Crop yields continue to increase across North America, but so do yield and market volatility.
According to Dr. Alan Ker, director of the University of Guelph’s Institute for the Advanced Study of Food and Agricultural Policy, increased volatility is something farmers will have to get used to as the impact of innovation and climate change increases in the years ahead. He also believes business risk management (BRM) programs will have to evolve to better serve farmers as that volatility grows.
In this interview, Ker explains that’s he’s a strong supporter of ag innovation, but improved technology that allows for planting at higher rates to increase yield, for example, increases demand for soil moisture, which can make the crop more susceptible to weather challenges. From this perspective, as climate change becomes more pronounced, Ker feels the changing weather’s impact on volatility will becomes even more dramatic.
His research indicates that about 20 percent of yield volatility is already linked to climate change and that will likely increase over time. He notes that climate change is showing it can also impact farmers differently depending on where they farm. Ker says farmers in Ontario, for example, are experiencing more climate change impact on their crops than farmers in Iowa.
See Ker’s recent presentation: Innovation and Climate Induced Yield Volatilities
What does all this mean for risk management programs? Ker says Canada’s BRM programs are very sound from an actuarial perspective – the program reserves are quite good. A lot of that financial soundness can be attributed to innovation because average yields have increased at a rate higher than the growth of yield volatility, Ker explains.
Overall, Ker believes Canada’s BRM programs are pretty good, but he does feel AgriStability needs to be revisited: “I think (Canadian) farmers would be better served with a gross revenue program like what we see available to U.S. producers,” says Ker.