Last summer, when extreme heat hit his crops, Jon Kenady slept easier than he has in the past, thanks to innovative weather insurance that paid $64,000 in claims even before the crop was harvested.

“It helps me sleep better at night when the weather goes against me,” says Kenady, who farms in west-central Illinois near Plainville. “Why sit up at night worrying about the weather?”

Kenady’s in-season payout resulted from his purchase of weather insurance from The Climate Corporation, one of two companies that began marketing weather risk management products across the Corn Belt in 2011. Kenady also protected 80% of historic yields with Multiple Peril Crop Insurance, which also made an indemnity payment for yield losses following harvest. 

The other new weather risk management tool is from eWeatherRisk, which sells weather hedge contracts based on underlying weather indexes. “Our product is not insurance; it is a weather-indexed risk management contract,” says Brian O’Hearne, eWeatherRisk president. But like insurance products, it is designed to minimize the financial impact of poor crop yields resulting from contracted weather events. And like insurance products sold by The Climate Corporation, it makes payouts soon after a weather event has concluded, without proof of actual harm to the crop.

In-season payouts are possible because both products are based on the presumption that extreme weather reduces yield, even though it is theoretically possible for a crop to rebound. “Our insurance pays for weather events that have a correlation to yield without having to prove actual yield loss,” explains Jeff Hamlin, director of agronomic research for The Climate Corporation. Excess moisture that delays planting, drought, high temperatures during pollination and other factors all can trigger in-season payouts, depending on what coverage has been purchased, he adds.

“These products are coming on the market now because we can measure weather events better than we could in the past,” says William Edwards, an Iowa State University farm management specialist, who notes that other weather insurance products have come and gone in past decades. “The concept boils down to how well weather events these products are based on correlate to yields on your farm.”

From his standpoint, Kenady thinks that buying additional protection against poor weather is a no-brainer. For 2012, he has purchased weather insurance on his entire 2,500-acre operation — up from 1,000 acres of coverage last year.

“With federal crop and weather insurance, I am paying $70/acre on corn,” he says. “I run more out the back of my combine than the extra premium for weather insurance.”