The Potential for Scale and Sustainability in Weather Index Insurance

THE POTENTIAL FOR SCALE AND SUSTAINABILITY IN WEATHER INDEX INSURANCE
FOR AGRICULTURE AND RURAL LIVELIHOODS
Case Study 6
Forage Rainfall Plan
in Ontario, Canada
Context
Primary agriculture (crop and animal production) accounts for some 8.7 per cent of
Ontario’s GDP. Nearly half the province’s agricultural activity is related to forage, with
753,681 ha of pasture and 1,037,062 ha of hay land, which together account for 33 per cent
of total farm land. Forage production is the foundation of Ontario’s beef and dairy industries.
The value of forage for agriculture in Ontario was estimated at 746 million Canadian dollars
(C$) (US$697 million) in 2007, making it the second largest crop produced in Ontario
after corn. 42
The average annual yield of forage crop is about 2.70 tons/acre in Canada. 43 Seasonal
forage yields vary across Ontario and over time, depending on rainfall. One half to two thirds
of the total yield is typically from the first cut. Yield variability in the first cut ranges from
25 per cent below to 20 per cent above the average first-cut yield. In years of drought,
second- and third-cut yields are more valuable than the first cut, but in extremely dry areas,
there may not be enough growth to have a second cut. Dry weather during the pasture
‘summer slump’ can quickly force farmers to use up their stored forage supplies.
In 1998, Ontario experienced lower than average precipitation and low water levels.
During the spring and summer of 1999, south-western and eastern Ontario experienced
an extended period of low rainfall. Traditionally, Ontario farmers cope with forage losses by
rotational grazing, supplementing pastures with hay, restricting livestock to a paddock with
full feed, and the use of corn silage. However, in 2000 the Ontario provincial government
initiated a Forage Pilot programme to protect producers from the financial consequences
of forage production decreases due to drought.
42 In February 2010, US$1 = C$1.07.
43 1 acre = 0.405 ha.
ANNEX
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