Mitigating agricultural risk

For the first time, Guyana’s crop-insurance facility has had to do what insurance is supposed to do – pay. During this year’s first crop, above-normal rainfall resulted in claims of almost US$128,000 (about G$27 million) for 2068 rice farmers. The facility, launched in 2025, is initially premium-free for farmers under a three-year arrangement involving the Government through the Guyana Rice Development Board, UPL Costa Rica and Philip Morris International.
Twenty-seven million dollars may not sound like much in an economy now accustomed to talking about billions. But the significance is not the size of the cheque; it is the principle behind it. Farmers do not control the weather and even if they plant improved varieties, improve drainage, use better machinery and fertiliser and follow every piece of agricultural advice offered by the experts, the rain can make it all for naught. And that is precisely why insurance matters.
We have traditionally dealt with agricultural disasters through government intervention after the fact – subsidies, compensation, emergency assistance, and political appeals. Those measures have their place, but they can leave farmers wondering whether help will come, how much it will be and when. Insurance introduces predictability which has implications well beyond compensating farmers after a flood.
Agriculture is an inherently risky business and if farmers believe that one bad season can wipe out their working capital, they naturally become conservative. They plant what they know rather than what might be more productive and hedge investment in machinery, irrigation, drainage, and technology. Banks also become cautious about lending while young people become reluctant to enter farming. Risk protection can, therefore, become development policy.
The United States offers a useful comparison. Its Federal Crop Insurance Program dates back to 1938 and has evolved into a large public-private system administered by the US Department of Agriculture’s Risk Management Agency. Private insurance companies sell and service the policies, while the federal government provides substantial support and shares catastrophic risk. The programme now covers more than 130 crops.
The American lesson is not that Guyana should copy Washington’s agricultural bureaucracy but that a serious agricultural economy treats risk management as part of agricultural infrastructure. Indeed, the US system goes beyond simply paying when crops are destroyed and includes revenue protection, prevented-planting coverage, whole-farm insurance and special assistance for beginning farmers. For 2026, for example, new farmers can receive additional premium subsidies for as many as their first 10 crop years.
That is particularly relevant for us if agriculture is to attract a new generation. Telling young Guyanese that they should become farmers while leaving them to negotiate simultaneously with the weather, markets, pests, financing and imported-input prices is not exactly an irresistible recruitment campaign, but insurance can change that calculation.
We should, therefore, see this first payout as the beginning rather than the conclusion. The present rice facility covers an important risk, but eventually insurance should evolve toward broader coverage covering comprehensive agricultural risk management, including other crops and, where commercially feasible, revenue and weather-index products. But insurance should not become another permanent subsidy disguised in insurance clothing. The objective should be to build a sustainable risk-sharing system in which Government helps establish the market, private partners bring expertise and capital, and farmers gradually acquire the capacity to insure their productive assets and income.
And there is no reason we cannot be inventive about it, since we now have something we did not have when agricultural policy was designed around scarcity – fiscal space. We now have the wherewithal to create institutions that allow agriculture eventually to stand more securely on its own feet.
The first $27 million of claims, therefore, deserves more attention than it has received. It not only tells the farmer who watched his rice field disappear under too much water that he has not been entirely left holding the (rice) bag. It signals all farmers – present and prospective who know that the weather has a rather independent mind – but also it is the beginning of using new market instruments to mitigate wider risks so that we can better fulfil our agricultural potential.