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The dairy sector: hailstorm or disaster?

Bertus
Master Management, Economics and Consumer Studies at Wageningen University.

Thursday the 23th of June in the East of Brabant a hailstorm like no one has ever seen before caused damage on cars and roofs. Farmers were also hit by damage of their glasshouses, barns as well as crops. This on top of damage by flooded fields due to heavy rainfall this season makes the crop season 2015 – 2016 a disaster for farmers of the southeast of the Netherlands. The estimated damage, of which part is insured and part is not, is around 500 million euros according to farmer organization ZLTO.

Two interesting discussions arose after the hailstorm. One of these discussions involved farmers and the government: Should the government consider this area as a disaster area? If an area is classified as a disaster area the government can support the farmers via an emergency fund to overcome financial difficulties caused by this weather. ZLTO, farmers and political parties such as CDA and PVV plead for this because it is a rare situation which is hard to insure against. However, Van Dam, who is State Secretary for Economic Affairs, stated soon after the hailstorm that he does not agree with this. According to him farmers have the possibility to insure themselves against these risks.

Van Dam referred to the Brede Weersverzekering as a possibility to lower ones entrepreneurial risk. Newspaper Eindhovens Dagblad (2016) gave an example of this type of insurance. It stated that a tree nursery has to pay a premium that is equal to one third of the maximum insured amount of 100.000 euros which might make this insurance not that attractive for entrepreneurs

A second discussion is between farmers and insurance companies: Are the farmers covered? After the damage caused by the hailstorm some problems and unclarity regarding this arose. Glasshouses were insured since this is a requirement for a bank loan. Therefore, they are sure their damage will be covered. This does not necessarily include the economic loss of being out of production for 1 or 2 seasons.

Many farmers who are not insured against hail damage are insured for storm damage. Some insurance companies state that the damage caused by hail in this case actually qualifies as a storm. Others don’t recognize this and therefore don’t compensate farmers. Recently, a dairy farmer challenged his insurance company Interpolis for this. His damage is 95.000 euros. On the 4th of November he lost his case.

It is interesting to see how the agricultural sector will recover in the next couple of years. Some farmers will recover while others might go bankrupt. And if farmers are compensated for the damage, some will be out of running for a few seasons.

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