Agribusiness
Agribusinesses will need to manage costs, improve risk management and embrace personalized benefits in 2024.
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What to Expect in 2024
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What to Expect in 2024
Rising costs for labour, farm inputs and insurance will continue to affect profits for farms, food production, and forestry and wood manufacturing. Continued labour shortages will force agribusinesses to get creative with benefits, focus on training and increase automation. Active risk management and adequate insurance will be essential in 2024.
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profits and drive organizational vitality and resilience...
Higher input costs and insurance premiums will pressure profits in 2024.
The cost-related pressures that have squeezed profits the past three years will not abate in 2024.
Rising input costs, high interest rates, a tight labour market and damage from extreme weather events have hurt the bottom line of farms and food processors alike, not to mention forestry and wood products manufacturers.
Input costs have slammed agribusiness the past three years, as the COVID-19 pandemic nearly broke the supply chain and the war in Ukraine reduced fertilizer and wheat production. The cost of raising crops and caring for livestock will reach $23.1 billion in 2023, an all-time high and an increase of nearly 6% from the previous year. Elevated input prices are expected to continue through 2024, affecting all agribusinesses, not just farms.
Insurance costs are also cutting into profits. Stock throughput insurance, which covers a company’s goods through the supply chain and is essential for food producers and warehouses, is difficult to obtain.
The cost and diminishing availability of insurance are likely reasons only 15% of Canadian agribusiness respondents to the HUB International 2024 Outlook Executive Survey have sufficient insurance to protect their profit margin.
It may be difficult for agribusinesses to lower input costs, fight the effects of high interest rates or combat weather events. However, working with a broker to lower insurance costs through alternative risk management vehicles and shouldering additional risk will help improve profits in 2024.
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Automation won’t solve the labour shortage by itself — personalized benefits will be key.
All sectors of agribusiness, from farm to table or forest to finished product, will continue to feel the effects of a nationwide labour shortage in 2024.
More than 40% of Canadian farmers are expected to retire in the next decade. Farmers still struggle to hire short-term labourers to pick crops and long-term workers to operate and maintain equipment. Warehousers and shippers can’t find enough employees to keep operations running smoothly.
Labour shortages and even walkouts have beset food and beverage makers, while higher wages in other industries needing manual labour have siphoned workers from forestry and wood production.
Clearly, the industry is aware of the problem: About half of Canadian agribusiness respondents to HUB’s Outlook Executive Survey list talent recruitment as instrumental to the vitality of its workforce; a similar number cite training and employee “upskilling” as equally important.
While automation has long been touted as a means to help solve the labour shortage, particularly in food and beverage where much of the assembly lines are automated, it is not a panacea. Some companies are reverting to human labour because of the issues with automation, including costs, product defects and lower overall production compared with human workers.
All sectors of agribusiness have been searching for creative solutions through benefits. The industry will see the greatest boost to the vitality of their workforce through personalized benefits informed by data analytics.
Personalized benefits that speak to individuals will deliver quality employee experiences (QEX), which will engender increased employee loyalty and attract workers to an industry in desperate need of them.
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Agribusiness will leverage creative solutions to stay resilient.
All agribusiness sectors will struggle to manage risk in 2024, but emerging insurance solutions will help ensure their resiliency.
Weather-related threats have increased in frequency and severity. Droughts, record heat, massive wildfires, windstorms and flooding have diminished farm yields, hampering food processors’ ability to procure raw materials and making logging and wood production a perilous proposition.
With agribusinesses’ reliance on automation, malware and ransomware attacks are more serious and costly than ever. Beyond the immediate financial toll, there is reputational damage as well.
Add supply chain disruptions, global conflict and labour shortages to the mix, and it equals difficult realities for agribusinesses on insurance renewal.
Agribusiness insurance rates are expected to rise across the board in 2024. Crop insurance premiums are likely to increase as much as 10%. Stock throughput coverage will climb as high as 15% for perishable goods.
High property rates will burden food and beverage manufacturers, who will see premiums rise as much as 30%; forestry and wood products operations will see similar increases. Property rate increases for crop input retailers and wholesalers, as well as grain terminals and handling facilities, will see far less pressure, topping out at 10%.
Increased insurance premiums will require agribusinesses to implement novel, specialized insurance solutions to provide a backstop against risk. For instance, parametric insurance policies pay out after a qualified weather event, even if an insured does not sustain damage.
Consulting with their insurance broker will help agribusinesses determine the best solutions, whether it’s modifying limits in existing policies or turning to a layered insurance program, captives or self-insurance.
Resiliency
Vitality
Profitability
Thoughtful risk management will help agribusiness combat new and familiar dangers in 2024.
In an industry full of unknowns, agribusinesses have a clear picture of how to prepare for 2024.
In addition to severe weather, cybercrime and supply chain woes, agribusinesses will need to consider worker safety, product recall risk and manufacturing plant maintenance in their 2024 risk management strategies.
Ensuring compliance to a risk management plan won’t be easy: Only 42% of Canadian agribusiness respondents to HUB’s Outlook Executive Survey align risk mitigation strategies with organizational goals, 23% maintain an effective facilities risk mitigation plan and just 15% say they foster a culture of risk awareness, preparedness and mitigation.
But filling these gaps in preparedness is essential to long-term stability. For instance, while weather dangers cannot be avoided, farms can reduce the effects of drought through improved resource management, and wood mills can improve safety measures to protect employees and property from wildfire risk. Agribusinesses can lean on catastrophe (CAT) modelling to develop risk management and business continuity plans.
Cybercrime has emerged as a threat, with disproportionate weight on food and beverage production. A data breach at Maple Leaf Foods in November 2022 briefly stopped production and cost the company $23 million. Agribusinesses can prepare for cyber threats with multifactor authentication, endpoint detection and response and education to shore up employee defences.
Food recalls remain an ever-present risk, particularly for allergens: Of the nearly 150 recalls in the first three quarters of 2023, nearly half were due to contamination from allergens or ingredient mislabelling. Strong product oversight, including periodic audits, will help minimize food recalls, most of which occur due to employee error.
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HUB agribusiness insurance, risk management and employee benefits specialists will work with you to develop a tailored strategy that will protect the bottom line, support your workforce and build resiliency for 2024. Here are some initial considerations:
Thoughtfully lean into risk.
Risks in agribusiness have increased — and so have insurance premiums. Consider taking a higher deductible on some coverages, which reduces premiums and improves experience rating, or think about alternative risk transfer vehicles to lower costs. Ask your broker what kind of insurance strategy meets your risk profile and budget.
Increase engagement through benefits.
Re-emphasize safety.
Be transparent with your broker.
Re-emphasize safety.
Understand your loss trends.
Thoughtfully lean into risk.
Employees expect you to support their health, safety and wellbeing. A benefits strategy based on personalization and fostering quality employee experiences (QEX) will boost engagement, recruiting and retention and lower risk.
Increase engagement through benefits.
In an era of labour shortages, stringent regulation and greater litigation, keeping employees safe and healthy is essential. Train and onboard employees to understand expectations and commit to maintaining a safe work environment.
Re-emphasize safety.
Thoughtfully lean into risk.
Increase engagement through benefits.
Understand your loss trends.
Understand the root cause of your large losses and explain to carriers what you’re doing to prevent future losses. Develop a strategy with HUB to determine the best time and frequency to review alternative markets.
Understand your loss trends.
Thoughtfully lean into risk.
Increase engagement through benefits.
Re-emphasize safety.
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Download our 2024 Agribusiness Outlook and Insurance Market Rate Report to see what to expect in the coming year.
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When you partner with HUB, you’re at the centre of a vast network of experts who will help you improve your profitability, enhance the vitality of your workforce and remain resilient into the future. For more information on how to manage your insurance costs, reduce your risk and take care of your employees, talk to a HUB agribusiness advisor. We’re here to help.
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1. Farm Credit Canada, “2023 Outlook for the crop input market,” February 7, 2023.
5. Food and Beverage Canada, “Food and Beverage Manufacturing Emergency Foreign Worker Program,” accessed October 18, 2023.
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Understand your loss trends.
Be transparent with your broker.
Be transparent with your broker.
Understand your loss trends.
Let your broker know what changes you’ve made to the business, so there are no surprises at renewal. Review exposures and insurance needs at least 90 days prior to policy renewal, so your broker can identify the best options.
Be transparent with your broker.
Re-emphasize safety.
Increase engagement through benefits.
Thoughtfully lean into risk.
Be transparent with your broker.
2. Progressive Farmer, “Saskatchewan Announces Drought Aid for Producers; Alberta Says Aid is Coming,” August 24, 2023.
4. Cision, “Bridging the Gap Aims to Better Understand Labour Shortages in the Forestry Sector,” February 2, 2023.
6. Financial Post, “More than 40% of farm operators to retire by 2033, leaving shortage behind: report,” April 10, 2023.
7. Food Processing, “Maple Leaf Foods’ Late-2022 Cyber Incident Cost ‘at Least’ $23 Million,” July 19, 2023.
8. Government of Canada, “Recalls and Safety Alerts,” accessed October 25, 2023.
8. Food Safety Magazine, “Cyber Threats Impacting the Food and Agriculture Sector,” August 8, 2023.
Record high input costs in 2023 are expected to continue through 2024, affecting all agribusinesses, not just farms.
Crop insurance has grown prohibitively expensive. Some underwriters have pulled out of the market altogether, with capacity particularly limited in areas such as Saskatchewan, which is suffering from prolonged drought. Business interruption insurance policies are often unaffordable for many agribusinesses.
Umbrella and excess liability insurance rates will likely increase 10% to 20%, with lower limits. Commercial auto premiums for fleets of five or more vehicles will jump as much as 15%, in part due to difficulty in hiring qualified drivers.
Increased insurance premiums will require agribusinesses to implement novel, specialized insurance solutions to provide a backstop against risk.
9. Food Industry Council, “2023 Recalls,” accessed October 3, 2023.
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3. HUB’s 2024 Outlook Executive Survey polled 900 C-Suite and VP-level executives on the issues facing them on profitability, employee vitality and organizational resilience.