David and Celesta Hicks Farms, a family-owned agricultural business in Seminole, Texas, partnered with Arbol to mitigate climate-related risks threatening their cotton production. With unpredictable weather patterns—including droughts, extreme heat, and severe storms—creating yield volatility and financial uncertainty, the farm needed a reliable risk management solution to protect its operations and financial stability. While traditional crop insurance covers direct farmer losses, it doesn’t mitigate loss of income for farms experiencing inconsistent yields. By implementing Arbol’s parametric Area Yield Program (AYP), David and Celesta Hicks Farms secured a data-driven financial safety net that ensures business continuity and resilience, even in low-yield years.
Strengthened resilience for long-term financial sustainability in a changing climate.
Safeguarded against low cotton yields across key Texas counties.
Triggered by USDA crop yield data, ensuring immediate financial relief.
Tailored policy addressing drought, heat stress, and regional yield variability.
Enabled the farm to maintain production and fulfill commitments despite climate challenges.
Arbol’s parametric Area Yield Program (AYP) was identified as a potential solution to address these complex, interrelated challenges and provide the farm with a tailored risk management tool.
Arbol proposed a tailored parametric crop yield index derivative using the Area Yield Program (AYP). This county-level yield index product was designed to protect David and Celesta Hicks Farms against revenue losses due to low crop yields. How it works and why it works was crucial for David and Celesta Hicks Farms.
While farmers have access to government crop insurance and disaster assistance programs, businesses reliant on their production lack business income insurance for crop yield losses.
AYP covers volumetric losses that price risk management tools cannot insure, providing comprehensive protection against yield shortages.
One aggregate policy limit can cover multiple sources of income loss, including lower volumes, additional expenses to import supply, price fluctuations affecting margins, and reductions in sales due to commodity substitution by customers.
Payments are made fairly and objectively, utilizing independent data to ensure hassle-free claims.
The agreement covered specific locations in Texas, ensuring that payouts were aligned with the actual yield performance.
The success of this parametric solution may lead to expanded use of similar risk management strategies across their operations and for other crops they produce.
Are you a cotton farmer or agricultural business owner concerned about climate-related yield risks? Discover how Arbol’s Area Yield Program can provide tailored protection for your operations. Contact us today to learn how parametric solutions can safeguard your business against unpredictable weather patterns and yield volatility.