You might be surprised what all you can buy insurance to protect these days: homes, cars, boats, your health, teeth, life, even your pet’s health or a quarterback’s arm, and that’s just scratching the surface. But risks in production agriculture are different from risk in most other segments of the economy where they are biological in nature and generally pretty widespread within a region. Crop losses usually have much less to do with a farmer’s actions and instead result from highly unpredictable and unavoidable natural events like flooding or drought or plant diseases. To make matters worse, if a drought or any of these natural events affects my crop, chances are pretty good it’s affecting all my neighbors’ crops as well, magnifying the losses.

As a result, specialized (and for the most part, subsidized) crop insurance products are available providing indemnification in the cases of catastrophic events or shortfalls in yield or even revenue. Well-developed commodity markets for most major crop commodities offer opportunities to use financial tools like forward contracting or hedging to help producers manage risk. And in particularly catastrophic or pervasive loss situations, there’s a long history of federal disaster assistance programs to mitigate widespread losses.

All good news for energy crop producers, right? Wrong! To date, crop insurance products are not available for purpose grown energy crops. Genera Energy has worked with USDA’s Risk Management Agency over the last several years to provide information for the design and testing of a pilot yield risk insurance product for switchgrass. But as of today, none of the traditional risk management tools are available.

While Genera continues to work to get energy crops a level playing field (no pun intended) with catastrophic and annual yield risk insurance products, Genera Energy’s fully integrated biomass supply chain management system is the next best thing. Genera works with biorefinery project developers to select the optimal crop portfolio and varieties for a specific region to minimize production risk. For example, native grasses have spent millennia adapting to their environment and self-selecting survivor plants resistant to pests, diseases and other stresses common to that region. Utilization of these native varieties of energy crops where practical can reduce yield risk significantly.

Timing matters too as perennial energy crops are most susceptible to environmental and biological stresses in the initial establishment year. If you can get an energy crop well-established the first year, the plants are pretty hardy and resilient across a wide variety of environmental and biological stresses in subsequent years. Genera has developed management programs specifically tailored to the initial establishment year that result in very high rates of initial crop establishment success, an important factor in managing long-term yield risk.

While we can’t control the weather or climate, Genera has demonstrated that selecting the best crop for each acre and managing the entire production cycle to minimize risk can minimize seasonal yield variability. In one case, Genera’s energy crops experienced a hundred-year-drought situation and then nearly 20 inches of above-average rainfall just three years later, with minimal yield impact. While Genera has addressed some of the ways to manage risk in producing and harvesting a standing biomass crop, there’s still more risk exposure in the aggregation, storage, transportation, and material handling activities that are between the farm gate and the biorefinery gate. We’ll address some of those other supply chain risks in a future post so check back often.

By Kelly Tiller, Ph.D., President and CEO