Jacques Roberts, Head of Sales and Distribution at South Africa’s largest crop insurer, Santam, says that as farming risks become more complex, crop insurance must be in the production plan, and not at the bottom of the budget.

Farmers plan carefully for the seed, fertiliser and crop protection needed to bring a harvest to fruition. Crop insurance should form part of that same production-planning process – not as an optional overhead considered only after other costs have been allocated, but as protection for every rand committed before the first shoots emerge.

This shift in thinking is becoming urgent. According to Statistics South Africa, the total gross value of agricultural production in 2025 (the total production during the 2025 production season valued at the average basic prices received by producers) grew by 9,5% to R500 492 million, compared to R456 980 million in 2024, helping to anchor South Africa’s economic performance.

Agricultural exports also reached a record US$15.1 billion in 2025, their sixth consecutive annual high. Yet the capital behind this success is being exposed to a risk environment that is less predictable, more interconnected and increasingly expensive.

The driver is not simply “more bad weather”

For farmers, the challenge lies in managing threats that extend well beyond the weather. Ageing or constrained infrastructure, logistics disruptions, rising input and energy costs, biosecurity threats and volatile commodity markets can all affect production, quality and profitability. These pressures often compound one another, allowing a single disruption to move quickly through the farm’s balance sheet and the wider agricultural value chain.

Recent claims trends highlight how production risks are evolving

During the 2025/26 season, insured crop losses exceeded R1 billion, making it one of the most active claims environments in more than a decade. Hail-related claims accounted for almost all claims paid during the season, highlighting the significant financial impact a single weather event can have on agricultural production.

Insurance cannot be considered only in the aftermath of a claim

Considering this, the strategic value of insurance starts before planting. It protects working capital invested in seed, fertiliser, chemicals, labour and technology – providing a financial floor when a weather event cuts yield or quality.

Critically, it can also strengthen a farmer’s ability to secure seasonal finance, which is the backbone of commercial agriculture. Farmers incur most production costs months before they earn income from a harvest, so they commonly borrow to fund seed, fertiliser, crop protection, fuel, equipment and labour. That facility is then repaid from the proceeds of the crop. In a normal season, the cycle supports production and allows the next planting decision to begin. When hail, fire, frost, drought, or flooding cause a partial or total yield loss, however, the farmer may be left with both reduced revenue and a loan that still has to be serviced.

South Africa’s agricultural debt has been estimated at R238 443 million for the year ending 31 December 2025. In aggregate, that debt has been described as reasonably balanced against the value of agricultural assets. But a national ratio can mask the pressure on an individual farm, particularly where margins are already being squeezed by input costs, interest expenses, infrastructure constraints and volatile commodity prices.

This is where crop insurance becomes part of the financing architecture rather than an after-the-event expense

A valid claim can help replace lost income, meet repayment obligations and preserve the liquidity needed to plant again. It also gives lenders greater confidence that an uncontrollable production shock will not automatically become a credit default. Without that safety net, one severe season can force debt restructuring, asset sales or exit from farming altogether.

The consequences do not stop at the farm gate. A failed crop can reduce throughput for packhouses and processors, disrupt supply contracts, weaken rural employment and place added pressure on food availability and prices. Protecting the farmer’s ability to recover and replant therefore supports the continuity of the broader agricultural value chain and, ultimately, national food security.

Financing resilience

Globally, the UN says that the frequency of disasters has risen from about 100 a year in the 1970s to roughly 400 a year over the past two decades. Over 30 years, disasters caused an estimated US$3.8 trillion in crop and livestock production losses, around US$123 billion a year, or 5% of annual global agricultural GDP.  Resilience therefore needs to be financed deliberately.

That begins with cover matched to the farm’s actual exposure. Risk differs by crop, geography, growth stage, production method and balance-sheet capacity. Effective insurance therefore requires more than a generic policy: it calls for reliable data, local agricultural knowledge, disciplined underwriting and an ongoing conversation about changing conditions. Early-warning information, resilient infrastructure, sound agronomic practices, technology and insurance should work together as part of a broader resilience strategy, each reducing a different component of risk

In an increasingly complex operating environment, resilience is built through informed production decisions, sound financial planning, proactive risk management and appropriate insurance protection. While crop insurance may feel expensive in a good year, farmers should assess whether the business could absorb a failed harvest, damaged infrastructure, unmet delivery commitments and outstanding seasonal debt in a bad one. When measured against the full capital at risk, crop insurance is not money diverted from production. It is what helps keep production possible.

Source: Santam