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Canola Farmers are bracing for Extreme Heat during Flowering: How can I use Parametric Heat Stress Insurance to combat Yield Loss?

BOM is forecasting a hot end to the season, good news for some worried about frost but bad news for those worried about heat stress over anthesis. CelsiusPro's Heat Stress Weather Certificate can safeguard your income from yield loss caused by heat stress.


Forecasted Temperature Map of Australia

How Heat Affects Canola Yields


Heat stress is a critical climatic challenge that significantly impacts canola yields. Research by Malcolm Morrison, a scientist at Agriculture and Agri-Food Canada, highlights the sensitivity of canola to temperature increases during flowering stages. His findings indicate that canola yields begin to decline when temperatures exceed 29.5°C during flowering, with a 4% loss in yield for each additional unit of heat stress experienced.


This effect is particularly pronounced during a critical 28-day risk period that spans from two weeks after the first flowering to two weeks after flowering ends. During this time, temperatures above 28°C, 29°C, and especially 30°C can severely affect the sterility of the plants, thereby reducing yield. Given the high market value of canola and significant input costs, it’s essential for growers to implement strategies to mitigate these risks.


Combatting Heat-Induced Yield Loss with Parametric Heat Stress Insurance


In response to these challenges, Australian farmers are increasingly turning to parametric heat stress insurance. This innovative solution, known as the Heat Stress Weather Certificate, is designed to address yield losses directly attributable to heat.


The structure of this insurance pays out based on cumulative degrees recorded above a certain temperature threshold, which can be set between 28ºC and 30ºC depending on individual needs and risk assessments. If temperatures rise above this threshold during the designated risk period, the certificate triggers a payout. Typically, the payout corresponds to about 4% of the expected yield for each degree above the threshold, although this percentage can be tailored to better match the specific needs of each farm.


By integrating such financial instruments into their risk management strategies, Australian canola farmers are not only protecting their investments but also enhancing their capacity to navigate the uncertainties of climate variability.


This proactive approach enables farmers to maintain stable operations despite the increasing frequency of extreme weather events, ensuring the sustainability and profitability of their agricultural practices.


Heat Stress Weather Certificate Example:

Example

The grower wants to hedge yield loss if the temperatures go over 28° on any one day. So, if he had a day of 30° it would represent 2 heat stress units with a potential yield penalty of 8%. He decides that each heat stress unit will be worth $50,000 with a maximum loss of $500,000.


The premium is 7% of the sum insured. The policy is set 30 days before the 28-day risk period. 


Payout Scenarios


Scenario 1 - the maximum temperature was not greater than 28°; the cover would expire with no payout, yet the farmers received the expected yield.


Scenario 2 - the maximum temperature on one day was 30°which represents two heat stress units with the potential yield loss of 8% or 0.106t/ha. The payout would be $100,000, which is approximately the same as the monetary value of the yield loss based on historical prices of $750/t.


Scenario 3: The maximum temperatures were recorded at 29°, 30°, and 31°. The number of heat stress units totalled 6, so the potential yield loss was 24% or 0.32t/ha. The payout would be $300,000, which is approximately the same as the monetary value of the yield loss based on historical prices of $750/t.


All parameters can be changed to suit the farmer's expectations and perceived risks. Premiums range from 5% - 15% of the sum insured. Temperatures are measured via BOM grid or Weather Station.


As climate variability continues to challenge agricultural norms, Australian canola farmers are finding robust solutions in parametric heat stress insurance. This strategic tool allows them to shield their livelihoods against extreme heat impacts effectively. By incorporating such innovative insurance products into their farming practices, growers not only safeguard their yields but also enhance their resilience, ensuring that they can thrive in the face of climate challenges. Embracing parametric insurance is more than a protective measure; it's an investment in the future of farming.


Engage with us


Book a consultation below if you're interested in learning how weather certificates can curb your income volatility and effectively manage production risks against unpredictable weather conditions.


Let us help you turn your weather risks into manageable challenges.




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