The Essentials After Planting
Now that most cotton in Australia has been planted and is powering along with plenty of moisture available, growers have some time to plan the rest of the season. While it might seem obvious what has to be done to grow the actual cotton; providing fertiliser, keeping insects away etc. there are other matters to attend to as well. Insurance and crop marketing are two of these 'other tasks' that are easy to forget, but vital to a successful season nonetheless.
I'll start with insuring your cotton crop; whilst there are many questions regarding the exact type of insurance required, most growers are aware of the need to insure their cotton crop. Insurance for cotton crop is designed to keep growers in business by safeguarding their production costs. As cotton requires a large capital investment to grow and is easily devastated by hail, insurance is important and often even required by third parties providing crop finance to growers.
There are a lot of different options available when it comes to crop insurance, such as:
* Variable yield / fixed yield
* Market prices / fixed prices
* Quality cover / blanket cover
* Insuring production costs / insuring crop revenue
As you can see, there are a lot of variables to take into account and a simple mistake when signing your policy can later prove to be extremely costly in case of an actual claim. As a start, you will have to provide an accurate costing structure for your estimated growing season in order to calculate your total sum insured when choosing your policy. Then there are the plethora of other options that you can choose in order to tailor your insurance to your situation. There are also different policy options for dryland and irrigated cotton, as the cost structure and yield variability is very different between the two options.
Cotton Growers Services (CGS) has partnered up with AgriRisk to provide insurance to cotton growers. Growers often comment that the combination of AgriRisk's insurance knowledge and CGS's agronomic expertise ensures that they receive an insurance policy that is a perfect fit for their situation. Regardless of how you obtain your insurance, make sure that you get advice from an expert.
It might seem a bit early in the season, but it's never too early to start thinking about marketing your cotton. Where irrigated growers can have a higher degree of confidence in their expected yield than dryland growers, dryland growers are also wise to consider their marketing options early. There are many different marketing organisations, contract forms and marketing options out there; it pays to be informed and make the right decisions at the right time.
With a wide range of contracts available, such as forward cash price, spot contracts, on-call contracts, pools etc., not every option might suit your operation. It is important to keep an eye on your risk profile on the one side, and the market price fluctuations on the other side. You risk profile can be calculated by estimating your yield and comparing that to the amount of bales you have contracted. Obviously, the further you get into the season, the more accurate and confident your yield estimates get. Market fluctuations can happen for a wide variety of reasons such as the AUD/USD exchange rate, base index price, worldwide supply & demand for cotton, etc. There are however seasonal patterns that you can take advantage of, if your operation allows you to.
If you have any questions in regards to crop insurance or marketing your cotton, you are welcome to reach out to me on the details below.
Written by: Reinder Prins. Reinder Prins is the market development manager for Cotton Growers Services and as such is responsible for the Precision Agriculture initiatives within the organisation. Reinder can be contacted on +61 427 - 808 489 or via e-mail on firstname.lastname@example.org.