than 85 per cent of the long-term average rainfall for your area, a claim will be paid. Base plan When the crop season rainfall between May 1 and August 31 is less than 85 per cent of the historical average, a claim may be calculated. The rainfall for each month is given equal weighting. Monthly weighting The claim calculation is performed in a similar way to the base plan, except the deficit or surplus of the actual rainfall in each month is weighted as follows: Month Percentage weighting May 130% June 120% July 80% August 70% Bi-monthly weighting Claims are calculated separately for May-June and July-August. 60 per cent of coverage is allocated to May-June and 40 per cent of the producer s coverage being allocated to July-August. For example, if Lee-Sing Hay Farms has $10,000 of applied coverage, $6,000 will be allocated to May-June, and $4,000 will be allocated to July-August. Three-month The claim calculation is performed in a similar way to the base plan, except that only rainfall data for the months of May, June and July will be used. Any applicable claims under the three-month coverage option are paid at the same time as claims from the other options. 7

10 How are Production Insurance premiums determined? Your annual Production Insurance premium calculation is based on: Customer base premium rate Chosen coverage value Coverage option Customer base premium rate Base premium rates are determined annually at the time of renewal. Rates may change based on factors like past performance of the plan, changes to the coverage options, and the level of the Production Insurance Reserve Fund. Cost sharing Premiums are cost-shared with the federal and provincial governments, who together pay up to 60 per cent of the annual premium, depending on the risk profile. Your portion does not include any fees for administrative costs, which are funded entirely by the provincial and federal governments. Example II: Calculating annual premium In Example I, Lee-Sing Hay Farms maximum eligible coverage for the insufficient rainfall option was calculated as $18,375. Assume that for the current year, they choose a Production Insurance coverage level of $10,000 and the monthly weighting coverage option, which has a customer base premium rate of 3.26 per cent. Their annual premium (AP) is calculated as follows: AP = coverage level customer base premium rate = $10, % = $ How are claims determined? Agricorp uses the following factors to determine if a claim is paid: Forage crop value Chosen coverage value Coverage option Rainfall collection station Harvest window (excess rainfall option only) Excess rainfall claims If there are no consecutive five-day windows in the chosen harvest period with less rainfall than the chosen threshold, a claim will be paid. Claim payments will be automatically calculated and mailed at the end of the summer. You will receive a forage excess rainfall report that will provide details on any applicable claims, which are based on the threshold and harvest window you selected. Claim = 35% chosen coverage amount for hay/haylage Combined claims from the insufficient rainfall and excess rainfall options cannot exceed the chosen insured value of the forage grown. 8

11 Example III: Excess rainfall option only (5 mm threshold selected) This customer is located in Guelph-Eramosa township, Wellington County and intensely manages 50 acres of forage for both haylage and dry hay to feed to a small herd of dairy cows. Value of forage (determined by Agricorp staff and customer) Field Type Acres Value ($) Total ($) 1 (front right) Hay ,500 2 (front left) Hay ,000 3 (bush field) Hay ,400 4 (beside house) Hay ,500 5 (pasture) Pasture N/A for excess rainfall option Total value of hay land: 14,400 Customer selections on application: 1. Rainfall station selection: Erin (station is located in an adjacent township) 2. Rainfall threshold selection: 5 mm 3. Harvest period selection: June 1-10 (this is when the customer typically does first cut) 4. Chosen coverage amount: $14,400 (the customer can choose to insure between $2,000 and $14,400) Premium calculation: Premium amount = 4.08% chosen coverage amount = 4.08% $14,400 = $ Claim determination: June 1 0 mm June 2 0 mm June 3 0 mm June 4 0 mm June 5 5 mm June 6 0 mm June 7 0 mm June 8 0 mm June 9 2 mm June 10 4 mm 5 mm rain 5 mm rain 5 mm rain 5 mm rain 7 mm rain 6 mm rain A claim is payable since there are no consecutive five-day windows with less than 5 mm of rainfall. Since the chosen coverage amount is $14,400, the claim payable would be: Claim amount = Chosen claim amount 35% Claim amount = $14,400 35% = $5,040 9

12 Insufficient rainfall claims Claims will be calculated according to the coverage you selected. You will receive a forage rainfall report that indicates the rainfall received at your chosen rainfall station(s). The report will also provide details on any applicable claims, which are based on the coverage level and option you selected. Cumulative claims from the insufficient rainfall and excess rainfall options cannot exceed the chosen insured value of the forage grown. The forage rainfall Production Insurance plan does not require you to file a damage report or complete a proof of loss form to finalize a claim payment. Claims are triggered if the percentage rainfall received is less than 85 per cent of the historical average. Depending on the percentage of rainfall received, the following formulas will be used to calculate claim payments. % of rainfall Claim formula Over 85% rainfall No claim 80% - 85% rainfall (85% - per cent rainfall) applied coverage price index Under 80% rainfall* [5% + ((80% - % rainfall) 1.5)] applied coverage price index * Rainfall deficits less than 80% of the long term average are factored at 1.5 to reflect increased forage yield losses below this level. An additional 5% is added to represent the yield loss from 85%-80%. The amount of an insufficient rainfall claim depends on the amount of applied coverage and the following factors: Capped rainfall Weighted rainfall (monthly weighting option only) Per cent rainfall Price index Example IV: Calculating a claim payment The table below shows sample rainfall data and will be used throughout the insufficient rainfall claims section. Month Historical rainfall (mm) Actual rainfall (mm) May June July August Total

13 Weighting rainfall for the Monthly weighting option The rainfall surplus or deficit for each month is weighted using the following formula: [(actual rainfall - historical rainfall) monthly weight] + historical rainfall Using the sample rainfall data, the weighted rainfall is calculated as follows: May = (42mm - 72mm) mm = 33mm July = (84mm 82mm) mm = 83.6mm June = (35mm - 81mm) mm = 25.8mm August =(80mm - 84mm) mm = 81.2mm Calculating per cent rainfall After necessary caps are applied to monthly rainfall, per cent of rainfall can be calculated to determine whether or not a claim will be triggered. Option % of rainfall calculation with examples using sample data Base = (May + June + July + August) / historical 100 = (42mm + 35mm + 84mm + 80mm) / 319mm 100 = 241mm / 319mm 100 = 75.55% rainfall Monthly = (weighted May + weighted June + weighted July + weighted August) / historical 100 = (33mm mm mm mm) / 319mm 100 = 223.6mm / 319mm 100 = 70.09% rainfall Bi-monthly = (May + June) / (historic May + historic June) 100 = (42mm + 35mm) / (72mm + 81mm) 100 = 77mm / 153mm 100 = 50.33% rainfall = (July + August) / (historic July + historic August) 100 = (84mm + 80mm) / (82mm + 84mm) 100 = 164mm / 166mm 100 = 98.80% rainfall Three-month = (May + June + July ) / (historical May + historical June + historical July 100 = (42mm + 35mm +84mm) / (72mm + 81mm + 82mm) 100 =161mm / 235mm 100 = 68.51% rainfall 11

14 Price index The value of a claim depends on percentage of rainfall received. The price index increases as the per cent rainfall decreases to account for the higher cost of purchasing replacement forage during rainfall shortages. The following table is used to determine price index based on percent of rainfall when calculating a claim. For example, the per cent rainfall for the base option was 75.55% therefore the price index used would be 1.1. % of rainfall Price index 80% up to 85% % up to 80% % up to 75% % up to 70% % up to 60% % up to 55% 1.5 Less than 50% 1.6 Claim examples: The following are example claim calculations using the sample rainfall data and $10,000 applied coverage. Calculating a base claim = [5% + ((80% - % rainfall) 1.5)] x applied coverage x price index = [5% + (80% %) x 1.5] x $10,000 x 1.1 = $1, Calculating a monthly weighting claim = [5% + ((80% - % rainfall) 1.5)] x applied coverage x price index = [5% + (80% %) x 1.5] x $10,000 x 1.2 = $2, Calculating a bi-monthly claim May and June claim period (60% of applied coverage) = 60% [5% + ((80% %) 1.5)] $10, = $4, No claim was triggered for the July and August claim period. Total bi-monthly claim: = May and June claim + July and August claim = $4, $0.00 = $4, Calculating a three-month claim = [5% + ((80% - % rainfall) 1.5)] x applied coverage x price index = [5% + (80% %) x 1.5] x $10,000 x 1.3 = $2,

15 How do I resolve a Production Insurance dispute? Agricorp has a dispute resolution process for Production Insurance disagreements: If you disagree with a decision about your file, a claim or your eligibility for Production Insurance, please call us at If your issue remains unresolved after talking to us, you can request that Agricorp review your issue further. A customer service representative will review the required steps with you. For appeals on a claim, you must file your appeal with the Agriculture, Food and Rural Affairs Appeal Tribunal within one year from the day you submit your Proof of Loss form (or any equivalent form provided by Agricorp on which you are affirming details of a loss). Contact us Fax: TTY: Accessible formats available agricorp.com contact@agricorp.com Monday to Friday, 7 a.m. to 5 p.m. Version française disponible