Government scrutinising $10.5m Multi-Peril Crop Insurance options with farmers

Government scrutinising $10.5m Multi-Peril Crop Insurance options with farmers


Grain
Grain Producers Australia (GPA) Chair Andrew Weidemann.

Grain Producers Australia (GPA) Chair Andrew Weidemann.

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GRAIN grower representatives have put forward about 15 suggestions on ways to help manage farm production risks, like Multi-Peril Crop Insurance.

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GRAIN grower representatives have put forward about 15 suggestions on ways to help manage farm production risks, like Multi-Peril Crop Insurance (MPCI), as part of a new move to re-jig a bucket of federal government funding.

A round table involving grains industry leaders and farmers from a geographic spread of Australian production regions met in Canberra last week to provide feedback for Agriculture and Water Resource Minister Barnaby Joyce to consider.

It comes after a policy initiative delivered in the Coalition’s Agricultural Competitiveness White Paper of 2015, to help farmers assess MPCI suitability, suffered from low uptake and now has a question mark hanging over its immediate future.

Grain Producers Australia (GPA) Chair Andrew Weidemann attended the Canberra roundtable forum and said one of the options discussed was originally part of a submission to the White Paper that was compiled by a MPCI Taskforce.

The Taskforce was convened by GPA to tackle risk mitigation options and included current National Farmers’ Federation President Fiona Simson, Agricultural Commissioner and Australian Farm Institute Managing Director Mick Keogh, Mr Weidemann and representatives from the CSIRO and banking sector.

A suggestion in the final paper to introduce a refundable tax offset scheme of up 150 per cent for money spent on crop insurance cover was raised at the roundtable.

But Mr Weidemann said the tax break was seen by the minister’s office as being a longer-term policy option and stressed more practical, immediate steps were preferred.

He said the minister’s department gathered up to 15 suggestions from the roundtable meeting which were considered more relevant to determining how a $10.5 million pool of funds would be spent, that’s remaining from the White Paper MPCI policy.

Mr Weidemann said the initiatives, which would now be “road tested” by the department, ahead of further consultations, were “all about education and financial literacy and trying to educate the growers and the rural sector which is really important”.

“That was the most important part of the round table,” he said.

“I really felt it was one of the best meetings I’ve ever been involved with in agriculture.

“The energy and passion in the room was all about trying to solve a problem that everyone can see but we haven’t found a solution for it yet.

“What should come out of it is a really positive outcome for industry and growers.”

Mr Weidemann said Shadow Agriculture Minister Joel Fitzgibbon’s pressure had helped with forcing the government into action after the MPCI assessment and rebate program suffered from failed uptake.

But he said Mr Joyce and Mr Fitzgibbon were both on the same page, in trying to find a solution to the long-running question of setting up a MPCI in Australia and how to mitigate farm production risks, not just droughts.

“They’re both passionate about the farm sector but it’s always going to be hard, due to the political agenda,” he said.

He said GPA wanted to see the $10.5m “invested wisely for the benefit of growers who are trying to better manage their businesses”.

“MPCI is not the silver bullet but it is part of a longer term solution for industry,” he said.

“It all comes down to geographic spread of risk and whether you can get the critical mass of growers needed to establish the right scheme.

“The process the government has gone through to support its establishment hasn’t been able to hit the right target yet, to provide the right solution.

“But if both sides of government are on the same page, you have to ask why can’t we get this done?

“The outcomes of the roundtable meeting were clear; the department’s now going to take all of the options that were on the table and come back to the group with some recommendations, to filter through us, and then they’ll take it back to the government and the minister is likely to make an announcement in about five weeks’ time.”

Mr Weidemann said GPA and the industry’s other representative body GrainGrowers were both “really focussed” on improving farm risk management options and wanted the government to “take action”.

“It’s not just about MPCI – it’s also about asking farmers why they need insurance and it’s more than just grains,” he said.

“There’s $10.5m available to look at new initiatives to improve the potential for MPCI and to assist risk management options and grower education or financial literacy.

“One of the problems with the $2500 rebate was that farmers actually had to take out a MPCI policy, to receive the rebate, which I was critical of, and that’s why there was poor uptake.

“GPA has been a long supporter of farmers looking after themselves through a commercial process and that’s why we’re looking at this; rather than relying on the government to continually provide drought induced subsidies.

“It’s not just drought; we also have catastrophic problems like floods and frost which we can’t control.”

The Taskforce said agriculture was “positive that a market for commercially underwritten and reinsured MPCI policies can successfully operate in Australia” but believed government had an important role to play in establishing such a market.

Fitzgibbon’s view on MPCI and farm risk management

Asked on ABC radio yesterday if he supported the tax break for MPCI, Mr Fitzgibbon said “The general answer is yes, but we do need to get the policy right - that’s the key point here”.

“There are two things we are definitely supportive of and that is the ongoing development of a drought policy in this country,” he said.

“It’s something that began right back in about 2008 and seemed to stall after the 2013 election.

“We do need to focus on how we better manage drought into the future and we certainly support a market based risk management approach to drought and all the associated adverse impacts of drought.

“We know there has been a moral hazard in drought assistance in the past in that it tends to reward those who have acted least and therefore have relatively disadvantaged those who have done what is possible to prepare for drought.

“We need a market based approach supported by government.”

While criticising the government over the failed uptake of the White Paper MPCI rebate initiative, Mr Fitzgibbon said “this is the last thing we want to play politics with”.

“Nothing would call for a more bipartisan approach than dealing with drought and its impact on producers and growers,” he said.

“We stand ready to assist and embrace any market based approach that takes us forward and improves things in the future.

“I think it is very important that we look at this with a number of solutions.

“Obviously farm management deposit scheme is a critical part of the equation.

“So is assistance in water infrastructure and other on farm efficiency schemes but I think in terms of insurance, we have learned in the past that there is that moral hazard in government handouts and we want to, if you like, share the responsibility with the farmers, but more particularly, ensure in sharing that responsibility we are putting in place a scheme that is going to improve practices in the future but also insure farmers against that drought event that can’t possibly be properly planned and prepared for.”

Mr Fitzgibbon said any insurance pool needed critical mass and “it makes sense for government to become involved”. both in education and ensuring the insurance policy is affordable.

“If you have a very small pool of growers, producers and farmers generally then in those early years, particularly when we are still struggling what the risk looks like, the premiums are likely to be quite high,” he said.

“If government can play a role building the insurance pool, helping people to determine and assess risk then we can bring those premiums down over time and therefore in turn, it’s a virtuous cycle (with) more farmers interested in taking out the insurance.

“I believe without government intervention, we are not going to ever put in place and secure what is a sensible drought policy and goodness me, the climate…is getting more harsh, less predictable and there has never been a more important time to be tackling this problem.”

Mr Fitzgibbon said his style as a minister would be to sit down with the key stakeholders in the area of drought and “talk through the issues and work together”.

“You can never have too much consultation and I think there are a lot of smart minds around,” he said.

“The GrainGrowers currently have a very good paper on the table.

“The Minister needs to sit down with the stakeholders and work these issues through - that would be my approach.”

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