Navigating the World of Crop Insurance
January 22, 2021
The Widespread wildfire season of 2020 had winegrape growers and vintners up and down the West Coast scrambling to run micro-fermentations and test grapes for guaiacol and 4-methylguaiacol. Contracts, many of which contained no specific provisions for smoke exposure, were called into question, and animosity between some buyers and sellers ran high. With so many grapes unable to be sold, or never even harvested, a lot of business was lost. To recoup that loss, those who had signed up for the federally subsidized Crop Insurance program filed claims.
California growers, for the most part, were in a better position leading into August’s lightning storm-fueled fires, as well as the Glass Fire in northern Napa Valley—seventy-seven percent of California winegrape growers had coverage. In the Pacific Northwest, which was also affected by severe smoke exposure, 76 percent of Washington state grapegrowers were insured. Oregon grapegrowers, on the other hand, weren’t. Just 32 percent of grapegrowers there had crop insurance.
“What it indicates is there are a lot of uninsured growers out there...If they don’t get crop insurance, hopefully there could be a disaster program legislated, or something to help take care of them,” said Jeff Yasui, director of the RMA office that oversees California, Arizona, Nevada, Utah and Hawaii, at a recent California Association of Winegrape Growers (CAWG) webinar.
Why Crop Insurance?
The obvious answer is that Mother Nature is unpredictable. From the more traditional crop concerns like frost and hail, to the more recent frequency of wildfires, many winegrape growers are finding insurance a forward- thinking and responsible choice.
Whether crop insurance is worth the spend is something that many growers have considered following this harvest season. At Wine Business Monthly, we’ve heard from a number of growers that it’s worth every penny. Matthew Heil, director of fruit supply at Copper Cane Wines & Provisions is one of them. He argues that it would behoove growers across the country to take advantage of the federally subsidized insurance program.
The Federal Crop Insurance Program
The United States Department of Agriculture (USDA)’s Risk Management Agency (RMA) was created in 1996 to provide risk management tools and crop insurance products to the nation’s farmers. Approved Insurance Providers (AIPs), the more traditional insurance companies, then sell and service these federal crop insurance policies, which are a partnership between the RMA and the Federal Crop Insurance Corporation (FCIC).
Simply put, the RMA creates an insurance product, Crop Insurance, and then asks AIPs to sell them to growers and deal with claims. RMA then subsi- dizes the majority of the premiums. According to the RMA, the federal crop insurance policies for grapes cover loss from adverse weather conditions, earthquake, failure of irrigation water supply if caused by an insured peril during the insured period, fire, insects and plant disease (except for insuffi- cient or improper application of pest or disease control measures), wildfire or volcanic eruption. It does not, however, cover Phylloxera damage, labor losses, or an inability to sell the grapes because of lack of demand.
To obtain a policy, growers and farmland owners must reach out to one of the RMA’s AIPs, who are responsible for selling and managing the policies (For a full list, visit www.rma.usda.gov/Information-Tools/Agent-Locator-Page). In the event of a claim, these companies will send out their own auditors to evaluate and assess damage, if it exists and then pay out the reimbursement.
The AIPs work as facilitators for the product and in order to continue selling the insurance, these companies must abide by the rules set forth by RMA, and Yasui has said that has earned them a reputation for being strict.
“RMA plays with a lot of liability on them to execute their responsibilities properly. From a government standpoint, they’re looked at by a compliance division of our agency and USDA. They’re also subject to review by the Office of Investigator General with USDA,” he said. “The companies, they have to follow the rules, and although you may feel that the rules are harsh, maybe too detailed, maybe too minuscule, maybe not even applicable, it is their responsibility to follow these rules and they are checked on them.”
Catastrophic Risk Protection (CAT) policies that provide additional coverage beyond a basic policy are also available. At $655 per crop per county, coverage is fixed at 50 percent of the average yield and 55 percent of the price election.
It is important to note that crop insurance must be purchased prior to a loss and before the sales closing date. There are no retroactive provisions allowed. In California, the sales closing date is January 31. For all other states where the federal program is available the sales closing date is November 20.
Continue Reading "Navigating the World of Crop Insurance" in the December 2020 Wine Business Monthly.