By: Trevor Troyer, VP, Agricultural Risk Management
How does your crop insurance policy work? What type of policy is Grape Crop Insurance? How much do you need to know? I mentioned a little about grape crop insurance in the last article in the Grape Vine. I am going to go into the policy information and how it is set up in this one.
Grape crop insurance is an Actual Production History (APH) policy. This means it uses a vineyard’s historical production to determine how much is covered. Basically, you are covering an average of your tons per variety. Since crop insurance is subsidized the insurable varieties, prices per ton, premiums are set by the USDA. This also means that there is no difference from one insurance company to the next. If anyone represents that they can get you a lower premium for the same coverage, it is false.
Your agent will work with you to set up individual databases for each variety. If you have vineyards in different locations, you can often times set them up separately. This can be good when you have a claim. You might have a loss in one location but not the other. You don’t want your production co-mingled, as you may not have a payable loss at that point.
The databases can go back up to 10 years, if you have the production. Minimally 4 years is needed to set up an APH database. If the vines have just become insurable then a Transitional Yield (T-Yield), based on the county and variety, can be used to fill in up to three years. If you purchase a vineyard that has been producing you can transfer that production history. You must have records or some way to prove that history though. The database can only be set up as far as you have production records to prove the yields. Production records are not required at the time you sign up for crop insurance or at production or acreage reporting times. But it can come up during a claim or a review.
Here’s what the 2022 Crop Insurance Handbook says about grape production records:
“Settlement sheets, sales receipts, machine harvest records, certified scale records, pick records and final or year-end statements from a winery, cannery or processor must indicate net paid tons of Grapes delivered by variety. Converting gallons of wine to tons of grapes does not qualify as acceptable records.”
It is especially important to keep good records if the grower is “vertically integrated.” “A producer is vertically integrated when all stages of production of a crop, from acquisition of materials to the retailing or use of the final product, are controlled by one person, or by different persons that are related.”– CIH If the entity that owns the vineyard is a winery, then they would be vertically integrated. Even if they sell some of the grapes to other wineries. If you own a vineyard and are partners in a winery and you sell the grapes to that winery you could be vertically integrated as well.
Let’s move on to insurability of the grapes. Vines need to be in their 4th growing season for the grapes to be insurable. A minimum of 4 years is needed to do the average, if the grapes have just become insurable then a T-Yield, as mentioned before, is used in place of any missing years.
Usually, the third growing season after being grafted is considered insurable. The vines must have produced an average of at least two tons per acre in at least one of the three preceding crop years. There can be exceptions to this rule. Sometimes there are other requirements located in the “Special Provisions” for that particular county. In California the USDA Davis Regional Office (DRO) puts out Informational Memorandums that lay out specific requirements for the state of California. These differ from other growing regions in the US. You are able to make higher yield requests that can be approved by the DRO.
Grape crop insurance is available in the following states; Arkansas, California, Colorado, Connecticut, Idaho, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, Texas, Virginia and Washington. Crop insurance is not available for grapes in all counties in each state though. For a list of insurable counties, you can look at the RMA’s website at rma.usda.gov or contact your agent. Even though there may be differences between AVAs in a given county, the insurability, prices, premiums are set by county not AVA.
Insurable varieties are also different between states and counties. The varieties are usually set by what has been being grown in that county or what a particular climate in a state/county allows for. Even if a particular variety is not listed it can be insured. There are Types/Practices for each county that list out specific varieties and also make allowance for others. For example, it may list Cabernet Sauvignon, Chenin Blanc, Gewurztraminer, Grenache, Cabernet Franc and so on. If a particular variety is not listed it can be most often insured under “Other Varieties”, “Other White Varieties” or “Other Red/Pink Varieties.”
Having a lot of varieties that are not specifically listed causes these different varieties to be lumped together in the database. This can cause problems if you have varieties that yield differently. But this is still better than not having any coverage at all. Any coverage is better than no coverage as can be attested by many growers in California a couple years ago during the wildfires.
It may happen that your production is low in particular year. You might have had a claim paid or not, but what about your database and average going down? This isn’t good. You may elect an optional endorsement when you sign up called Yield Adjustment. “For APH yield calculation purposes, insureds may elect to substitute 60 percent of the applicable T-Yield for actual yields (does not apply to assigned and temporary yields) that are less than 60 percent of the applicable T-Yield to mitigate the effect of catastrophic year(s). Insureds may elect the APH YA and substitute 60 percent of the applicable T-Yield for low actual yields caused by drought, flood, or other natural disasters.” – 2022 Crop Insurance Handbook. This can make a big difference; you want your yields to stay up so that your average does. This makes it more likely to have a claim paid at the time of a loss.
You cannot cover 100% of your average production. You can choose coverage levels from 50% to 85%. There is a built-in production deductible. Coverage levels are in 5% increments. Coverage levels are relative to premium, the lower the coverage the lower the premium, the more coverage you buy the higher the premium. What the correct coverage for your needs is something your crop insurance agent can help you with.
If you would like more information on crop insurance, please feel free to contact me. We also offer free second opinions on grower’s existing policies. Sometimes we find mistakes or the policy is structured in a way, to cause claims to not be paid or reduced.
Crop insurance is subsidized through the Federal Government. The USDA Risk Management Agency oversees crop insurance. The RMA’s website is www.rma.usda.gov.
For more information please contact…Trevor Troyer: VP Operations, Agricultural Risk Management, LLC. Call: (239) 810-0138