Apache Farmer’s Coop Readies New Risk Management Services For Roll Out

The following article appear in the Agriculture News Section of the Oklahoma Farm Report on Monday September 24, 2012:

Apache Farmers Co-op finance manager Davey Jones has been studying the agricultural finance landscape for a long time. What he’s learned over the years has allowed his co-op to create a bundle of risk-management tools and services they are preparing to offer their members. If they benefit the membership of the co-op, Jones says they may be coming to a co-op near you.

Radio Oklahoma Network’s Farm News Director, Ron Hays, recently spoke with Jones about the evolution of their risk management process and what it offers producers. Jones says the project has developed organically as the needs of producers has developed.

“It’s been a process as agriculture has changed and as, specifically, the input costs in agriculture have changed. It’s become a much riskier way of life. As we’ve watched that unfold, we’ve noticed that there are certain things that, looking backwards, if our producers had taken certain steps, then they really could have negated a lot of the negative consequences of these risks when they do play out to their disadvantage.

“So, we began to look at some things, as a co-op, that we might do, services we might provide that would help them plan ahead and manage those risks a little better.

“So, about two-and-a-half years ago, we began to kind of put together the pieces of the puzzle as droughts and price volatility of both inputs and the crops and livestock that we market became more erratic. As they became more erratic, it really seemed to pick up the pace of the need to make that come to fruition a little quicker.

“So we’ve stepped up our pace in trying to pull all those plans together to get the right products, the right services. And now we’re at the point of the right kind of communication to the members about what it is that we’re trying to do, how it is that we feel it will be of benefit to them and get them familiar with the process of managing risk.”

Jones says the package of financial, risk management, and insurance products the co-op will offer is rather unique. It is so unique, he said, that the co-op had to create a separate umbrella company to offer all the services. The company is called: Ag Risk Management and Insurance Agency. He says the company is looking not just at the obvious risks entailed in farming, like crop insurance, but all the risks a producer might face.

“It will be even more than crop insurance. It will go into farm and homeowners. It will go into life and medical insurance. And I think the reason that it’s different, first of all, it’s co-op owned. The people who are buying from the company, from the agency, doing business with the agency, actually own it. I think that’s unique in itself. I think the more significant difference is that it gives our producers a place that they can come–one place-they can examine the risks that are out there, kind of examine those risks, prioritize them, come up with a game plan and then have some place where they can periodically stop and evaluate how it’s working.

“I don’t know anywhere else you can go where you can get all those services at one place. You can go to the co-op and kind of manage your input risks and manage your marketing risks, but if you also had input finance needs, you need to go to the bank to do that. And the back doesn’t really know so much what’s going on at the co-op. And then to do your farm and your crop insurance, you go to a different person at a different company and they may or may not always be aware of everything going on in the other aspects of your business. I think the most unique thing about what we’re wanting to provide is a one-stop shop–not so much for convenience, although it will be convenient, too-but a place where one company will know everything that you’re doing to try to manage risk and can work in harmony with one another instead of fighting against itself sometimes.”
It will start at the Apache Co-op, but Jones says they have their sights on a bigger picture.

“If this proves to be advantageous for our members and our co-op, then it stands to reason it would be a good thing for other co-ops across Oklahoma for sure, and maybe even beyond. If it’s a good service, provides valuable benefits to the members, provides an additional revenue stream to the co-op and gives members a good, reliable place to do an overall risk management plan, then I think this is something other co-ops would want to take a look at. And, we’re kind of pioneering it and we’d be happy to work with other co-ops to help them establish this same kind of service in their town or in their communities for their members.

Jones says there has been a lot of interest in what’s brewing in Apache, and he thinks it will be a model that will spread far and wide. He doesn’t know what form that broader approach might take, but he thinks co-ops large and small will be able to benefit from what they are pioneering in Apache, Okla.

“It would be an idea and a business model that would be shared with other co-ops. You know, maybe every little co-op doesn’t want to form their own agency, and find their own companies that can write the insurance through. And so the agency that we’ve created may be the agency that kind of works through all the other co-ops.

“But the other risk management things that happen in the inputs and the marketing, those would all be done primarily through that local co-op. And then what we would do is kind of come up alongside that and reinforce their services to their members.”

Jones says the ongoing drought hit farmers in his area hard and has really made everyone in the area take a long look at better ways of mitigating risk.
“Yeah, it’s kind of unfortunate that that’s the case, but sometimes we have to be moved to a point of desperation before we really open our minds up to alternate ways of doing things such as managing risk”