The California drought has captured a lot of attention in the news. The media has focused on water consumption by households, but the water consumption of farmers is even more important. Drought is nothing new to farmers — it is always hard to predict how much rain a given year will yield. Furthermore, farmers care about more than just the amount of rain in a year. Different crops need different amounts of rain at the right time in order to develop properly. So while a drought is certainly bad for crops, even having rain is not enough to ensure a good harvest. The uncertainty of the weather is one of the oldest problems in farming. The basic problem is that farmers need to make all their capital expenses up front. They buy seeds, buy or rent farming equipment, and draw up labor contracts all before they can start planting. Then they plant and tend the crops for months. At the end of the season, they can finally harvest and sell their crop. There is a lag time between the investment the farmer makes up front and the money they collect at the end, with a lot of weather uncertainty in between. In addition, farmers cannot be quite sure of the price of their produce at the end of the season, so they don’t know how much they will make even if the weather is good. The leading solution to this problem is crop insurance. The risks associated with the weather and the price of crops are nothing special, from an insurance perspective. Insurance companies have been offering crop insurance to farmers since the 1800s. The probability of various types of weather is known in advance with a reasonable degree of certainty, so the insurance company can calculate the risk of adverse weather in advance. Predicting the future price of crops is harder, but still doable. Insurance firms help farmers mitigate the risk of a bad season. The farmer pays a premium to the insurance company, who, in turn, visits the farm a few times a year to examine the crop and estimate potential losses. If the farmer has a bad season, the insurance company will reimburse them according to their contract. This simple idea makes farmers’ lives much easier. When a drought like the one currently affecting California comes along, farmers are not simply out of luck. This situation is exactly what crop insurance is designed to help farmers overcome. The potential issues that can come up during a season are not limited to the weather or the price of the final product. Again, the underlying problem of a farmer is not the fact that they are vulnerable to the weather — it is that there is a major time lag between when they need to buy their capital and when they can sell their product. In the intervening time, any disruption can ruin a season and put the farmer in the red. There are many different things that can threaten a season in that intervening time. Some, like the weather, are particular to farming. Others are more traditional business risks. For example, as a location with heavy machinery and hands-on labor, farms are potential grounds for injuries and their related lawsuits. An incident with an expensive workmen’s compensation or liability case can be just as damaging as a drought. As with the weather, it is hard to see these incidents coming, but crop insurance can cover injuries and other events that can lead to lawsuits. Crop insurance covers all manner of events that affect the profitability of a farmer’s crop. Finding crop insurance online is simple. It is easy to get insurance quotes online because crop insurance is a standardized product. Of course, each farm has its own needs, but getting a baseline quote to understand the ballpark of crop insurance premiums is a good place to start. Crop insurance is the best way for a farmer to hedge against the variety of risks they face over the course of their season. Source - http://naija247news.com