Agribusiness: A Dangerous & Complex Business

Busby-Stone Risk Management recognizes the complexity of Agribusiness and provides real customized services to reduce those exposures brought onto the land and facilities by the contractors hired.

The Risk Management Process is rarely if ever discussed in the Agribusiness circles; we have changed this with our Agribusiness Complex Risk Package of Services which can include:

  1. Risk Identification services
  2. Risk Analysis – Qualitative and Quantitative or “The, What” and “The, How Much” you have at risk.
  3. Risk Control – Creating a culture of safety is priority one. This means more than employee safety meetings and insurance company visits
  4. Risk Financing – We indicated earlier in this presentation insurance is NOT the only solution and we mean it. We will analyze your financial statement and provide detail alternative risk financing approaches that create a long-term strategy for reducing your cost of risk.
  5. Risk Administration – This includes monitoring the previous four steps.

Busby-Stone Risk Management has had many post-accident engagements. The majority of post-accident investigations include root cause analysis that reveal contractors, and the services they provide, cause most of the accidents that lead to lawsuits.

BSRM Agribusiness Service Agreements include risk allocation clauses frequently missing in agribusiness relationships. Indemnity contractually establishes the level of protection the contractor or vendor agrees to indemnify you and hold you harmless arising out of their own operations. The insurance clause establishes the minimum acceptable policy limit for each of the types of insurance required. We highly recommend you have your own attorney review the service agreement.

Once this program is implemented we will:

  • Administer BSRM Agribusiness Service Agreement – Sending it to each contractor and vendor you include in our agreement. Your staff is notified via email whether or not the service agreement has been signed.
  • Certificate of Insurance Compliance – We obtain the required certificate of insurance and analyze it for compliance with the terms of the service agreement. Frequently, the email sent confirming receipt of the signed service agreement and compliant or non-compliant certificate of insurance has been received.

Withholding the contractor and or vendors payment has been a traditional strategy in other industries in obtaining these important documents.

BSRM Agribusiness Risk Management Program

  • Risk Identification – This is the most important of the five steps because we cannot manage what we do not know about. This is the most involved part of the engagement as we visit each of your locations including all farming ground, including contract farms, cold storage and other real property facilities and those owned by others and with whom you contract to store your produce. Transportation both in-house and out-sourced. Contract review of all current contractual relationships.
  • Risk Analysis – Qualitative and Quantities, or the what and how much, is at risk.
  • Risk Control – We review current risk control programs for viability and success. From this analysis we will provide recommendation with cost benefit analysis to determine whether the return on investment makes the recommendation an option.
  • Risk Finance – The acquisition of funds at an optimal cost to pay for claims. We analyze your financial statement to determine your ability to retain risk. Insurance is frequently the most useful mechanism but if other alternative such as captive, large deductible or self-insurance reduces your cost of risk you will be provided the information to assist us in making that decision.
  • Risk Administration – We will provide a long-term administration manual to help you monitor the success of the risk management program’s previous four steps. We can provide this as an on-going service at a discounted rate once the previous four steps have been completed.

We apply our daily rate and that becomes the retainer fee.

BSRM Agribusiness Contractual Risk Services

BSRM Agribusiness Service Agreement includes risk allocation clauses frequently missing in agribusiness relationships. Indemnity establishes contractually the level of protection the contractor or vendor agrees to indemnify you and hold you harmless arising out or their own operations. The insurance clause establishes the minimum acceptable policy limit for each of the types of insurance required. We highly recommend you have your own attorney review the service agreement.

Once this program is implemented we will:

  • Administer BSRM Agribusiness Service Agreement – Sending it to each contractor and vendor you include in our agreement. Your staff is notified via email whether or not the service agreement has been signed.
  • Certificate of Insurance Compliance – We obtain the required certificate of insurance and analyze it for compliance with the terms of the service agreement. Frequently, the email sent confirming receipt of the signed service agreement and compliant or non-compliant certificate of insurance has been received.

Withholding the contractor and or vendors payment has been a traditional strategy in other industries in obtaining these important documents.

Agribusiness Insurance Policy Analysis

We recognize that long-term relationships exist and some people put a high value on those relationships even if their agent’s expertise is questionable. When this is the case, BSRM can provide valuable assistance in helping you maintain the long-term relationship.

BSRM employs Farm and Agribusiness Insurance Specialist (AFIS™) will review perform the following:

  • Current in-force insurance policy review.
  • Provide a side-by-side coverage comparison that confirms that strengths and weaknesses of the current policy.
  • Make real world recommendations for improving insurance coverage.
  • Determine whether financially stable insurers write the policies.
  • Create the underwriting information the agent/broker can then use to bid your insurance policy premium.

This service is provided on a flat-fee basis. Following this service, should you determine that BSRM is the appropriate broker of record, we will discount the flat-fee invoice sixty percent (60%).

Agribusiness Insurance Brokerage

Acrisure, Busby-Stone Risk Management is the twelfth largest broker in the United States. We have billions of dollars in written premium that allows us to enjoy relationships with most any insurer you can name.

Agribusiness insurance is specialized and we have the appropriate insurance company for you. We are disciplined insurance brokers and as such insurance is the last step we take not the first. We will begin by initiating steps from the risk management process and use that information to design a cost effective insurance program with underwriters that will allow long-term relationships.

The insurance market has been in a soft condition for the last fifteen years. We have not had insurance rates this low in three decades. Reducing premium costs is always a priority however our first priority is creating a coverage that triggers a defense when needed, this is our process.

  • Using steps from the risk management process design a cost effective insurance program
  • Ninety (90) days prior to your policy expiration send the underwriting submission to insurers with an appetite for agribusiness.
  • Thirty (30) days prior to expiration complete our customized Renewal Workbook and meet with you. Our clients have enjoyed our renewal workbook for years and years. Included information is a five (5) year history of your basis of premium, policy coverage compared year to year and premium comparisons for each.
  • Together we make an informed decision which insurance company can provide long-term cost effective services.
  • We send the underwriter chosen specific binding instructions to eliminate any confusion about the terms and conditions to be included in their policy.
  • Once received we use our renewal workbook to confirm that what was included in our binding instructions has now been replicated in your insurance policy.
  • We will provide a copy of the policy(s) in a format of your choice. Hard copy paper in binders, Pdf’s combined into one saved document, thumb drive, CD or any combination of your choosing.
  • We recommend reviewing the policies together when you have time.
  • BSRM prides itself on the speed with which we provide requested certificates of insurance and will execute those usually within minutes from receiving the request.

Typically we are compensated in the form or commission paid by the insurance company. The rates of commission vary by type of policy. Ten percent (10%) to fifteen percent (15%) are typical industry standards. Some property and inland marine insurers pay up to twenty-two percent (22%).

For larger agribusiness we will consider annual fee in -lieu of commission. We require a minimum three year contract cancellable by either party with one hundred-twenty days written notice.

Why we prefer compensated with fee in-lieu of commission:

  • We are Farm and Agribusiness Insurance Specialist (AFIS™) with that much dedication to education and industry knowledge we believe it is a more appropriate compensation method
  • We believe that it removes the potential stigma that our recommendations are tied somehow to the commission the insurer pays us.
  • Our clients feel similarly that they can hold us to the standard we promote and in doing so increase the focus we give their company. We happen to disagree with this point.

AGRIBUSINESS RISK MANAGEMENT

San Joaquin Valley Overview

San Joaquin Valley
The San Joaquin Valley is the most productive agricultural region in the world, cultivating more than 250 crops.

Hot Caps
To help prevent early plantings of warm-season vegetables such as cucumbers, zucchini squash, and fresh tomatoes from frost damage, individual plants of small acreage plantings are covered with “hot” caps made from wax paper. The cap has twofold purpose: first in raising the daytime temperature to get a faster growth response and second for some frost protection due to the heat it retains. It has been estimated that the cap gives an additional 2º F of protection to the plant growing underneath.

Tomatoes
Approximately 15,000 acres of fresh tomatoes and 110,000 acres of processing tomatoes are grown annually in the southern San Joaquin Valley. Fresno County leads the state in tomato production. Tomato culture is similar for fresh and processed tomatoes, although varieties and harvest practices are distinctly different.

Gondola of Green Tomatoes
Fresh tomato harvest commences in early June and continues through November. Fresh tomatoes are hand haravested at a mature green stage, transported to a packing shed where they are washed, sorted, graded, boxed and exposed to ethylene (a natural ripening hormone found in many fruits such as tomato) to provide uniform ripening conditions.

Processing Tomato Harvest
Processing tomatoes are machine harvested when they are red ripe and trucked to the processing plant in large trucks and trailers.

CDFA Inspection Station
Every truckload of tomatoes is sampled and inspected prior to processing by the California Department of Food and Agriculture (CDFA) to insure a standard of tomato quality for the state.

Lettuce Field
Lettuce is grown year round in California and accounts for 20% of the total value of vegetable production. The San Joaquin Valley is a major lettuce supplier two seasons per year. Iceberg and specialty lettuces are planted in midsummer for a late fall harvest and planted in late fall for a mid-spring harvest.

Lettuce Harvest
Skilled labor crews travel to production areas around the state with sophisticated harvest aid and packing equipment to maintain efficiency in the highly competitive lettuce industry.

Carrot Harvest
California is the major supplier of carrots for the US, and Kern County in the San Joaquin Valley is the major producer in California. Green-top bunch carrots are extremely field labor intensive at harvest, whereas cello and value-added carrot packs require labor and machinery in a processing facility.

Pesticide Application of Garlic Field
Garlic (pictured here), onions, melons, peppers and broccoli are some of the other vegetables with substantial acreage and production value in the San Joaquin Valley. Commercial fields are rarely less than 40 acres in size, typically averaging 80 acres, and in rare instances, are as much as 640 acres planted to a single commodity.

Strawberry Harvest and Young Corn Field
Also prevalent in the San Joaquin Valley is the small-scale vegetable and/or strawberry grower. Twenty-acre parcels are often subdivided among producers for the cultivation of miscellaneous vegetables, such as sweet corn, cherry tomatoes, eggplant, summer and winter squashes, Asian vegetables and herbs.

Information developed and authored by the University of California Davis – Department of Plant Sciences. http://vric.ucdavis.edu/virtual_tour/sanjoq.htm