Whether you are growing Cannabis, Hemp, or Hops obtaining a perfect harvest is your main objective. As Farmers and Growers, every harvest is a risk. Owning a cash crop is a high-pressure role filled with tender loving care and anxiety. Insuring your crop is not an investment, but a form of risk management.
The Cannabis, Hemp, and Hops Industries require a lot of investments prior to any profits being made; this opens businesses to significant t risk. Risk management strategies are used to put a safety net under the cash crop. In times of theft or low production, insurance can provide much-needed protection to meet financial obligations.
Many of my current clients have investors or silent partners who expect to receive a payout once the harvest is made and crops are sold. Low receipts due to damage or theft can make it impossible to repay and keep up with both variable and fixed expenses. What’s worst is these unpaid debts get rolled into intermediate debts that are liabilities on your balance sheet for your next harvest.
Farmers and Growers who are successful with obtaining a risk management portfolio plan at least a year ahead. Treating your cover crops like cash crops lays a great foundation for maximizing success.
Here are a few reasons why I encourage Crop Insurance:
1. Risk Management Tool- Some cash crops, especially indoor operations, are operating at a high debt to asset ratio (e.g. 60%), new investors and lenders will look hard at the business financial situation before advancing operating capital. Crop insurance provides a safety net that prevents receipts from going below a certain level.
2. Peace of Mind- Crop insurance protects against adverse conditions (such as weather) that can limit crop yield.
3. Positive Balance Sheet- No business owner wants to start a business cycle in the negative. Crop Insurance can give the necessary income protection if a crop has low production.
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