The Farmers' Union Continues to Oppose the Creation of a Risk Fund in Agriculture 0 11

"We are creating a Risk Fund by contributing X euros for each hectare, for example, three euros per hectare. In Latvia, there are 1.7 million hectares, so theoretically, about five million euros can be collected annually. But the fact is that insurers have paid out about 20 million euros annually over the past three years. We do not see how a Risk Fund with five million a year can cover the current insurance offerings," explained the organization's position by Lazdiņš.

He noted that if this year the losses in the grain sector due to climatic conditions amount to 100 million euros, then accumulating five million a year would take 20 years to cover the losses for just this year. Therefore, the Farmers' Union does not understand how a reserve can be created that would at least ensure the existing insurance offerings and compensations that farmers have already received from insurers.

Moreover, it remains unclear what the management principles of the Risk Fund will be and what the administrative burden will be.

He also disagrees with the argument that insurers' offerings are unprofitable, for example, for the vegetable or fruit-growing sectors, which is why very few areas are insured in these sectors.

"In any cooperation, both supply and demand are needed. As for the fruit and vegetable sectors, these two players — insurers and farmers — have not yet met, but there is an offer. Speaking of vegetable growing, for example, potato producers will face an insurance premium of 200 euros per hectare. They think this is a lot, but if you consider that the income from the insured hectare is 10,000–12,000 euros, then this is not much. It's only 2%. But producers still choose not to insure, and the wheel has not yet started turning," emphasized Lazdiņš.

He added that currently about 400,000 hectares are insured in grain production, but the potential is at least another 600–700 thousand hectares.

"The more we insure, the cheaper insurance becomes. But this is not happening because more than half of grain producers still believe that this will not affect them. This is their choice, but then they should not run and ask for help later. Since 2016, there has been an agreement with the government that the state covers part of the costs of insurance policies, but we do not ask for compensations. This is how this system works, and there can be no exceptions: 'I do not insure, but I want compensation,'" noted the head of the Farmers' Union.

He added that negotiations are currently underway with the Ministry of Agriculture to make crop insurance mandatory in the next planning period, but only for minimal risks. At the same time, farmers will be able to voluntarily insure additional risks.

"In my opinion, this is the direction we need to move in, rather than creating a Risk Fund, the principles of which we do not understand and which cannot cover the needs that have existed in the sector over the past three years," said Lazdiņš.

It was previously reported that the idea of creating a Risk Fund has been discussed for several years, but agricultural organizations have not yet managed to reach a compromise on its operational principles.