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NSW study flags insurance options to protect farmers

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A $2 million NSW government-funded farm risk management study has flagged some insurance-related tools for the agricultural sector to consider while dismissing the viability of using public finances to set up a farm income protection insurance market.

Investing in weather data and technology to reduce basis risk, removing stamp duty on agricultural weather insurance to make products more affordable and developing a digital insurance platform to reduce transaction costs for farmers are worth considering, the study says.

Carried out by the National Farmers’ Federation, the study project was announced in 2019 by the NSW Government to look into a possible national insurance scheme to protect the drought-hit farming sector from future dry spells.

The Federation, which has long pushed for a national drought resilience plan, has indicated the idea for a farm income protection insurance program may not be over.

“To this end, the report into insurance rules out the viability of government financial support to establish an ongoing market for farm income protection insurance, noting that the cost of government support would significantly outweigh the benefits to farmers,” CEO Tony Mahar said.

He calls it “a disappointing finding for the industry” that government funding for such a scheme is not viable and says it “will need to be revisited over time as improved weather and production data allows the better characterisation of these aspects of agricultural risk”.

NSW Minister for Agriculture Adam Marshall has welcomed the completion of the Future-Proofing Farming report.

“Our primary producers have faced unprecedented volatility over the past few years, from devastating drought to bushfires and floods,” Mr Marshall said.

“As a Government, we thought big and commissioned a $2 million report from the [National Farmers’ Federation] to explore how primary producers could be better protected from climatic events such as drought, through innovative tools such as on-farm income protection.

“The report emphasises the need for a national approach, so I have formally requested it be tabled and discussed at the next Agricultural Ministers’ meeting.”

Click here for the study.