climate change risk, farm insurance

3 WAYS TO PROTECT YOUR FARM FROM CLIMATE RISKS

Farms in Australia are exposed to a variety of risks and a risky climate is forecast for the future but there several solutions to protect your farm and mitigate climate change risk.

Impact of climate variability on Australian farms

Droughts and climate variability are having a significant impact on Australian farms and their profitability. The Australian Bureau of Agricultural and Resource Economics and Sciences’ (ABARES) Insights Report has estimated that climate change has cut broadacre crop production in Australia by $1.1 billion each year. Changes in climate have reduced profits in the cropping sector, the sector hardest hit, on average by 35% or $70,900 per year.

The changes in temperatures and rainfall that we are experiencing are creating significant risk for farms. Whilst the statistics are alarming the list of risks long, ABARES suggests that the government could help farms in a number of ways. These include helping farmers manage their climate risk through drought relief, drought preparedness and self-reliance as well as drought policy and development of viable weather insurance markets. Furthermore, there are several solutions that farmers can implement themselves to mitigate risk.

Three ways farmers can protect themselves and mitigate risk:

  1. Diversification – To ensure the long term success of your farm you can reduce your exposure to risk through increasing your variety of crop and livestock and farming in several locations. Another approach to diversification is generating off-farm income. Currently large farms on average generate 6% of their household income from off-farm sources and 50% for small farms. Despite the high level of variability in farm profits, these strategies help farms maintain high survival rates.
  2. Improvements in technology and management practices – Newer practices that better conserve soil moisture are credited with increasing productivity on farms during dry conditions. The Department of Agriculture, Water and the Environment has also put together a drought response, resilience and preparedness plan that includes a range of information including better on-farm water management practices and a rebate scheme to encourage investment in water infrastructure.
  3. Insurance – Another component for managing climate risks is insurance. Climate risks include hail, fire, floods, heat waves, cyclones and drought and while not all of these have straight forward insurance solutions, you can still use insurance to help you reduce your total risk exposures. We have access to an extensive range of covers for farm, stock and crop including fire, business interruption and machinery insurance.

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