New insurance idea ‘could help farmers cope with price volatility’
Risk management was brought into focus at Sentry’s annual farming conference at Newmarket, on Wednesday (February 7). Sarah Chambers reports
A revolutionary form of UK farm insurance to help growers cope with price volatility could be on the cards, East Anglian farmers were told this week.
Nuffield scholar Richard Counsell has been working with top mathematicians from around the world to come up with a simple way to cushion farmers against the sometimes devastating effects of global price swings which can be the difference between make or break for their businesses.
It involves farmers coming up with a per tonne figure for their crops below which they can’t cope, and a premium to reflect that using a sliding scale.
Mr Counsell, who was at Sentry’s annual regional farming conference at Newmarket on Wednesday, February 7, is hoping to get the backing of insurers for his idea, which has been three years in the making.
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He wanted to come up with something that was affordable, simple to use and low risk, he said. But he faced a hurdle because commodity price fluctuations happened globally, making insuring against them unattractive. However, he looked at the old adage ‘up horn, down corn’ to see if there was something behind that balance which could lower the risk to insurers.
The farmer and software entrepreneur, from Wells in Somerset, was brought up on his family’s farm but spent 15 years working in technology, and ran a US software firm. While in Chicago, he studied how US farmers used Price Risk Management to help them cope with fluctuations and felt there was an opportunity to lower risk for farmers here. In 2016, he completed a Nuffield Farming Scholarship involving academics from Harvard and Liverpool universities.
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“From a simple idea I had on my farm to where it has got to now is largely due to Nuffield,” he said.
This year, together with some of Europe’s largest insurers, he is using his findings to launch index insurance company Stable, which he heads.
“This is not a silver bullet,” he said. “We should all be thinking about productivity before we think about risk management.”
A series of speakers at the Sentry conference, which this year was entitled British Farming: Delivering value whilst upholding values, was aimed at helping the region’s farmers to prepare themselves and their businesses to thrive in a volatile political landscape.
The Rt Revd Dr Alan Smith, Bishop of St Albans, who is a member of the House of Lords and president of the Rural Coalition, a grouping of 12 rural organisations, gave his views on the future of the countryside, and the importance of farmers engaging with the wider world.
“We do have a real problem. Fewer people in our country today understand agriculture,” he said.
More and more people viewed the countryside as primarily a place for leisure activity rather than for growing food, he said, while it faced a crisis in rural housing, and problems with services and connectivity.
“I have no doubt at all we are going to see a considerable shake-up of agriculture over the next decade,” he said. “We need a concerted campaign to highlight the vital importance of feeding our nation.”
Former banker Jan Boomaars, of Vexour Farms, Kent, showed how he built up his farm business from the ground up, after a long search to find a suitable site to buy.
He focused on livestock, with Charolais, Aberdeen Angus and Hereford pedigree cattle, as well as a flock of pedigree Texel sheep, and an arable operation on his 1500 acre farm. Farming had been a “humbling experience”, he said, and there was always room for improvement. “I think patience is an asset in this business,” he said.
Victoria Harris, head of sustainability and responsible sourcing for Waitrose, explained how the retailer tried to properly reward farmers, and saw things from a farmer perspective through operating its own estate in Hampshire. However, it was still constrained by market forces, and, despite focusing on quality over price, putting food prices up as farmers would like was not as simple as it seemed. When milk prices plummeted, the chain tried to buck the trend by holding up prices. However, sales fell away. “It’s a really, really difficult one because of the competitiveness of the market,” she said.
County Cork farmer Alan Jagoe explained how entrepreneurial young farmers in Ireland get a foot on the farming ladder through an Irish government initiative.