Crop price insurance - Poll

[richardcounsell]

I would ask what risk is there that the insurance company could go bust if they guarantee a price and the market goes against them they then cannot pay up

You're right this is a risk yellow belly. It's something we thought long and hard about when building Stable. Stable is backed/underwritten by the biggest insurers in the world so farmers are contracting with global reinsurers, not a local merchant or tech start up. We're also governed by the FCA as an insurance company.

 

[richardcounsell]

Farming is a risk, the skill of being a farmer is minimising that risk though putting everything in place to have the best chance of success like skilled staff, good agronomy and enough harvest capacity etc

Most farmers are pretty good and considering and managing those weather related risks but then often totally ignore the risks around commodity price and currency movements

There is usually more money to be made buying and selling right than there is in just growing better crops

agree entirely Clive...I found on my Nuffield farmers are brilliant at managing production risk...just not great on price risk. But the tools out there are designed for financiers rather than farmers. The Stable initiative was built with the help of over 200 farmers to help us design and build it with simplicity in mind. You can see more at www.stableprice.com

 

[richardcounsell]

Agree. Richard at Stable is a top man and it will be good to see it when live

thanks Tom! look forward to catching up soon

 

[TOM BARCLAY]

thanks will- we're working hard to launch the crop insurance company early next year. Thanks for your support

Agrimarche Ltd. Caught out pocketing the premiums and not buying the options the clients thought they were. Fine until the market moved against them

http://lexisweb.co.uk/cases/2010/july/re-agrimarche-ltd-in-creditors-voluntary-liquidation

terrible.... and then Wellgrain not a dissimilar situation - underlying the importance of regulation

 

[richardcounsell]

Hold your horses !!!
Went to a CMA talk last month and the speaker was Richard Counsell , MD of Stable and a Nuffield Scholar and he is about to launch in the New Year just what this thread is on about. Basically there will be a web site and you select crop [ there will be 8 types initially] ie feed wheat, a month and a price which is linked to HGCA prices. The web site will come up with a insurance cost / tonne depending on the risk and basically it will pay out the difference between the actual price that month and your price you picked on the web site if its lower.
EG: you pick 100 tonne Feed Wheat, May 2018, £145/ tonne and lets say it costs £3.50 /tonne. If in June 2018, having got HGCA s figures for May if the average HGCA figure said £145, then no payout and its cost you £3.50 so you ve made £141.50. However if the HGCA said £140/ tonne then you would receive 100 t x £5 = £500 but remember it cost you £3.50 back when you did the contract.
You will only be able to deal with the tonnage you have which will be checked through data ie if you have 100acs of wheat, then you will only be able to insure say 400 tonnes not 4000 t . This is to stop professional hedge fund guys / dealers and only farmers with holding numbers will be allowed to insure.
I have nothing to do with this buisness and I hope I have explained it correctly but it was very intresting and looked like a use full way of covering up and down prices however until its launched we will have to see. It was a 2 hour talk and he has got some very high ranking specialist in data /computer programmers and some big insurance companies to work together. By the way he is also a farmers son who ended up doing hedge fund stuff in UK and USA.

thanks oscar- that's a very good explanation of what we're building...using AHDB data and larger scale underwriters. You can see more at www.stableprice.com speak soon Richard (MD Stable)

 

[richardcounsell]

That makes more sense.

Turning it around, how is this company proposing to do the business from their side of the transaction? Do they buy options or hedge or something against your 'purchase'?

Would such a company fall under the financial conduct authority sphere of influence?

Hi Ollie- we're regulated by the FCA as an insurer and the farmers policies are underwritten by UK and global insurers. It's rock solid in other words and this was fundamental to me as a farmer myself when we started building Stable and researching solutions on my Nuffield scholarship. The way we reduce risk is that we insure all commodities including dairy and livestock and this reduces risk for the insurer. The insurers are acting like a traditional mixed farmer and the diversification makes this all possible. Hope that helps but you can find out more at www.stableprice.com kind regards Richard

 

[4course]

looks like this thread could be turning into a love in free advert

 

[TOM BARCLAY]

or free information/knowledge on risk management

 

[4course]

or free information/knowledge on risk management

think most of the farmers on here are savvy enough to form their own opinion

 

[Banana Bar]

Is this not the same as buying an option? Not sure of the cost but doubt £5 would buy cover 12 months away? TBH I haven't looked at options for a while but this could be worth thinking about again.

 

[Clive]

Is this not the same as buying an option? Not sure of the cost but doubt £5 would buy cover 12 months away? TBH I haven't looked at options for a while but this could be worth thinking about again.

Read my earlier posts in this thread

Basically it is an option - what’s interesting is when you call it insurance people are more interested

 

[Banana Bar]

Read my earlier posts in this thread

Basically it is an option - what’s interesting is when you call it insurance people are more interested

Did think I should of read all replies before putting my 2p in however over 100 posts takes some time!

Agree insurance sounds attractive, option sounds scary. Only because it is misunderstood!

How was Agritechnica?

BB

 

[Clive]

How was Agritechnica?

BB

Big ....... Very big !

well worth the trip, some very interesting stuff there

 

[Alfie]

With BB on the reading all 111 previous posts! My only point to possibly add is that in USA they have crop insurance to guarantee farmers make a profit. However the best farmer (in my opinion) in the US doesn't buy it!! What does that say? Oh and his biggest problem is income tax liability!! He's a
He's also the one who doesn't use glyphosate, artificial fertiliser, fungicide or insecticide and has taken his soil organic matter from 1.9% to 6.2% in the last 10 years.

In answer to your question, No, I probably wouldn't buy.

 

[Brisel]

US crop insurance is underwritten by the US Treasury, though uptake these days is lower because the government have made it less attractive to save costs. As an income support tool it is dificult to budget for because the cash flow is so unpredictable. A medium term bear market like the current one gets very expensive.

 

[4course]

Big ....... Very big !

well worth the trip, some very interesting stuff there

off topic apologies, but was looking for a thread on agri technica I wasnt there but son was who has come back full of enthusiasm for growing maize buying a zetor and visiting every irish bar in the world

 

[richardcounsell]

Err, I hate insurance . . .

Who would underwrite this ?

Hi- we're working with the world's largest insurers who are the underwriters for Stable. Hope that helps

 

[Oscar]

When is your launch please ? @richardcounsell

 

[richardcounsell]

Hi Oscar, looks like next 3 months. Just going through the Lloyds of London process

If you’d like to join our farm testing team, we can share how it all works behind the scenes ahead of our launch. Just sign up to our newsletter on www.stableprice.com and we can send you some more info- best regards Richard