Agricultural Insurance, Risk Management and Sustainable Development

Risk management and sustainability in agro-industrial production play an important role. These factors are the focus of studies that were reviewed in this special edition of the journal Agriculture. This Special Issue of Agriculture has been published with the aim of summarizing the international knowledge in the field of agricultural insurance, risk management in agriculture and rural sustainable development. Within the framework of this Special Issue, scientific research aimed at solving a set of problems to ensure the development of agriculture will be presented, namely:

Conducting agricultural production in risky conditions, the use of risk reduction tools and the development of agricultural insurance;

The development of scientific and practical potential in order to formulate proposals for the introduction of science-intensive technologies in agriculture;

Popularization of fundamental and applied research in the field of agriculture, animal science, zoology, agronomy, plant growing and soil science;

Formation of recommendations aimed at improving computer models, information technology, engineering and innovative or digital technologies in agriculture.

Crop insurance is an important financial instrument for the stable and successful functioning of crop production, realized by reducing risks [1,2,3]. The use of insurance tools allows to redistribute risk over time and reduces its impact on the results of an agricultural enterprise in unfavorable periods. This helps to maintain financial stability. Risk insurance also provides conditions for the technological development of agro-industrial production [4].

Risks to harvesting are unfavorable abiotic factors (weather conditions) or biotic factors (the spread of diseases and plant pests), manifesting in a decrease in the yield of cultivated crops. At the same time, the yield of each agricultural crop depends on a region’s climatic conditions, the characteristics of its soil cover, the soil type and properties and the use of cultivation technologies, an important element of which is the use of highly productive varieties with varying degrees of resistance or immunity in the cultivation process [5].

Among the most numerous pests of agricultural crops, which are the cause of the greatest reductions in yield, wheat thrips (Haplothrips tritici Kurd.) stand out. With a small size, their abundance leads to high losses in grain crops. Knowing the features of their biology and the cause of losses, one can not only predict their size depending on climatic features, but also identify promising areas of plant breeding to reduce the amount of losses from this pest [1].

A similar problem is manifested in relation to harmful vegetation, especially invasive species that do not have natural enemies in the area. For example, due to its qualities, milk thistle (Silybum marianum (L.) Gaertn.) suppresses the plant community in its distribution area and has become an important resource competitor of cultivated plants, thus reducing yields and increasing the cost of crop production [6].

According to the World Bank, crop insurance accounts for a significant share of the world’s agricultural insurance market. More than 90% of the insurance premium collected is financed by crop insurance [7]. In the Russian Federation, crop farming accounts for more than 95% of emergency losses in the agricultural sector. This reflects the importance of crop insurance for the Russian agro-industrial complex. Yet, in the Samara region, crop insurance with state support is still not used widely, even given the close attention from the government. Since 2014, there has been a decrease in the number of contracts on state-supported crop insurance (from 114 in 2014 to 0 in 2017). The region is located in an area that is hazardous for agriculture, and natural and climatic factors have a key influence on the efficiency of crop farming in agricultural organizations. Regarding this, according to the Federal Agency for State Support of the Agro-Industrial Complex, crop losses ranged from 11.1% in 2016 to 25.8% in 2017, which means that during the period under review, agricultural producers collected RUB 0.185 of indemnities for RUB 1 of insurance premiums [8].

Agricultural insurance not only motivates farmers to adopt environmentally friendly production methods and improves the production efficiency, but also reduces the amount of chemicals released into the environment. Based on data from 50 US states, there is a significant relationship between agricultural insurance, air pollution and the total production of environmentally friendly agricultural inputs. The expansion of agricultural insurance can increase the production of organic products [4].

Along with crop production, livestock and aquaculture also have many factors that affect production efficiency. For example, one of the stress factors affecting the productivity of aquaculture is the accumulation of heavy metals in the bottom sediment of water bodies [7].

Another reason for the reduction in the state-supported crop insurance market is the high insurance premium which a company pays during spring field works, diverting financial resources from the primary objective: providing a sound cultivation technology (acquisition of chemicals, spare parts, fuel, salary payment, etc.) [9].

In this regard, insurance rates are typically set for a group of crops without being separated by variety or cultivation technology [6]. However, it is known that the variety of a crop affects its resistance to drought and therefore the extent of crop yield reductions, which is why when calculating insurance rates, it is necessary to take into account the variety of a cultivated crop.

The sustainability of agricultural development is influenced not only by large-scale production, but also by small farmers (for example, in China) [8] or personal subsidiary plots (in Russia) [3]. Their advantages are manifested in those industries where, at the current level of development of scientific progress, it is necessary to use a large amount of manual labor. At the same time, it is in the conditions of agriculture that these advantages are most pronounced, since small agricultural producers use the synergistic effect from the multifunctionality of agricultural production to the greatest extent. At the same time, this category of agricultural producers is under constant psychological pressure, which often leads to a decrease in motivation. Here, the role of social and state support becomes important, which can mitigate the negative impact of perceived stress.

An increased use of renewable energy sources, including biofuels, also has an impact on improving the sustainability of agricultural development. Reducing the dependence on oil and gas companies in the long term will help to minimize the dependence on global market conditions and fluctuations in diesel fuel and gasoline prices. One study considers various technologies for the production of oilseed crops, which allow optimizing both the choice of crop and the technology of its cultivation, taking into account the characteristics of the territory, the set of equipment and the potential yield of crops [2].

Digitalization of agricultural production is the most important task for agro industry development. However, this should include not only the automation of the production processes themselves (parallel driving systems, processing of crops with plant protection products, automatic fertilizing, etc.), but also managerial decision making automation, both at the level of individual enterprises and the industry as a whole. The introduction of MRP II/EPR and APS standards and their further development makes it possible to optimize enterprise’s production activities. However, all these approaches are mainly used at the operational and tactical planning level and do not affect the strategy development level. This is due to difficulties in obtaining quantitative information currently used in management software products.