Drought climate adaptation program: producing enhanced agricultural crop insurance systems: summary report

Queensland farmers are subject to highly variable climatic conditions, including drought and floods, which can undermine production. Insurance could play an important role in helping Queensland farmers manage their climate risk. However, currently the use of insurance to manage climate related production risk is poorly understood and utilised by farmers. This project aims to address this gap by providing information on climate risks and the role of insurance for managing these. This project conducted focussed reviews on climate risk in agriculture and on how insurance products could be used to address these risks. The project also carried out on-ground surveys from cotton and sugar industry and conducted modelling to assess risks and the role of insurance for cotton and sugar cane farmers in Queensland. Prototype climate assessment risk and reporting tools were also developed. The reviews carried out in this project identified that Queensland’s agricultural sector is highly exposed to production volatility as a result of weather risks. It is our view that the Queensland agricultural sector has an excellent opportunity to provide its farmers with protection against uninsured seasonal risks to crop production. Key climate and farming systems risks were identified by interviewing a total of 55 farmers (23 cotton growers and 32 sugar cane growers) across Queensland. Key climate risks to the cotton industry include hail, drought/dry years (lack of rainfall during planting and season), quality downgrade (discolouration), excessive heat, floods and wet weather (during season and especially during harvest). Similarly, for the sugar industry, key climate risks include, drought, flood, excessive rainfall during harvest, cyclone, pests and disease. Key messages from farmer surveys are that current insurance products available to Queensland farmers (specifically, cotton and sugar cane farmers) may not address critical risks to the production and/or profitability of these systems and that farmers would prefer to have comprehensive insurance products available that cover them against profitability losses across multiple risk factors. A ‘climate and agricultural risk assessment and reporting tool’ (prototype) was developed as part of the project. This ‘tool’ allows quantification of key climate risks, initially for the sugar and cotton industry. The tool provides an option to generate a detail climate risk report based on historical data and a future seasonal climate forecast for an individual location. The tool data also serves as a dataset portal, allowing for the download of data in a required template. Cotton and sugarcane crop models APSIM and DSSAT were employed to simulate the growth and yield for 10 and 12 sites, respectively, across Queensland over the period 1940-2017 for various crop management factors. Comparing the simulated yields (from each model or the mean simulated value from ensemble models) to the observed yield (available at regional scale) the trend in year to year variability is satisfactorily captured for cotton on average, whereas for sugarcane there is a trend to overestimate or underestimate the yield depending on the site. Based on survey findings three prototype insurance products were developed for the cotton industry Insurance products developed were Drought Cover: insufficient rainfall during the planting season – August to November; Drought Cover: insufficient rainfall during growing season – November to February; and Wet Harvest Cover: excessive rainfall during harvest season – March to June. Two prototype insurance products were developed for sugar industry. They include; Cyclone Cover: crop damage during cyclone season – November to April; and Wet Harvest Cover: excessive rainfall during harvest season – June to December. Rainfall-indexed based worked examples were also developed for sugar and cotton industry growers to better appreciate the insurance mechanisms.