How Farmers Can Reduce Losses When Hit by Natural Disasters

On April 12, Longping High-Tech issued an announcement regarding the widely followed “Liangyou 0293” incident, stating that it will stop selling “Liangyou 0293”, and is currently communicating with representatives of affected farmers, distributors and agricultural management departments to explore the most possible relief plans, which are being implemented in stages and batches. At the same time, it plans to establish a post-disaster relief fund for the seed industry, extracting a certain proportion of funds from annual profits into the fund to provide relief to farmers who suffer natural disasters.

Claims settlement by Anhui Guoyuan Agricultural Insurance Company was basically completed before this year's Spring Festival. The claims payout for the total crop failure of the 0293 rice seed this time was more than 200 yuan per mu, while for reduced yields it depended on the situation, with compensation amounts ranging from several dozen yuan to more than 100 yuan.

According to the field on-site appraisal conclusions of the Anhui Provincial Agricultural Commission and other authorities, the important cause of the reduced yield and total crop failure of the “Liangyou 0293” rice seed was natural disaster. In the face of natural risks, how can losses for all parties be minimized? Why was insurance compensation for this local disaster in Anhui at most only 330 yuan per mu? How can a more effective catastrophe risk diversification mechanism be established? A reporter interviewed experts on these matters.

Why was compensation at most only 330 yuan per mu?

Insurance covers only costs, not output value; compensation ratio is linked to the growth stage

Farmer Chang Xiuliang of Xiaowei Town, Wuhe County, Bengbu City, runs a seed store called “Changliang Agricultural Supplies Store”. “Liangyou 0293” has been sold since 2008 and is the main promoted variety. Chang Xiuliang's own 60 mu of land was also planted with “Liangyou 0293”. “I've used it since 2008, and in previous years it was very good, with yields of more than 1000 jin per mu. Last year the average was only more than 100 jin, and many plots had total crop failure.”

The insurance company settled claims for Chang Xiuliang and other farmers according to regulations. “Guoyuan Insurance Company's claims settlement efficiency was very high. After on-site inspection, the compensation funds were already paid into the farmers' agricultural subsidy cards in February this year, averaging about 120 yuan per mu, compensating a small part of the losses right away.” Chang Xiuliang roughly calculated that, excluding labor costs, the costs per mu for pumping water, seeds, fertilizer and harvesting totaled 890 yuan. With the insurance company compensating 120 yuan, there was still a loss of nearly 800 yuan.

Why did most farmers receive only more than 200 yuan per mu this time?

“Crop insurance compensation is related to the crop's growth stage when the disaster occurs.” Professor Tuo Guozhu of Capital University of Economics and Business explained that rice insurance is divided into four stages: seedling stage, growth stage, heading stage and grain-filling stage. This time the Anhui rice disaster occurred at the heading stage, so the compensation amount was 80% of the total insured amount. Based on the insured amount of 330 yuan/mu, it is reasonable for the insurance company to compensate more than 200 yuan per mu for plots with total crop failure. Judging from farmer feedback, everyone had no major objections to the insurance company's fulfillment results.

“For the seed production company, the compensation is only out of humanitarianism, not insurance compensation.” Tuo Guozhu said. In its response, Longping High-Tech also held that the company has no liability for compensation at the legal level, but the company has still been discussing the most possible relief plans with representatives of affected farmers, distributors and agricultural management departments.

At present, China's agricultural insurance covers major crops exceeding 1.5 billion mu, accounting for 61.6% of the national crop planting area. Overall, the compensation level of agricultural insurance is still very low. The most prominent problem is that agricultural insurance only protects the materialized costs of agricultural production——seeds, fertilizer and pesticides——rather than the output value of crops.