By Josh Smart
The pressure of international commodity tariffs will continue to plague the agriculture industry into 2019. From farmers to agribusiness owners and operators, there are a lot of unknowns. Will your product continue to command an optimal price abroad? Will your product be rejected at the overseas port? All could have supply chain implications down the road. Here’s what’s on the horizon for agribusinesses in 2019:
- An increased need for Trade Credit coverage. As North American trade fluctuates in today’s political climate, domestic businesses are increasingly concerned with protecting their products traveling overseas from import/export and tariffs. Regardless of the commodity – wood products, soybeans, corn and even poultry – businesses that trade overseas are on high alert. More are buying Trade Credit coverage to transfer their risk. If your product is denied at port, what will you do? How will you recoup losses? It may be time to start exploring your Trade Credit coverage options.
- Product recalls will continue to increase. Food recall protocols and insurance have changed significantly since food recalls of years past. They’ll continue to evolve in 2019 on the heels of the 2018 salmonella recalls on romaine lettuce, beef and cake mix. Recall publicity and therefore, liability, has increased, thanks to widespread access to media and communications channels. The hype has caused products outside of affected batches to be recalled as well as renewed emphasis on cleaning and sanitation regulations and increased operator training. Ultimately, though, human error will continue to play a hand in product recalls. For this reason, an increasing number of food processors, manufacturers and distributors are investing in product recall insurance to minimize their risk.
- Expanded H-2A regulations. What farmers are obligated to provide to seasonal H-2A employees has recently increased. Laws require agribusiness employers to provide H-2A employees with adequate housing, transportation, food and facilities for washing and grooming. This presents a challenge for farmers who need the labor but cannot meet the requirements. However, by doing so and improving the quality of life for H-2A employees, operators can lower employee acquisition costs. When H-2A employees feel safe and supported, there’s a better chance they’ll return for the next season. Retaining H-2A employees can also help minimize the need to re-train year after year, increase productivity, and lower injury and fatality claims.
- Logistics will drive auto liability rate increases. Whether moving grain, nuts, fruit or produce, agribusinesses rely heavily on vehicles. From power units to hauling vehicles and tankers, small farms could have at least 25 trucks, while large agribusinesses might utilize 150-plus seasonal and year-round active vehicles. After suffering well over 100 percent annual loss ratios from insuring agribusinesses over the last few years, auto insurers are expected to raise rates in 2019. And while it’s still cost effective to manage your own logistics internally, owners will want to engage in fleet safety best practices. A greater emphasis needs to be placed on fleet safety that includes training, but also the monitoring of vehicle and driver, with dashboard cameras and GPS-enabled software. As drivers are rewarded for an increased awareness, road safety claims will decrease and ultimately help keep rate increases at bay.
2019 Growth and Beyond
While many North American agribusinesses have merged, expanded and matured over the last few years, commodity tariffs, product recalls and auto insurance rate increases will threaten margins in 2019. The challenge will be for the agriculture industry to stay the course through the current tariff crisis, positioning their businesses as ripe for tomorrow’s international marketplace.