When can I sign up for grape crop insurance?
By Trevor Troyer, Agricultural Risk Management
Crop Insurance is unlike most other types of insurance. There are specific deadlines for signing up, reporting the previous year’s production, reporting acreage etc. You can only sign up for crop insurance by certain dates. Since crop insurance is partially subsidized through the USDA these dates, along with premiums, are set by them.
All states where you can obtain grape crop insurance, except for California, have the sign-up deadline or Sales Closing Date (SCD) of November 20. The states where grape crop insurance is available are 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. Grape Crop insurance is not available in all counties in the above states though. You may be able to obtain coverage through a special Written Agreement with the USDA, in one of those counties where it is not.
If you want to amend the existing policy for next year, it needs to be done by the Sales Closing Date. What changes might you want to make by the SCD or sign-up deadline?
The main ones are:
1. Add coverage.
2. Cancel coverage.
3. Change optional endorsements.
4. Increase coverage levels.
5. Decrease coverage levels.
What about options that you might not realize are available? While all crop insurance is the same from one insurance provider to the next, not all options may be added by your agent. He or she might not have told you about certain ones or they themselves might be unaware of different endorsements that are available. Contract Pricing and Yield Adjustment are a couple I think can be particularly important.
Yield Adjustment is an option that allows you to use a higher yield, in a disaster or in place of a bad year. This would replace your actual yield, in the database that is used to calculate your average tons, with a higher one.
Here is what the Crop Insurance Handbook, 2023 and Succeeding Years says:
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.
T-Yield is a transition yield. These are set by the USDA for each county and variety. The main point is that Yield Adjustment allows you to use a higher yield to calculate your average. This can make an enormous difference when it comes to how much of a reimbursement you get on a claim.
I have seen many vineyards in California and Oregon that had zero production due to fires and smoke taint. Their averages would have been significantly worse moving forward without Yield Adjustment (YA). This would in turn cause them to have less insured value and lessen the likelihood of future claims getting paid.
Contract Pricing is another valuable tool that allows growers to increase their price per ton. Prices per ton are set by the USDA Risk Management Agency per county and variety and other counties allow for Contract Pricing. If you have a contract or contracts with a winery or processor you may be able to get a higher per ton price. This endorsement – Contract Pricing (CP) needs to be elected at the Sales Closing Date. Contracts are not due till the acreage reporting date which is later.
With Contract Pricing for vineyards, all your grapes do not have to be grown under contract. You can have part of your grapes grown under contract and your other grapes are not. Or you can have other grapes grown under different contracts, with different values per ton, with various wineries. In these cases, a weighted average is used to determine the per-ton price. Of course, if the value of your grapes goes up so does your premium.
Here is an example from the Crop Insurance Handbook:
Production based contract for 290 total tons at $2,100 per ton = $609,000 total contract value. Non-contracted 72.5 tons at the price election of $1,622 per ton = $117,595. Total value of contracted and non-contracted tons = $726,595. Total value of $726,595 divided by the total expected production = $2,004 weighted average price.
So, at the time of a claim in the above example any indemnity payment would be $2004 per ton instead of $1622. Again, using Contract Pricing means your premium will go up. The higher the dollar value the more the premium will be. I have seen growers choose not to use CP because of this.
Another option that growers may opt to use is price election. Normally the price election is 100%.
What is price election or percentage? Simply put it is a percentage of the price you are getting per ton. For example, at 75% coverage you are covering 75% of the value of your grapes. You would have a 25% damage deductible. The underlying price election would be 100%. So, you are getting paid 100% of the value of the grapes covered (75%). If you had CAT or Catastrophic coverage you would have a coverage level of 50% and a price election of 55%. You can adjust this price election percentage by coverage level.
This can get extremely complicated, but it can make sense for a variety of growers. You can select different price percentages for different coverage levels. What if you choose a higher coverage level and then a lower price percentage? Sometimes this makes more sense. You would be more likely to have a claim paid but the claim payment might be less. You would still come out ahead rather than not having a claim paid.
Here is an example let us say you choose 65% coverage. If your average is 5 tons per acre, then you are covered for 3.25 tons per acre. You have a 35% or 1.75 tons per acre deductible. You must harvest less than 3.25 tons an acre to have a loss. Maybe you think 35% is too big a deductible. You might have had a loss last year of 30% and did not get paid anything. You have looked at 80% with a 20% deductible and that seems good, but the premium is too high for you at 100% of the price. You could instead choose 80% coverage and then decrease the price percentage. That way you lower your deductible percentage, making it more likely to have a claim paid while paying around the same premium.
Decreasing the price percentage lowers the dollar value of what is covered and therefore lowers the premium. You will get less money per ton, but you may get a claim payment, where in the past you would not have been paid as much or at all.
This is all very relative to the grower, the state, the county or growing region and the main perils with which you are concerned. These are just a few examples of available tools you can use to mitigate your risks. Hopefully, this helps.
