The project was led by the University of Manitoba, under the direction and supervision of the Principal Investigator Lysa Porth, an academic staff member at the university’s Asper School of Business specializing in agricultural risk management and insurance.
Duration of the project: 2016-2018
In Canada, forage crops have received coverage under Agri-Insurance (crop insurance) since 1967, however, participation rates have been relatively low at approximately 10 to 20% of the potential land area, compared to approximately 70 to 85% for other crops. This has left the sector particularly vulnerable in times of substantial forage shortages due to adverse weather. Therefore, improving forage and pasture insurance, and increasing participation rates among producers, has been identified as a priority for federal and provincial governments.
Traditional insurance programs used for other crops do not always work well for forage. For example, forage management systems may vary greatly from one farm to another and may also change according to annual weather conditions. In addition, forage may be harvested multiple times throughout the growing season and/or grazed by livestock. For these reasons, accurate insurance loss estimates for forage are difficult to achieve even when relying on costly, and time-consuming, human expertise. Collectively, these challenges make it difficult to design a relevant forage insurance program and determine actuarially fair and sustainable premium rates. As a result, index-based insurance is considered to be an alternative framework for developing forage insurance. With index-based insurance, the insurance payout is linked to an index, such as rainfall, temperature, or satellite, rather than the actual loss on the farm. Therefore, an index-based insurance approach may solve some of the problems that limit the application of traditional crop insurance in the case of forages.
The overall objective of this research was to develop improved index-based forage insurance products for the Provinces of Alberta and Saskatchewan, to address the current low demand for forage insurance and improve producer risk management. Its main focus was the assessment and development of index-based forage insurance using satellite-derived indices. Two Grassland Production Indices (GPIs), developed by Airbus Defence & Space and based on biophysical parameters, were examined. In addition, sixteen alternative Forage Production Indices (FPIs) were investigated, based on publicly available data. This included eleven FPIs based on vegetation indices, with various resolutions and data products. Each of the Airbus GPIs and the alternative FPIs were validated against ground truth forage yield data, which includes native and improved pasture data in Alberta, and tame-hay data in Saskatchewan, including alfalfa, grass and alfalfa/grass mix.
The results of this research show that there are strong correlations in the satellite-based indices compared to the ground truth forage yield data in both Alberta and Saskatchewan. This is compared to the indices constructed from ground weather station variables, which show overall weaker relationships with the yield data in both provinces. Further research should be conducted on selecting the best performing indices, and with further refinement of the model, on the design and testing of the insurance product, pricing and actuarial risk assessment, and validation with producers.
Read the final report:
C. Brock Porth, Lysa Porth, Milton Boyd, Ken Seng Tan, Wenjun Zhu: “Assessing the Feasibility and Development of a Forage Insurance Plan using Satellite-Derived Biophysical Parameters with a Focus on the Provinces of Alberta and Saskatchewan, Canada”, March 31, 2018, Canada