Locked out of drought help? Give moisture insurance a try

Alberta livestock producers frozen out of the new Canada-Alberta Drought Livestock Assistance program may want to consider an under-utilized insurance program in the future, said a representative from the program administrators.

The AgriRecovery-based program was recently introduced to help livestock producers who faced extraordinary costs accessing feed in 2023. However, it doesn’t cover all of Alberta’s municipalities.

Jesse Cole with Alberta Financial Services Corporation said its Moisture Deficiency Insurance pasture program might be an option for cattle producers excluded from the other program due to area-based eligibility.

“MDI is working,” said Cole, manager of insurance products and product innovation.

“This year it paid out $230 million so far. And that’s with $66 million in premiums, so it was paying out quite a bit. It’s responding to drought conditions fairly well and paying people when they need it,” he said.

“I would call it undersubscribed compared to the annual crop side. What that means is that there was a lot of money left on the table this year.”

The MDI is a program that compensates clients when the accumulated precipitation at selected weather stations in a given year falls below the normal expected precipitation for that weather station. It’s designed to insure native, improved, bush or community pasture.

“It’s had a couple of upgrades in the last few years, including the inclusion of an extreme temperature element that recognizes extreme heat and its effect on moisture,” said Cole.

“It’s also moved to monthly payments to try and get money out the door a little quicker so that people that need it can participate in the feed markets right away and they don’t have those cash flow issues.”

Why is it undersubscribed? Some people don’t know about it, said Cole.

“Maybe we haven’t got the right information to the right people to know that it exists and that it’s cost-shared, that the premiums are supported quite heavily by the federal and provincial governments and that it does pay out quite a bit in these types of years. The premium that goes in is much less than what it pays out.”

The federal-provincial livestock assistance program has been criticized by beef producers who are excluded due to its area-specific eligibility clause. Alberta Agriculture Minister RJ Sigurdson recently said the text was a federal government condition for helping fund the program.

“(Alberta’s) design was based on the need for feed,” said Cole. “But any time you put a geographic boundary in place, there’s someone on the ineligible side. It causes a lot of issues.”

The federal government’s argument for the clause is that drought in 2023 was not as widespread as in 2021. The AgriRecovery response for livestock in 2021 did not include geographic limitations.

Cole doesn’t know why the feds wanted this clause but hazards a guess that it derived from its focus on Canadian Drought Monitor criteria for severe drought. The Canadian Drought Monitor is the country’s official source for monitoring and reporting drought.

“They wanted to use a science-based approach that considered rainfall and they also wanted to focus on areas with severe drought. They wanted to use the Canadian Drought Monitor criteria for severe drought, which is defined by them as basically a one in 10-year event,” said Cole.

This specific focus on one in 10-year “severe” drought events may have created inconsistencies in defining eligibility for a year that was notoriously patchy in terms of rainfall.

“We applied the (federal drought monitor data) to weather stations and for any weather station in that category, we just included the county,” said Cole.

“But with some counties you might have had the weather station in the corner or whatever and the whole county got included, so I think we’re including a few areas that maybe didn’t necessarily need the help this year but also excluded some areas that looked like they needed help.”

Soil moisture deficits at the start of the growing season may have contributed to the variability in program eligibility, said Cole.

“The big thing this year was that we started the year with a huge soil moisture deficit over a very large area in the province and it takes a lot of moisture to rectify that,” he said.

“I think that early moisture deficit was very impactful. It may not have shown up on that drought monitor map.”

As well, AgriRecovery programs are relatively general in design, said Cole.

“It’s quite a blunt tool that is not super good at recognizing individual needs and parsing them out.”

More information on Moisture Deficiency Insurance and Canada-Alberta Drought Livestock Assistance is available on the AFSC website at afsc.ca.