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Introduction
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Production Insurance is designed as a management tool to provide producers with
some measure of income protection against uncontrollable natural perils. The
Agency offers two program options to producers. One option is crop-specific
insurance coverage and the other is whole farm insurance coverage. Coverage
offered to producers is available under two scenarios: the first is based on
the producer's pre-harvest cost of production; and, the second is based on
70% of the market price for the crop. Under both options, the producer's
investment is protected against the effects of drought, excessive moisture,
wind, frost, hail, snow, wildlife, disease and insects. However, Production
Insurance does not cover losses due to poor farming practices, negligence
or lack of insect, disease or weed control. The Agency further requires that
insured producers follow control practices as recommended by the Department
of Natural Resources for the control of late blight and clubroot.
This administration cost of the program is jointly funded by Agriculture
and Agri-Food Canada and the provincial Department of Natural Resources
on a 60:40 percent basis respectively. The total premium costs are shared
between the federal government, the provincial government and the producer on a
36:24:40 percent basis respectively. |
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Crops Insured
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There are currently separate insurance plans for: potato, turnip, cabbage,
beet, carrot on mineral soils and carrot on peat-based soils and parsnip.
There is a basic requirement of one acre of crop and insurance must be
purchased on the entire crop planted (not just the high risk areas).
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How Crop Insurance Works
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A producer must apply for production insurance prior to April 30 of that year. Producers select
the coverage level and price option for which they intend to insure their crops at time of
application. Those applicants who do not indicate their intentions will be offered the Agency’s
default coverage of 60 percent at the Cost of Production price option. Once an application has
been approved by the Crop Insurance Agency, an Agricultural Technician meets with the
producer and measures the planted acreage using a GPS and then creates a map of the planted
acreage.
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Production Guarantee
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The production guaranteed to a producer is based on the producer's Probable Yield, which is a
combination of the producer's past yields and the area average yield (as provided by The
Newfoundland and Labrador Crop Insurance Agency) over a fifteen (15) year period. The
Agency adjusts the area average yield by applying a factor which better reflects actual
production insurance yields. The producer's Production Guarantee is determined by multiplying
the Probable Yield by the Coverage Level, either the Basic Disaster Coverage of 60 percent or
70 or 80 percent. Field test plots are used to statistically determine the actual production
achieved in a growing season. Product from a test plot is graded and weighed at the end of the
season and this weight is converted to a total crop yield figure. If this figure indicates that
production has fallen below the Production Guarantee due to one of the insured perils, then the
producer may be in a claim position.
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Claim Benefits
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The Production Insurance program is equipped with two claim benefits.
A Re-seeding Benefit is used in the event of
a germination loss on insured crops. The grower may receive a claim adjustment enabling them to replant the crop in
the same season if the crop was lost as a result of one of the insurable perils and the crop can be
replanted up to the planting deadline. The regular insurance is available at the time of harvest. If
a producer finds that the crop has been damaged by an insurable peril and yields are below the
Production Guarantee, as determined by the Crop Insurance Agency, the producer must file a
"Notice of Crop Damage and Request for Inspection" with the Agency. Once it has been
established that the claim is justified, the producer will be paid an adjustment to cover the loss as
agreed to in the Contract of Insurance. In both cases, the "Notice of Crop Damage and Request
for Inspection" must be filed by the producer within five (5) days of noticing the loss.
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Premiums
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The cost of insurance is dependent upon several variables. The first set of variables is the
Coverage Level. The producer can choose one of three Coverage Levels, 60%, 70% or 80% for
each crop. This percentage is multiplied by the producer's Probable Yield to obtain the
Production Guarantee.
The second set of variables is the Price Option. This is where the producer decides to insure his
or her crop based on either the pre-harvest cost of production (i.e. seed, fertilizer, limestone) or
on 70% of the market price. This Price Option is multiplied by the Production Guarantee to
determine a total Coverage Value. The total premium costs are then determined by multiplying
the total Coverage Value by a pre-determined premium rate. Additionally, a premium
surcharge/discount is applied to the total premium to reflect an insured producer’s production
history with the Production Insurance program.
As the carrot, beet and parsnip plans are relatively new plans with very little historical data, the
terms of the Canada - Newfoundland and Labrador Production Insurance Agreement allows the
Agency to offer insurance on these three crops to a maximum of the 70 percent coverage level
only.
Example:
The following example is for a potato producer who has not participated in the Production
Insurance program in the past and therefore has no program historical yield data from which to
build Probable Yields or Premium Discounts or Surcharges.
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POTATO |
Cost of Production |
Market Price |
| Coverage |
60% |
70% |
80% |
60% |
70% |
80% |
| Premium Rate |
0.0918 |
0.1147 |
0.1379 |
0.0918 |
0.1147 |
0.1379 |
| Probable Yield (lb/ac) |
17,306 |
17,306 |
17,306 |
17,306 |
17,306 |
17,306 |
| Production Guarantee (lb/ac) |
10,384 |
12,114 |
13,845 |
10,384 |
12,114 |
13,845 |
| Price Option (lb) |
0.07 |
0.07 |
0.07 |
0.12 |
0.12 |
0.12 |
| Coverage ($) |
726.85 |
847.99 |
969.14 |
1,246.03 |
1,453.70 |
1,661.38 |
| Total Premium ($/ac) |
66.73 |
97.26 |
133.64 |
114.39 |
166.74 |
229.10 |
| Federal Premium ($/ac) |
24.02 |
35.02 |
48.11 |
41.18 |
30.03 |
82.48 |
| Provincial Premium ($/ac) |
16.01 |
23.34 |
32.07 |
27.45 |
40.02 |
54.98 |
| Producer Premium ($/ac) |
26.69 |
38.91 |
53.46 |
45.75 |
66.70 |
91.64 |
Whole Farm Insurance
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For 2007-08 the Newfoundland and Labrador Crop Insurance Agency will continue to offer a
whole farm insurance option in addition to the currently available crop-specific insurance. The
whole farm insurance option is not replacing the crop-specific insurance program, it is another
option offered to the vegetable producers. The same six vegetable crops of potato, turnip,
cabbage, carrot on both mineral soil and peat, beet and parsnip are eligible under the whole farm
insurance option. The only coverage level offered under this option is 70 percent.
The Whole Farm approach represents a critical change in production insurance for producers.
Currently, the “by-crop” or “crop-specific” approach is used and this approach sets a guaranteed
yield level for each crop individually and the producer is charged based on the amount of
coverage selected for that individual crop.
A minimum of 2 crops have to be planted to avail of the whole farm insurance option. The whole
farm insurance option only covers the producer from yield dropping below a guaranteed level on
a total of all crop basis. Consequently, a guaranteed yield is set for the whole farm and actual
yield is calculated for the combination of all crops. Thus, excesses over the guaranteed level for
certain crops will offset deficiencies in other crops.
The possible decrease in indemnity leads to a discount in total farm premium rates where a
variety of crops are insured. The magnitude of the discount is fundamentally based on how the
crops interact. Producers would be eligible for a minimum premium discount of 23 percent and a
maximum premium discount of 50 percent. Refer to the following examples of the possible
premium discounts.
Example 1: |
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Coverage Value ($) |
Percentage |
| Crop 1 |
152,000 |
76% |
| Crop 2 |
42,000 |
21% |
| Crop 3 |
6,000 |
3% |
| Total Value |
200,000 |
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For Crop 1, select the coverage value of 76 percent in column 1 (left) of Discount Table and
round up to the higher percentage. Pick 0.80.
For Crop 2, select the coverage value of 21 percent in column 2 (top) of Discount Table
and round down to the lower percentage. Pick 0.20.
The intersection of 0.80 and 0.20 in the discount table lists a total farm premium discount of 0.26
or 26 percent.
Example 2: |
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Coverage Value ($) |
Percentage |
| Crop 1 |
105,000 |
26% |
| Crop 2 |
90,000 |
23% |
| Crop 3 |
85,000 |
21% |
| Crop 4 |
70,000 |
18% |
| Crop 5 |
50,000 |
13% |
| Total Value |
400,000 |
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For Crop 1, select the coverage value of 26 percent in column 1 (left) of Discount Table and
round up to the higher percentage. Pick 0.30.
For Crop 2, select the coverage value of 23 percent in column 2 (top) of Discount Table and
round down to the lower percentage. Pick 0.20.
The intersection of 0.30 and 0.20 in the discount table lists a total farm premium discount of 0.50
or 50 percent.
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Coverage Level 70% |
% Crop 2 |
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0.5 |
0.10 |
0.15 |
0.20 |
0.25 |
0.30 |
0.35 |
0.40 |
0.45 |
0.50 |
%
C
R
O
P
1 |
0.20 |
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0.50 |
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0.25 |
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0.50 |
0.50 |
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0.30 |
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0.50 |
0.50 |
0.50 |
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0.35 |
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0.50 |
0.50 |
0.50 |
0.44 |
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0.40 |
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0.50 |
0.50 |
0.50 |
0.44 |
0.44 |
0.44 |
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0.45 |
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0.50 |
0.50 |
0.50 |
0.44 |
0.44 |
0.44 |
0.43 |
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0.50 |
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0.50 |
0.50 |
0.44 |
0.44 |
0.44 |
0.43 |
0.42 |
0.29 |
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0.55 |
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0.50 |
0.50 |
0.44 |
0.44 |
0.43 |
0.42 |
0.29 |
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0.60 |
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0.50 |
0.50 |
0.43 |
0.43 |
0.43 |
0.42 |
0.29 |
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0.65 |
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0.50 |
0.50 |
0.43 |
0.43 |
0.42 |
0.28 |
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0.70 |
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0.50 |
0.42 |
0.42 |
0.41 |
0.28 |
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0.75 |
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0.50 |
0.41 |
0.41 |
0.27 |
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0.80 |
0.50 |
0.41 |
0.40 |
0.26 |
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0.85 |
0.48 |
0.39 |
0.26 |
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0.90 |
0.38 |
0.24 |
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0.95 |
0.23 |
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Application Procedure
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Production Insurance applications are mailed out to producers during the first week of April. If
you do not receive an application by mail, you should contact your area Agricultural Technician
or your area Agricultural Representative. The application form may also be downloaded from
this site Application for Production Insurance. The application deadline is April 30th of each
year. Completed forms should be sent to:
Newfoundland and Labrador Crop Insurance Agency
Department of Natural Resources
Agrifoods Branch
P.O. Box 2006
Corner Brook, NL
A2H 6J8
Tel: 709-637-2077
Fax: 709-637-2591
For additional information, please contact the Agricultural Technician or the Agricultural
Representative in your area. |
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(pdf -
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