SCIC Weather-Based Programs Garner Attention After 2021 and 2022 Dry Growing Conditions

Article written by SCIC

^{(also available in 2023 Yield Saskatchewan publication presented by The Western Producer)}

Saskatchewan forage and livestock producers who needed to secure feed in years of tight supply, most recently in 2021 and 2022, understand the need for cashflow through August and September. Saskatchewan Crop Insurance Corporation (SCIC) has designed the Crop Insurance Weather-Based Programs to help address weather-related risks. These programs include the Forage Rainfall Insurance Program (FRIP), which provided significant support to producers in recent years, and also the Corn Rainfall Insurance Program and the Corn Heat Unit Insurance Program.

SCIC works closely with forage and livestock industry groups to enhance Crop Insurance programs to meet the changing needs of Saskatchewan producers. This led to several changes thanks to input from the SCIC Forage Working Group, which was formed in 2014. Most notably, in 2019, there was a modification to coverage pricing methodology which generated a larger coverage per acre. This was also when SCIC expanded the weather network from 131 weather stations to 186 stations, allowing almost all agriculture land in the province to be within 30 km of an eligible weather station. The coverage pricing methodology relies on the base alfalfa grass hay price, set in February, which resulted in significantly higher coverage offerings in 2021 and 2022; however, that value will fluctuate annually based on the hay market.

Like all Crop Insurance Programs, FRIP is cost-shared; producers pay 40 per cent of the total premium, the Government of Saskatchewan contributes 24 per cent and the Federal government contributes 36 per cent. Typically, insurance is designed to break even, which in this case would be total premium dollars, including government and producer contributions. There will be good production years, where the Program accumulates a surplus, and challenging production years where significant payments are made. Over the long term, FRIP will provide financial benefits to participating producers as 60 per cent of the premium cost and all administration costs are paid by government.

In 2022, a heat enhancement was added to SCIC’s Weather-Based Programs. This enhancement, which reduces rainfall accumulations in situations of high heat to account for the loss of moisture available to the plant, results in a higher likelihood of payment and, as such, a slight increase in premiums. For FRIP and Corn Rainfall claim calculations, the monthly accumulated precipitation was reduced by 1.0 mm for any day in the month a station reaches 31.0 degrees Celsius. This enhancement generated an additional $4.6 million in FRIP payments (an increase of 12 per cent due to this change) and over $400,000 in Corn Rainfall payments (an increase of 82 per cent).

Forage and Corn Rainfall Insurance Program Details

FRIP insures all types of grazing acres and tame hay acres, protecting pasture and hayland in the event seasonal precipitation is below the long-term average. Similarly, the Corn Rainfall Insurance Program insures against a lack of moisture over the growing season for corn seeded for grain, silage or grazing.

Data for these programs are collected from a network of 186 weather stations across the province. Producers can select a station within 100 kilometres of their insured land. The stations are administered by a third-party who is responsible for the installation, maintenance and quality assurance of the data. SCIC’s Weather-Based Programs are excluded from Crop Insurance Individual Premium calculations, as weather-based claims are determined by data from the weather stations and not indicative of individual farm management practices.

Producers can select several different options to customize their FRIP and/or Corn Rainfall coverage. These selections carry over from year to year, unless revised annually prior to March 31. Selections include dollar coverage per acre, rainfall caps (125 or 150 per cent of normal) for each month, monthly rainfall weighting options and weather station locations. The FRIP coverage levels are set each year, based on seasonal forage prices. Producers can select from a range of coverage (Low, Medium or High) dependent on soil zone and the type of forage insured. The Corn Rainfall Insurance Program coverage is set at different dollar per acre values and reviewed periodically based on market conditions. The different monthly weighting options allow producers to determine when rainfall is the most important for each piece of land. Options may vary due to factors, including geographical location, time of grazing (for pasture) and personal preference.

Table 1. Forage Rainfall Insurance Program Selections

*Selection must be made for all land descriptions of that forage type but can differ among forage types.

Table 2. Corn Rainfall Insurance Program Selections

FRIP and Corn Rainfall Program calculations are completed monthly. Following each month, weather data is available at www.scic.ca/resources/statistics. Historical data generates a weather station’s monthly expected normal at the station. To determine the per cent of normal, actual precipitation is compared to the normal. This percentage is multiplied by the monthly weighting and is done each month of the growing season. Claim calculations are automatically generated when SCIC receives the final data. A producer is in a claim position when the precipitation at their selected weather station is below 80 per cent of normal.

An added benefit with FRIP is year-long fire insurance coverage. If the insured area experiences an accidental fire, an adjuster inspects the acres to confirm cause of loss. Producers receive 100 per cent of selected coverage for acres lost to fire. If a lack of rainfall claim is determined prior to the fire, the producer receives up to 100 per cent of the selected coverage for the acres lost by fire.

Corn Heat Unit Insurance Program

Where the rainfall programs insure against lack of moisture, SCIC also offers the Corn Heat Unit Program to help provide risk management for corn producers who experience low temperatures during the growing season or early frost. The Corn Heat Unit Program starts accumulating corn heat units on May 15 of each year and stops when an individual station reaches negative 1.0 Celsius for any length of time. Program payments are based on the current year’s accumulated corn heat units compared to long-term normal accumulated corn heat units. The long-term normals are based on historical weather data from each weather station. If the program year has less than 95 per cent of normal corn heat units, the producer is in a claim position. For each per cent below 95, the producer receives four per cent of the insured coverage.

Under the Corn Heat Unit Program, producers have coverage options of $150, $175, $250 and $350 per acre. A producer can participate in both Corn Heat Unit and Corn Rainfall Programs. For those customers participating in both Programs, their coverage is automatically selected at $175 for each Program.

2023 Forage and Livestock Program Options

SCIC offers a full suite of business risk management programs – many of which have features and options available for forage and livestock producers to help manage the unknown of markets and the overall production of forage crops.

Through the Livestock Price Insurance (LPI) Program, producers can purchase price protection on livestock in the form of an insurance policy, providing protection against unexpected price drops over a defined period of time. Calf Price Insurance coverage is available this year from February 1, 2023, until June 8, 2023. While the calf market outlook is strong for 2023, the market carries several unknowns and an easy way to protect that positive outlook is to participate in the LPI Program. Coverage is offered every Tuesday, Wednesday and Thursday from 2 p.m. – 11 p.m. Mountain Time. To receive the daily premium and settlement emails, sign up at www.lpi.ca. These are simple ways to track LPI premium and settlement tables and help you decide when to make your purchase. The purchasing process is easily accessible online or by calling your local SCIC office. Purchases can be made over the phone with a SCIC representative. No longer due at time of purchase, premiums are due at the time of expiry of the policy.

Crop Insurance Deadline is March 31

Producers should review SCIC’s forage insurance options for hay, grazing and feed acres, particularly those returning customers upon receiving their Crop Insurance information package in the mail. Coverage responds to forage pricing and, each spring, producers should reevaluate their coverage to ensure selections are meeting the risk management needs of their farm. Please contact your local SCIC office to discuss coverage options or make any changes. The deadline to apply, reinstate, cancel or make changes to Crop Insurance contracts is March 31, 2023.

To learn more about SCIC’s Weather-Based Programs, call 1-888-935-0000 or visit www.scic.ca/weather-based-coverage.

March 31, 2023, is the deadline to apply, reinstate, cancel or make changes to your Crop Insurance contract.