RISK MANAGEMENT

This is the level of detail that we provide you with daily through our service, for each crop that you are growing if you choose to dig deeper into your data. We will use wheat as an example here, and this is actual data from an Australian farm. This example has been specifically chosen because it addresses rain and temperature risk together and is therefore relevant everywhere. 

This is the status of your farm, on a specific day for wheat. The model has calculated everything for you based on your seeding date and the amount of moisture that your soils can hold. Every day the model works out what stage your plant is at and where it should be for every plant stage based on your historical data. This allows us to accurately calculate the weather risk.

In this example you will see that the biggest risk as far as the weather is concerned is frost, or minimum temperature, at 43%. This risk is specifically for the dates calculated by the model based on the crop life cycle functionality included and displayed in the model.  

An analysis of the farm data shows that 27 mm is required to break even, and this has never not happened - you can see this by looking at the decile information on the left. In fact, only 63 mm is needed to reach the farmers yield target, and this has happened every year but 3 in the history of the farm. Rainfall is therefore not the risk and the farmer stands to lose a healthy profit if there is a frost. 

The diagram below shows an indication of what the cost would be to de-risk this concern. You will note from the co-ordinates that it is the same farm. You will also note that the dates line up with the risk periods calculated above.

In summary, the frost risk as calculated above using the historical data for the farm is 43%. The cost of covering this risk could be as high as 33% of the cover required. Both are large and scary numbers as they have been presented, however, as per the image below, it only requires 75 kg’s of wheat to cover the cost of the premium. Even in a very marginal crop targeting 1 tonne a hectare, that 7.5 kilograms is less than 1% of the yield.

Finally, if you look at the example below, you will see that an adjustment of the pay-out conditions can significantly change the cost of the de-risking process. The amount being covered has been increased significantly, but the amount paid out is spread over a longer period. Importantly you will see that the cost of the cover is now 9.2% and not 33% as above.

A significant difference that requires some level of understanding. The farmer will be able to negotiate this process by talking to their phone and getting to a level where they might be interested in investing in weather cover. A simple message to the phone will alert a certified Financial Consultant that you are interested in some cover and the consultant will be supplied with the parameters and workings that you have  developed through your interaction with the YourDataYourProfit model.

The consultant will be able to communicate with the farmer through the same app, ensuring that all conversations and compliance issues can be covered off and documented. If the farmer is happy with everything, they can then initiate their investment.

All of this can be done while the farmer is sitting in their tractor!!