Environmental group objections of climate change and environmental damage notwithstanding, agribusiness owners are happy because of the potential creation over 136,000 jobs. The federal government is looking to ethanol as a first step in cutting dependencies on foreign oil. It would seem that ethanol is the issue that could restore profitability to a flagging agriculture industry.

Yet there are risks, many still to be discovered. No one is arguing the side effects of an ethanol-based agriculture industry focus. It takes little imagination to see how lower corn production/harvest, such as this year’s widespread inability to harvest crops due to weather, could limit ethanol’s positive impact on the industry. That argument, along with the objections raised with the food-for-fuel debate, has increased the push for cellulosic-based ethanol products culled from grasses, wood chips, and other biomass products.

Tests have shown that ethanol works well in cars built after 2001, prompting the EPA’s announcement. While the lack of an immediate decision by the EPA disappointed some, the industry is hopeful a decision will come soon. In the meantime, the Renewable Fuels Association is pressuring the EPA to approve a 12 percent ethanol blend immediately in hopes that the lower blends would jump start market share.

The question going forward – how much room is there in the ethanol market for agribusiness? What would it cost to convert your business to a ethanol production model? How will insurers handle insuring the product? At the moment, there are a few ethanol insurance products on the market, but the agriculture insurance industry lacks historical data to accurately assess risks. Based on current crop models, insurance pays for loss in much the same way it does for lost harvests.

If ethanol production is in your future, contact us. We can walk you through the various available policies, limits, and exclusions.

Flickr photo credit:  mrobenalt

The attempt is part of the senator’s E. coli Eradication Act, legislation she authored that would for the first time federally mandate testing of all ground beef for E. coli. Her goal is to set stricter guidelines for bacteria, which may mean more testing for the livestock and meat production industry.

The highlight of the bill would be a requirement that slaughterhouses, producers and grinding facilities receiving ground beef trimmings use independent testing facilities for the E. coli testing. Also, the testing facilities would be given annual contracts to eliminate the chance of the testing facility being fired by the company as a result of returning too many positive E. coli test results.

For small producers, all is not lost. The bill sets a threshold 25,000 pounds of trim per day. Producers whose business falls under that threshold are given three years to comply with the measure.

The bill will put tighter recall deadlines on meat products; specifically, retailers must be notified of all Class I recalls directly and within 24 hours of a public recall. Also, producers will be expected to develop prevention plans to deal with food-borne hazards. That plan must be accessible by the FDA.

The good news is that the new bill, if passed, puts tighter food safety regulations on imported foods, leveling the playing field for domestic producers. To find out how the proposed legislation could affect your agribusiness, contact us for a free consultation. Understanding how to put together a prevention plan before it’s required could help you save both time and claims dollars later.

Flickr photo credit: VirtualErn

In Montana, water, or at least access to it, is the center of a debate between ranch owners and residential real estate developers. Six ranch owners are seeking the help of the Department of Natural Resources in limiting the water use rights they feel are being doled out carelessly, thanks to a loophole in the law, to supply new subdivisions with water that is sorely needed for agribusiness use.

 At the core of the debate is the state-use rule that allow for small wells located within large subdivisions to be exempt from state water laws. While the law gives priority to existing farms and ranches, the loophole has allowed developments to tap into underground water supplies without any regulatory repercussions. The land, once used for agricultural purposes, is now being developed, putting tens of thousands of new homes onto the Montana landscape and taxing an already limited underground water supply. In some cases, hundreds of homes are drawing from the same underground water source. Between 2000 and 2008, nearly 30,000 wells, all exempt from state laws, were drilled in the state. 

Who owns the water rights? According to Montana’s laws, the farming interests in the state have more or less a first-use right to the water. Yet with climate issues putting even more demand on water supplies, new development could spell disaster for agribusinesses should water supplies become depleted. Agribusiness owners who are seeing housing developments springing up around them are deeply concerned. Owners with water rights dating back hundreds of years are now scrambling to stop the slow draining of water that threatens to alter how they do business.

 This news comes on the heels of a USDA report showing that nearly 55 million acres of US farmland are now irrigated, a figure that shows a five-percent increase in the last six years. That’s an expensive alternative – the study found that in 2008 alone, agribusiness owners spent $2.1 billion on expenses related to irrigation equipment, facilities, land improvements and computer technology.

What do you think? Who owns the rights to the water supply? Where does your business obtain its water? Should there be a shared interest between agribusinesses and residents?

Flickr photo credit: dsearls

Worse, wet corn has to be dried. Costs of drying corn to acceptable grain elevator storage standards threaten to put a large dent in the profit margins for numerous crop growers across the country. Also, corn must be dried to a maximum 15 percent moisture level before it can be used in ethanol or syrup products. Grain elevators have fallen behind on the demand for crop drying, and farmers are taking a dollar-per-bushel penalty to transport crops awaiting drying to barges, lowering the profit margin to somewhere south of $3.75 a bushel. A farmer needs to net $4 a bushel to break even on planting and harvesting costs. If that weren’t enough, agribusiness owners may be forced to leave corn in the fields until spring, which means spring planting will be delayed as unusable crops are removed.

For insureds holding crop insurance policies, contact your insurance agent immediately. Some policies are set to expire soon, meaning your losses this harvest could be total losses. Even if it’s unclear that your crops are going to be lost, get the notice of loss filed with your agent as soon as possible. For some states, the deadline may have passed, but it’s still advisable to file should any federal insurance claims processes be extended.

Flickr photo credit: David George

Health care-sharing ministries, as they’re known, are religious-based health care options that work in a unique way. Instead of premium payments going toward a policy, members send premiums directly to other members who need the money to pay medical expenses.  Current estimates show that around 100,000 people are currently enrolled in this type of plan. The members send more than $60,000,000 annually to each other for health care expenses. Those who belong to such faith-based health care groups say it’s working.

However, such unique health programs may soon face a penalty for opting to go with a program outside what’s considered acceptable as defined by Congress. Current legislation on health care includes a 2.5 percent income tax penalty for health care purchasers who don’t participate in a qualified health care program, such as Medicare. What constitutes a qualified plan? One that includes consumer protection and oversight by licensed insurance professionals.

And it’s a valid consideration when one is choosing health care coverage. While faith-based ministry plans may seem like a practical solution to the private health care programs, oversight and consumer protections safeguard the insured’s premium dollars. Insurance companies are required to maintain reserves of capital in place to pay claims. In the event of a major series of claims that may cost $1,000,000 the carrier has the ability to pay this claim. This is a major concern, as these ministries do not maintain this type of reserve and thus cannot provide the protection to the consumer. Also, regulation is key to ensuring the coverage limits individuals and agribusinesses need.

If health care costs are a concern for your agribusiness, contact your agriculture insurance broker. There are cost-effective options available that can give you and your employees’ coverage without taking a huge chunk out of your operating budget. Don’t overlook the need for consumer protection and insurance regulation. Guaranteeing your employees’ coverage is an area of loss exposure you can’t afford to ignore.

Flickr photo credit: Loci Lenar

 And folks are eager to receive it – over 2,200 applicants in all states, five territories, and D.C. requesting $28 billion, an amount seven times that of the funding available. That’s impressive since the applications often reached the 500-page variety. In the 2007 Ag Census, it was reported that 56% of US farms had internet connections of some kind.  However, only 33% had high-speed, or broad band connections.  Twenty states rank below the US average in high-speed internet use (or availability). For a great interpretation of the report, please take a look at the Daily Yonder blog.

 What this could mean for the agriculture business is direct connection, not to websites touting farm businesses, but to transportation, growers, warehouses, and the like. Consider that your combine can now be connected to the Internet. The advantage? Agribusiness owners and employees can access the Internet from the equipment, seeking instant feedback from a cell phone or PDA on equipment issues, property lines, market prices, forecasting the weather, monitoring commodity prices.  In addition to receiving information, high-speed internet access is necessary for farmers to be able to share their story and products with the world – through blogs, websites, videos, and social networks like FarmSphere, etc.

 GPS and RFID technology is only part of how farmers can utilize technology to improve business processes. From understanding shipment locations and fuel costs to tracking product destinations and delivery times, farmers can harness a bit more control over the entire agriculture process – from grower through end user. Exciting, but just how valuable broadband will be to the agribusiness will depend on the business itself. Could technology reduce costs and time to market? If so, how will that affect losses and insurance premiums?

 Some believe broadband’s usefulness to the agribusiness is far from being realized, but the intent is to provide farmers with the tools to improve their business potential and allow them to expand technology benefits into the field. Literally.  So what about you?  Do you have high-speed internet access or will you benefit from the Rural Broadband program?  How do you or how will you use the internet in your agribusiness activities?  Post your comments and let us know.

 USDA 2007 Census of Agriculture Full Report

 Flickr photo credit: tpmartins

It’s a pre-emptive move by agriculture industry leaders to maintain control of a hotbed issue in the industry, one that farmers say gives them more control over the costs that could be associated with any necessary animal housing modifications. The livestock board, which will be comprised of livestock farmers and animal care experts, will work toward identifying cost-efficient ways to house animals humanely while not taxing the wallets of the livestock owners with heavy regulatory changes.

Food producers have been hit hard by the push from activists to allow more free-range animal care and no cages. Efforts to suppress opposition by attempting to explain the reason for cages and animal confinement as safety measures for the animals have resulted in more public outcry.

Now Ohio has set what appears a precedent allowing the agriculture industry to devise its own regulations and control its own destiny. At least 24 other states have scheduled similar voting referendums, which caused animal rights groups to come out in droves in opposition to the proposals.

The Ohio Farm Bureau Federation stated the support for the new board formation (known as Issue 2) has been overwhelming. At the moment, there’s little indication from insurers how the new board, and any other state boards that follow Ohio’s lead, will be dealt with from an insurance standpoint. Your livestock business insurance broker is a good source of updated information on the legislation in your state and region and can give you the latest information on how the new board will be handled from an insurance perspective.

So tell us what you think. How will this legislation impact your ag business? Will it ultimately help or hurt the livestock farmer?

Flickr photo credit: AmandaLeighPanda

 An employee of the company and eight of his accomplices alleged dreamed up and implemented a plot to overcharge the company for timber deliveries and then skim the overage off the top of the company’s payment for the non-existent timber. The employee is said to have discovered how to adjust the computer system in the company’s scale house so that he could produce two weight readings when one truck passed over the scales, thus creating an extra, fictional load. The employee allegedly secured the involvement of truck drivers to pull off the scheme. In one case, a driver received $910,000 in payments for deliveries when in fact he’d delivered nothing to the mill. The result – Temple-Inland paid close to $5 million for shipments they never received. That’s a lot of damage caused by one employee.

 Temple-Inland’s agribusiness insurance policy, if it contains coverage for employee theft, would cover the loss up to the coverage limits stated on the policy. Still, with agribusiness insurance companies, as with most insurance companies, there’s a measure of responsibility that falls on the company to prevent future occurrences. Now that the plot has been uncovered, the company should be putting safety measures in place to prevent a repeat of the alleged crime. Coverage is a great way to mitigate the loss, but agribusiness companies do run the risk of having future claims denied if there is no indication of preventative measures.

 When in doubt, talk to your agribusiness broker. Criminals are becoming more sophisticated in their approach. While you may not be able to predict the next incarnation of crime, your insurance broker can help you address potential areas of weakness in your business operations.

 Flickr photo credit: Curtis Gregory Perry

 Not much can be done to mitigate against acts of nature – lightning strikes that cause fires, drought conditions that exacerbate chances of a fire, etc. But for many areas of the agribusiness, fire loss exposure can be reduced significantly by developing risk reduction strategies.

 If you store fuel for your equipment, store it well away from any structure and make sure all brush and debris is kept clear. Also, store your fuel away from your equipment. It’s one thing to lose a tank of fuel. It’s entirely another to lose your fleet, as well.

 When assessing your fire exposure, look at the construction of your buildings. Are they equipped with sprinkler systems and fire alarms? Are roofing materials tile, metal, or fiberglass and not wood? Are your buildings covered in fire-resistant materials, such as brick, stone, or concrete? To reduce your exposure to fire, eliminate as much wood construction as possible.

 Other fire hazard reduction tips:

• Keep areas around your buildings clear of vegetation. Dried plants and weeds are simply fuel waiting to ignite.

• If you don’t already have it, install an emergency water supply. This reserve could save your building should a fire break out.

• Construct your driveways and access roads with emergency equipment in mind. Make sure they are wide enough to accommodate fire trucks (minimum of 12 feet wide by 15 feet long).

 Check with your agribusiness insurance broker for more information on reducing your fire risk.

 Flickr photo credit: Eric Willis (superic)

 But before we get too far ahead of ourselves, let’s examine what that means to you individually. At present, dairy farmers are paid under one-half of their productions costs for dairy products. The existing Milk Income Loss Contract is help for bad times, but it hasn’t been able to scratch the surface of the market’s current disastrous conditions.

 Under the new, additional plan, money has yet to be allocated, but suggestions are that there could be a per-cow or a regional distribution model set up in an attempt to ensure that all dairy farmers receive relief.

 What isn’t certain is how much you will end up with once the checks have been written. At the moment, the dairy industry is leaking money as dairy farmers try desperately to find ways of producing to government standards in cost-effective ways.

 What isn’t covered is personal losses that dairy farmers may incur as a result of doing business. Should your equipment fail, should fire or chemical spills befall the business, the government program will not respond. What will respond is a customized dairy farm insurance package. Besides personal liability, dairy farm insurance coverage will cover your operations up to and including any damage to the milk as it’s being transported to market.

 If you’re unsure if government appropriations and your insurance plan adequately address all your risks, give us a call. We’ll be happy to go over both plans with you and give you more insight into the appropriations bill and how that affects you.

 Flickr photo credit: Alicakes*