Risk Management in Agriculture


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  • Cruiser seed treatment and vigour effect in soybean in Brazil, leading to improved water use efficiency
  • With the remaining 5 USD dollars jane bought insecticides for her beans which she intercrops with her maize. The first picture shows her with the maize she planted form her payout, the second picture shows her and her son and two adoptive sons who she supports to attend secondary school
  • Starting off with the reasons why it worked and
  • Risk Management in Agriculture

    1. 1. Marco Ferroni and Rose Goslinga Syngenta Foundation for Sustainable Agriculture 3 rd International Disaster and Risk Conference IDRC Davos 2010 Davos, Switzerland, 2 June 2010 Risk Management in Agriculture Conference Theme: Risk and Global Change – From Threats to Sustainable Opportunities
    2. 2. Risk management <ul><li>Production Loss </li></ul><ul><li>Abiotic (temperature, wind, water, etc.) </li></ul><ul><li>Biotic (pests, diseases, weeds, etc.) </li></ul>Severe weather (drought, excess rain) Price/marketing risks (changes in supply or demand, loss of market access, etc.) Risks Technology (IPM, CP, varieties, ag practices, water & soil mgt) Solutions Insurance Market rationalization
    3. 3. Agricultural technology to manage production risk
    4. 4. Agricultural technology is risk management to protect yield k Yield potential Traits Seed treatments Sprays Agronomy & Extension: Ecosystem services Source: Syngenta Foundation Healthy farm population <ul><li>Soil protection </li></ul><ul><li>low/no-till Cons. Ag. </li></ul><ul><li>carbon markets </li></ul><ul><li>“ incentivisation” </li></ul><ul><li>Water management </li></ul><ul><li>irrigation technology </li></ul><ul><li>novel growing systems </li></ul><ul><li>Nutrient management </li></ul><ul><li>re-cycling, balance </li></ul><ul><li>NUE </li></ul><ul><li>cover crops </li></ul><ul><li>Post harvest </li></ul><ul><li>management </li></ul>Fertilizers
    5. 5. CP contribution to crop yield potential Source: Oerke et al. 1994
    6. 6. <ul><li>Risks are increasing in the face of resource overexploitation and climate change </li></ul><ul><li>This leads to uncertainties in agricultural practices: </li></ul><ul><ul><li>the timing of seasonal events </li></ul></ul><ul><ul><li>sowing dates </li></ul></ul><ul><ul><li>which variety or species to grow </li></ul></ul><ul><ul><li>water supply and irrigation system needs </li></ul></ul><ul><ul><li>fertilizer amounts and timing </li></ul></ul><ul><ul><li>tillage practices </li></ul></ul><ul><ul><li>grain drying needs </li></ul></ul><ul><ul><li>field operations timing </li></ul></ul>Risk prospects
    7. 7. <ul><li>Crops </li></ul><ul><li>Late / early maturing varieties </li></ul><ul><li>Ground coverage, early growth, more stubble </li></ul><ul><li>Deeper root systems </li></ul><ul><li>Overwintering crops </li></ul><ul><li>More perennial forage crops </li></ul><ul><li>Shift in crops </li></ul><ul><li>Crop management </li></ul><ul><li>Technology – pests, diseases, heat, frost, drought, nutrient management </li></ul><ul><li>Crop enhancement – chemical and biological </li></ul><ul><li>Field operations </li></ul><ul><li>Changes in timing of field operations </li></ul><ul><li>Timing of nitrogen application </li></ul><ul><li>Seeding rates </li></ul><ul><li>Changes in crop rotations </li></ul><ul><li>Conservation tillage and cover crops </li></ul>Responses (1/2)
    8. 8. Source: Syngenta Crop enhancement chemistry: VIGOUR and WUE
    9. 9. <ul><li>Resource management </li></ul><ul><li>Preserving water quality / water purification </li></ul><ul><li>Water use efficiency: investment in irrigation, salt tolerant crops </li></ul><ul><li>Improved water management: e.g., in rice </li></ul><ul><li>Preserving biodiversity: e.g., managed margins in arable fields </li></ul><ul><li>Small-scale reservoirs / rainwater collection methods / ditch management </li></ul><ul><li>New water supplies and limitations to water abstraction </li></ul><ul><li>Micro-environment management </li></ul><ul><li>Shading: climatic benefits and environmental services of trees and forests </li></ul><ul><li>Guarding against forest fires </li></ul><ul><li>Hedgerow and woodland restoration and planting </li></ul><ul><li>Biodiversity conservation </li></ul><ul><li>Financial management </li></ul><ul><li>Consolidation of farms, allowing greater investment </li></ul><ul><li>Diversification </li></ul><ul><li>Index based inputs / yield loss insurance </li></ul>Responses (2/2)
    10. 10. Index insurance – the novel case of Kilimo Salama
    11. 11. Outline <ul><li>What is Index Insurance? </li></ul><ul><li>Why do farmers need insurance? </li></ul><ul><li>What is Kilimo Salama? </li></ul><ul><li>How does Kilimo Salama work? </li></ul><ul><li>Key challenges and success factors </li></ul><ul><li>Next steps towards reaching scale </li></ul>
    12. 12. What is weather index based insurance? <ul><li>Weather station measures conditions </li></ul><ul><li>No farm visits = low admin costs </li></ul><ul><li>Relation rainfall & crop growth using agronomic models </li></ul><ul><li>Covers defined weather risks (drought, excess rain, frost, weather related disease) </li></ul><ul><li>If weather station shows loss, then all insured farmers are paid, irrespective of on-farm loss </li></ul><ul><li>Farmers encouraged to take care of their farm </li></ul><ul><li>Quick disbursement of payouts </li></ul>Example Agronomic model
    13. 13. Why do farmers need insurance: the case of Jane Simon <ul><li>Jane Gathoni Simon </li></ul><ul><li>Planted 1/2 acre of maize in Laikipia, Central Kenya in 2009 </li></ul><ul><li>Jane planted 4kg of hybrid maize seed in March worth 20 USD </li></ul><ul><li>That season she only harvested fodder </li></ul><ul><li>Normally she would have planted relief seeds following such a drought, harvesting ½ a bag worth 15 USD </li></ul><ul><li>With her insurance compensation she was able to buy maize seed AGAIN worth 15 USD </li></ul><ul><li>And harvested 2 bags of maize (60 USD) the following January </li></ul><ul><li>The difference: 45 USD </li></ul><ul><li>With the comfort of insurance, she has now planted 1 ½ acres of certified maize seed and is starting to use fertilizers . </li></ul>
    14. 14. Implementing index insurance: Kilimo Salama <ul><li>What is Kilimo Salama? </li></ul><ul><li>Kilimo Salama (= Safe Farming) initiated in Kenya in Dec 2008 </li></ul><ul><li>Micro insurance product insuring farm inputs (seeds, fertilizer, chemicals) against drought or excess rain </li></ul><ul><li>Insuring 200 farmers in 2009 and 11,000 farmers in 2010 season </li></ul><ul><li>Coordinated by the Syngenta Foundation for Sustainable Agriculture </li></ul><ul><li>Partnering with: </li></ul><ul><ul><li>UAP Insurance, </li></ul></ul><ul><ul><li>MEA ltd, </li></ul></ul><ul><ul><li>Syngenta East Africa Ltd </li></ul></ul><ul><ul><li>Seed Co </li></ul></ul><ul><ul><li>Safaricom </li></ul></ul>
    15. 15. How does Kilimo Salama work? <ul><li>A farmer can buy insurance at a 5% premium at an input shop when purchasing farming inputs. </li></ul><ul><li>The insurance is monitored through automated weather stations </li></ul><ul><li>Registration is done on mobile camera phones by the input dealers </li></ul><ul><li>Payouts are made based on weather data recorded at the weather stations, there are NO farm visits </li></ul><ul><li>Payouts are transferred through the mobile payment system M-Pesa </li></ul>
    16. 16. Kilimo Salama process
    17. 17. Key challenges and success factors <ul><li>1. Payouts </li></ul><ul><li>No one believes insurance until they or their relatives receive payouts </li></ul><ul><ul><li>The first pilot during the 2009 season recorded the worst drought in last 20 years, the insurance paid out to the then pilot group of 200 farmers. </li></ul></ul><ul><ul><li>In this region, insurance registrations increased threefold in the subsequent 2010 season. </li></ul></ul><ul><li>2. Credibility of partners </li></ul><ul><li>When insurance is linked to products farmers trust and sold by trusted distributors, farmers are willing to try. </li></ul><ul><ul><li>Distribution through agro dealers, partnerships with MoA, Churches, Schools, Agro Input companies </li></ul></ul>
    18. 18. <ul><li>3. Affordability without government subsidies </li></ul><ul><li>Through partnering with input companies premium was only 5% to the farmer instead of 10% since the companies contributed the remainder. </li></ul><ul><li>4. Mobile technology: </li></ul><ul><li>Scale is only viable if registration and payouts are paperless. </li></ul><ul><li>5. Historic weather data and stations </li></ul><ul><li>6. Convincing the commercial partners that the market will be profitable </li></ul><ul><li>7. Financial literacy & distrust of farmers </li></ul>Key challenges and success factors cont’d Eunice Wamaitha, 1 Acre insured What did you think about insurance before the payout? I thought they might not pay, our friends told us after the training that we were being lied to
    19. 19. Next steps towards reaching scale <ul><li>Insurance products are only sustainable if they can reach scale </li></ul><ul><ul><li>We currently insure 11,000 farmers in 5 areas in Kenya </li></ul></ul><ul><li>This will require investment in: </li></ul><ul><ul><li>The weather station network from 30  500 </li></ul></ul><ul><ul><li>A significant investment in financial education </li></ul></ul><ul><ul><li>We aim to offer insurance to farmers in all agricultural areas in Kenya by 2012 </li></ul></ul>
    20. 20. Thank you for your attention <ul><li>Parting thought: </li></ul><ul><ul><li>‘ Kilimo Salama maize’ does better than our usual maize! Say farmers in Embu and they sent us these proud pictures: </li></ul></ul><ul><ul><li>Insurance supports farmers to feel comfortable in investing in their farm, and can enable them to take advantage of their full potential! </li></ul></ul>
    21. 21. Risk Management in Agriculture