Agriculture technology provider Farmers Edge Inc. has launched an automated insurance product that will cover canola farmers if their crops are damaged by extreme heat.
The Winnipeg-based software company, which uses sensors to collect data on crops and weather conditions to help farmers improve their yields, will partner with Munich Reinsurance Co. of Canada to insure canola farmers at a cost of approximately $10 an acre. At first, the insurance will be available in Alberta, Manitoba, and Saskatchewan, but the company expects to expand into other markets.
Farmers Edge chief executive officer Wade Barnes said current forms of crop insurance don’t protect farmers from “heat blasts” – single days of extreme heat – which can cut substantial parts of a farmer’s yield. The risks of a heat blast are likely to increase as the effects of climate change intensify.
A heat blast “generally doesn’t wipe the crop out, so it’ll never put the farm into a crop insurance claim,” Mr. Barnes said, “but it steals all the gravy, all the upside.”
The company categorizes a heat blast as a scenario when temperatures rise above 28 degrees during the day and above 16 degrees at night. Its says temperatures exceeded those thresholds on “numerous days” in the Prairie provinces in 2020.
Depending on the number of heat-blast days during canola flowering, and the planting window, a claim is automatically triggered. Mr. Barnes says Farmers Edge sensors track weather conditions, eliminating the need for an insurance adjuster to visit a farm.
“When the climatic conditions cause the claim, we send that information to Munich, and Munich will pay,” Mr. Barnes said. “And so I think that the [automation] of that whole process is really a game changer.”
He expects the insurance product to be profitable, especially because canola is selling at premium prices amid high market demand. In April, both U.S. food producer Cargill Ltd. and Canadian grain handler Viterra Inc. announced plans to open canola processing facilities in Regina.
“With the discussions we’ve had with our farm clients, they seem pretty excited about this,” Mr. Barnes said. “In the end, it will determine at the end of the day whether our farmers are willing to write checks for risk and and I think with the high value of canola crop, I think they’re going to.”
Mr. Barnes says the company is interested in insuring other crops in different markets.
“In the southern U.S., it could be something different – with cotton. It could be in Brazil with sugar cane, soybeans .... but canola is sort of the first kick at the can.”
Farmer’s Edge, which is controlled by Fairfax Financial Holdings Ltd. , had a strong debut on the Toronto Stock Exchange in March. It will report its first earnings results as a public company next month, when investors will be hoping the company meets the lofty growth expectations it set after the IPO.
The company has incurred significant losses to scale up, and had an accumulated deficit of $363.4-million as of the end of 2019.
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