Category: Financial

What is Grape Crop Insurance & How Does it Work  

Cyndi Leave a comment

By: Trevor Troyer – Vice President at Agricultural Risk Management, LLC

Grape crop insurance is a federally subsidized program that is administered by the USDA Risk Management Agency.  Policies are sold by independent agents and agencies throughout the country.  There are thirteen approved insurance providers (insurance companies) that work with the USDA RMA. 

  Grape crop insurance is an Actual Production History (APH) policy.  This means that it uses a vineyard’s historical production to determine how much is covered.  You are covering an average of your tons per acre per variety.  Since crop insurance is partially subsidized, the insurable varieties, prices per ton, premiums are all set by the USDA.  This also means that there is no cost 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.  It is true that some agents and agencies are more knowledgeable with grape crop insurance. How your policy is set up and with what endorsements you have does make a difference.

  Per the Grape Crop Provisions grape crop insurance covers you for the following:

10. Causes of Loss.

(a) In accordance with the provisions of section 12 of the Basic Provisions, insurance is provided only against the following causes of loss that occur during the insurance period:

      (1) Adverse weather conditions;

      (2) Fire, unless weeds and other forms of undergrowth have not been controlled or pruning debris has not been removed from the vineyard;

      (3) Insects, except as excluded in 10(b)(1), but not damage due to insufficient or improper application of pest control measures;

      (4) Plant disease, but not damage due to insufficient or improper application of disease control measures;

      (5) Wildlife;

      (6) Earthquake;

      (7) Volcanic eruption; or

      (8) Failure of irrigation water supply, if caused by an insured peril that occurs during the insurance period.

(b) In addition to the causes of loss excluded in section 12 (Causes of Loss) of the Basic Provisions, we will not insure against damage or loss of production due to:

      (1) Phylloxera, regardless of cause; or

      (2) Inability to market the grapes for any reason other than actual physical damage from an insurable cause specified in this section. For example, we will not pay you an indemnity if you are unable to market due to quarantine, boycott, or refusal of any person to accept production.

  An agent will work with you to set up individual databases for each of your varieties.  If you have vineyards in different locations, it can sometimes be beneficial to set them up separately.  This can be good when you have a claim.  You might have a loss in one location but not in another.  You don’t want your production from different locations co-mingled, as you might not have enough of a loss to trigger a claim payment.

  The databases can go back 10 years, if your vineyard has been in production that long.  Minimally 4 years is needed to set up an APH policy’s database.  If the vines have just become insurable a Transitional Yield (T-Yield), based on the county and variety, can be used to fill in up to three years.  If you have purchased a vineyard that has been in production, you can transfer the production history.  You must have records or some way to prove the vineyard’s history though.  The database can only be set up as far back as you have production records to prove your tonnage.  Production records are not required at the time you sign up for crop insurance or at production or acreage reporting times.  But they may be required at the time of a claim.  It sometimes comes up that an insurance company may need to do a review and production records are needed.  So, it is good thing to keep them on hand.

  Here’s what the 2024 Crop Insurance Handbook (CIH) from the USDA says grape about production records:

1950 Grapes

A. Supporting 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.

  The CIH then goes into more detail about records and what needs to be on them.  Your agent can provide you this information as needed.

  What about 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 earlier, 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 2 tons per acre, in at least one of the preceding three crop years.  There can be exceptions to this rule, though.  Sometimes there are other requirements located in the Special Provisions for a certain county.  In California the USDA Davis Regional Office puts out Informational Memorandums that lay out specific requirements for the State of California.  These differ from other growing regions in the United States.

  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.  Grape crop insurance is not available in every county.  For a list of insurable counties, you can look at the RMA’s website at rma.usda.gov or contact your agent. 

 Insurable grape varieties are also different between states and counties.  The varieties are usually set by what has been being grown in that county or the climate of a particular state or county.  Even though there are differences between AVAs in a certain state/county, the insurability, prices, and premiums are all set by county not AVA.  Most of the time if a particular variety is not listed for a county it can be insured.  There are Types/Practices in the actuarial documents for each county that list out specific varieties and also make allowances for others. For example you might look up Hood River County in Washington State.  It lists; Cabernet Sauvignon, Chenin Blanc, Gewurztraminer, Grenache, Cabernet Franc and so on.  There is also listed “Other White Varieties” and “Other Red/Pink Varieties”, so if you have a grape variety that is not listed under it’s own name you can insure them under one of these categories.

  You can not cover 100% of your average production per variety.  You can choose coverage levels from 50% to 85% of your average.  Because of this, there is a sort of built in production deductible.  Coverage levels are in 5% increments.  The coverage level is relative to the premium, the lower the coverage level the lower the premium will be.  Obviously with higher coverage levels claims are more likely to be paid out; therefore the premium will be higher. What the correct coverage level for your needs is something your crop insurance agent can help you with.  Risks are different between states and counties. 

  Grape crop insurance is a valuable tool to mitigate risk for a vineyard. 

For More information please contact

Agricultural Risk Management, LLC

Toll Free: (888) 319-1627

Email: ttroyer@agriskmgmt.com

Or visit our website.

www.agriskmgmt.com

Should I Open Up a Claim?

Cyndi Leave a comment

By: Trevor Troyer, Agricultural Risk Management

When to open up a claim on your grape crop insurance is important.  A lot of growers say that don’t know if they have a payable loss early in the season.  With grape crop insurance you are covering an average of your production per grape variety. Depending on what coverage level you have chosen this could mean you have a large deductible or small one.  I agree it is hard to tell how much early season damage will affect tons harvested.

  Mid May this year there was a bad freeze/frost event in the Finger Lakes region of New York.  While late spring frosts are not uncommon, this one was really bad.  There was widespread damage to grape vines across the Finger Lakes.   The extent of the damage is not fully known at this time.  But there will be a reduction in the tons harvested this year for sure.

  In a situation like the above a claim should be opened immediately.  More than likely, due to the severity of the frost, an adjuster will come out and inspect the vineyard.  I always tell growers that they should take pictures of the frost damage that morning.  It is always good to document damage as close to the time it occurred as possible.

  It may be that some varieties of grapes show more damage than others.  This is to be expected as some are more resistant to cold.  And from what I have seen over the years with frost and freezes is that it doesn’t affect a vineyard or field evenly.  You might have more damage on one side of the vineyard or more damage on the lowest part of the blocks etc.  Damage varies but just because one variety or one area looks better than others doesn’t mean that you should not open a claim on that variety or block.

  I know that secondary and tertiary buds will emerge in the next few days or weeks after a freeze.  You should open up a claim now regardless.  The damage may be less than you think and you don’t end up having a payable claim.  But it is still best to get one opened up right away.  Don’t wait to see how many tons you harvest before opening a claim! 

  Here is an excerpt from the “How to File a Crop Insurance Claim” Fact Sheet from the USDA:

  Most policies state that you (the insured) should notify your agent within 72 hours of discovery of crop damage.  As a practical matter, you should always contact your agent immediately when you discover crop damage.

  That same night in May, that saw the frost/freeze in the Finger Lakes region, also saw damage to vineyards along the coast of Lake Erie.  I received calls and emails from growers stating that they had had frost as well.  Obviously, the damage was not as bad as the Finger Lakes, but frost on new buds is not something any vineyard owner wants to see.  I opened claims for all of them even though the extent of the damage was not known.

  I cannot stress enough the importance of opening up a claim early. 

  A lot of claims with grapes are relatively routine.  Once the claim is opened an adjuster will come out and document the damage.  You will continue to grow your crop and try to mitigate any damage received. Once you harvest grapes you will meet with the adjuster and give him your production records that show your tonnage per variety.  He will then adjust the claim based your guarantee (average tons per acre per variety and the price for that variety in the county.)

  In some circumstances you will need to get direction from the adjuster before doing anything.

What are your responsibilities after damage if the grapes have not matured properly and will not?  What if they have been rendered unusable (smoke-taint has been a major cause of this in California)? 

  Here is a section from the Grape Crop Provisions that goes over this:

11. Duties in the Event of Damage or Loss.

In addition to the requirements of section 14 of the Basic Provisions, the following will apply:

(a) You must notify us within 3 days of the date harvest should have started if the crop will not be harvested.

(b) If the crop has been damaged during the growing season and you previously gave notice in accordance with section 14 of the Basic Provisions, you must also provide notice at least 15 days prior to the beginning of harvest if you intend to claim an indemnity as a result of the damage previously reported. You must not destroy the damaged crop that is marketed in normal commercial channels, until after we have given you written consent to do so. If you fail to meet the requirements of this section, all such production will be considered undamaged and included as production to count.

  It is important to stay in contact with your adjuster during a claim.

  A lot of things can happen to your vines that could cause them not to produce a full crop.  The insurance period is long and it is important to report everything that may reduce your crop.

  When you sign up for crop insurance, coverage for grapes starts on February 1 in Arizona and California.  It begins on November 21 in all other states.  The end of insurance unless it is otherwise specified by the USDA RMA, is October 10th in Mississippi and Texas, November 10 in Arizona, California, Idaho, Oregon and Washington.  In all other states the end of insurance is November 20th.  Crop insurance is continuously in force, once signed up for, unless cancelled or terminated.  Your coverage for following years, will be the day after the end of the insurance period for the prior year.

Here are the Causes of Loss per the Grape crop provisions:

(1)   Adverse weather conditions;

(2)   Fire, unless weeds and other forms of undergrowth have not been controlled or pruning

       debris has not been removed from the vineyard;

(3)   Insects, except as excluded in 10(b)(1), but not damage due to insufficient or improper

       application of pest control measures;

(4)   Plant disease, but not damage due to insufficient or improper application of disease control

       measures;

(5)   Wildlife;

(6)   Earthquake;

(7)   Volcanic eruption; or

(8)   Failure of irrigation water supply, if caused by an insured peril that occurs during the

       insurance period.

  Adverse weather conditions could be anything that could cause damage to your grapes. For

example; drought, frost, freeze, excess moisture etc. Wildlife could be bird damage, deer etc.

Fire would also include smoke taint as that is a result of a fire.

  Crop insurance does not cover, the inability to sell your grapes because of a buyer’s refusal or contract breakage. It also doesn’t cover losses from boycotts or pandemics. Phylloxera is not covered, regardless of the cause. Overspray or chemical damage from a neighboring farm is not covered either.

  So, get those claims opened up early and stay in contact with your agent and adjuster.

Permit-Required Confined Spaces

Cyndi Leave a comment

By: Steven R. Sawyer, ARM, MS, CSP

As many employers have learned over the last few years, employees are a valuable resource.  The ability to find and keep employees has become a challenge for many employers in a variety of industries, including food and beverage agriculture.  Therefore, keeping employees safe is a top priority.

  Employers in the food and beverage agriculture industry, like vineyards and wineries, may have multiple confined spaces in which employees encounter in their daily job tasks.  These include vats, tanks, storage bins, tunnels, duct work, pits, drain systems, and liquid tanks and containers.  Many industry employees are required to enter these spaces as part of their jobs.

  Occupational Safety and Health Administration (OSHA), in their Permit-Required Confined Spaces standard 29 CFR 1910.146, describes a confined space as a space that is large enough for an employee to bodily enter and perform assigned work tasks, has a limited or restricted means of entry or exit, and is not designed for continuous employee occupancy.  Additionally, OSHA defines a Permit-Required Confined Space as a confined space with one or more of the following characteristics:  the confined space contains or has the potential to contain a hazardous atmosphere; the confined space contains a material that has the potential for engulfing the entrant; the confined space has an internal configuration with inwardly converging walls or a floor that slopes downward and tapers to a smaller cross section which could trap or asphyxiate an entrant; and contains any other recognized serious safety or health hazard. (OSHA.gov)

  The first step in protecting employees from the hazards of confined spaces is to evaluate the workplace to determine if the workplace contains permit-required confined spaces.  An initial survey or workplace evaluation should be conducted to locate and identify all confined spaces.  This initial workplace evaluation should be conducted by a qualified person who is familiar with the hazards and types of confined spaces.  Although this is the initial step, workplace evaluation must be ongoing for confined spaces which may change over time with the addition of new processes, equipment, or facilities.

  Once a confined space is identified in the workplace, the confined space should be treated as a hazardous area until a qualified person can determine the specific hazards.  Additionally, the qualified person will determine if the confined space is a permit-required confined space or a non-permit confined space.  Hazards an evaluator will look for include atmospheric hazards such as oxygen deficient or toxic atmosphere, biological hazards, mechanical hazards, physical hazards, and chemical hazards.

  If the qualified person has found permit-required confined spaces at the workplace, the employer must notify the employees.  Employees must know their workplace contains permit-required confined spaces, where the spaces are located and the hazards associated with those spaces.  Then, the employer must post signage to inform the employees of the permit spaces.  This signage can read “Danger – Permit-Required Confined Space, Do Not Enter” or a similar statement.  The signs should be posted on the entrance or in close proximity to the entrance of the permit space.

  At this point, an employer has a decision to make about their Permit-Required Confined Spaces:  either allow employees to enter or do not allow employees to enter.  If the employer makes a decision to not allow employees to enter permit spaces, then the employer should take effective measures to secure the spaces.  Some examples of securing permit spaces to prevent entry are padlocks, bolts, chains, and wire cables.

  If entry is necessary for employees to service or clean permit-required confined spaces, the employer must develop and implement a written permit-required confined space program and make the program available for employee inspection.  This written program should include written entry procedures for the permit-required confined spaces along with the hazards present, and how to eliminate or control the hazards. 

  The written permit-required confined space program should include an entry permit.  The entry permit is a document to be used for all permit-required confined space entries.  The entry permit should include the date of entry and authorized duration of the entry, the location of the entry, the names of all entrants, and the work that is being conducted in the confined space.  Additionally, the permit must include the names of attendants, the name of the entry supervisor, the hazards present in the space to be entered, how the hazards will be eliminated or controlled before entry, acceptable entry conditions, results of initial and periodic tests performed along with the names of the testers and when tests were performed, rescue and emergency services to contact in the event of an emergency, communication procedures between the entrant and the attendant, equipment necessary including personal protective equipment, testing equipment, communication equipment, alarm systems, and rescue equipment, other information deemed necessary for safe entry, and any additional permits such as hot work permits.  Lastly, the permit should have a signature line for the entry supervisor to authorize the entry, including the date and time of the entry.  The entry supervisor should communicate the contents of the entry permit to the authorized entry personnel and may wish to post the entry permit in a designated location.

  OSHA requires that employers provide training for all employees who must work in permit-required confined spaces.  The training should occur before the initial work assignment, when job duties change, employee performance deficiencies occur, or when the permit-required confined space program changes or operations change.  Although it is not required to train all employees to the extent of the authorized entrants training, it is a best practice to inform all employees of the confined spaces present in the workplace and the hazards that accompany the confined spaces.  

  If entry is required in a permit-required confined space, the employer must provide an authorized entrant (the person who enters the space and conducts maintenance or cleaning operations), an attendant (a person who remains outside of the confined space), and an entry supervisor (the person who oversees the entry operations and ensures the entrants follow the permit and are safe).  These personnel have specific duties that must occur to ensure safe entry into permit spaces.  Their duties must be followed in order to comply with the OSHA Permit-Required Confined Spaces standard.

  When the entry into the permit space is complete, the entry supervisor terminates the confined space entry.  The entry supervisor can also cancel the entry of the confined space if the conditions within the space are no longer safe for the entrant.  As a best practice, when the entry is complete, a debrief should be conducted with the entry personnel to determine if any changes are needed for future entry procedures.  Employers are required to keep canceled entry permits for one year.  Any deviations or problems with the entry should be noted on the canceled permits.

  Even with a permit-required confined space program in place, emergencies can happen.  It is important that local emergency responders are aware of the specific hazards associated with confined spaces in the workplace.  Invite local emergency agencies to the workplace and evaluate their knowledge of confined space rescue, their rescue equipment, and their capabilities. 

  Having a permit-required confined space program in place will help vineyards and wineries avoid catastrophic incidents and costly OSHA citations.  To learn more about Permit-Required Confined Spaces, go to osha.gov or ansi.org.

  Steven R. Sawyer, ARM, MS, CSP, is the owner/operator of LSW & Associates Safety Consulting Services, LLC.  Sawyer has been active in the safety industry since 1999, much of that time working with multi-faceted, high-hazard agribusinesses, developing a special expertise in grain bin engulfment and prevention; OSHA grain handling standards; lockout/tagout (LOTO); machine guarding; confined spaces; heavy equipment and specialized equipment operations; and safety program development and training.

Website:  sawyersafetysolutions.com

New Grapevine Insurance Program

Cyndi Leave a comment

By: Trevor Troyer

Grape crop insurance has been available for many years now.  You can protect an average of your historical tonnage per variety.   But there has not been an insurance program for grape vines.   There are subsidized insurance programs for apple trees, orange trees, avocado trees, mango trees etc. through the USDA Risk Management Agency.  But there has not been anything for vineyards, until now.

  AgriLogic Consulting, LLC is consulting company that develops crop insurance products for the USDA.  They do feasibility studies and evaluations of existing and potential programs.  AgriLogic Consulting, LLC has been working on a Grapevine insurance program.

  Here is what was just released on the AgriLogic website, agrilogicconsulting.com

  The Grapevine Insurance Program has been approved by the Federal Crop Insurance Corporation for implementation in the following states: California, Idaho, Michigan, New York, Ohio, Oregon, Pennsylvania, Texas, and Washington. Insurance industry representatives in key production regions requested a product to protect producers against perils that can destroy vines. The list of perils to be included are freeze, hail, flood, fire, and failure of the irrigation water supply (if caused by an unavoidable naturally occurring event during the insurance period). Claims will be limited to loss due to complete destruction or death of the vine. Losses for partial damage are not included under the program. While both programs are federally subsidized and administered by the USDA Risk Management Agency (RMA), the vine replacement program is different and separate from the existing Grape and Table Grape Crop Insurance Programs, which cover losses related to the production of the fruit itself. Producers will be able to purchase the vine insurance program through existing crop insurance agents once the program becomes available.

  I don’t have to tell you that this is a big deal.  I know vineyards that have wanted this for years and nothing has been available.  I have seen vineyards devasted by fire in California and Oregon in recent years. I have seen damage from early freezes in Pennsylvania and New York.  This program will give growers much needed protection for their vines.

  The policy documents are set to be released to the approved insurance providers by no later than August 31, 2023.  The sign-up deadline for the new Grapevine Insurance program will be November 1st, 2023.  Availability maps should be released at the end of August as well.

  At this point we do not have any information than the above.  I look forward to helping vineyards get coverage for their vines.

Crop Insurance is a Valuable Tool for Growers

Cyndi 1 Comment

By: Trevor Troyer, Agricultural Risk Management

I am not sure how many of you made it to Unified in Sacramento this January.  I did, it was my first time back since the pandemic.  I had a good time catching up with friends and making new ones.  The company was good and so was the wine. 

  If you had a chance to go to any the sessions you might have come across ones dealing with climate and weather conditions in the vineyard.  I attended some of these and they were very informative.  One was dealing with how to mitigate cold damage in grapevines.  Another one talked about how to deal with drought in the vineyard. It is interesting how we adapt to the conditions around us and how we adapt those plants and animals we have domesticated. 

  One thing I have learned over the years is that, things do not stay the same.  Change is inevitable.  This is especially true in farming.   You cannot expect to have the same growing conditions every year nor can you expect have the “right” crop every year.  Times change and so do tastes and desires in food and wine.  I know of plenty of vineyards that have pulled out one variety and planted another as trends changed.  As a grower you have to mitigate these risks and stay relevant. 

  Growers that adapt and learn new techniques are able to get by in tough times.  Things are not getting easier; input costs are still extremely high compared to years past.  Water regulations in some states are problematic. And climate and weather factors make it difficult, to say the least. Grape crop insurance can be a useful tool to help you continue making a living.

  With all that being said I have heard growers say that they can’t afford crop insurance.  With margins getting tighter, crop insurance is a tool, in my opinion, that you should not forego.   In the sessions I went to they discussed methods of handling the vineyard to mitigate damage. But what about those instances when you don’t make a crop or do not make much of one?  This is when crop insurance is important.  If you don’t have money to grow a crop the following year, you are out of business.

  Crop insurance is designed to help a grower get enough money to be able to produce a crop the following year.  It is not set up to replace profits lost.  I have had winery owners complain to me that it doesn’t cover the cost of how much their wine is worth.  While I can totally understand this, it is the growing costs that are being insured against. Crop insurance does not cover the production costs of making wine or juice etc. 

  Here are the Causes of Loss for Grapes out of a National Fact Sheet from the USDA:

Causes of Loss

You are protected against the following:

•   Adverse weather conditions, including natural perils such as hail, frost, freeze, wind, drought, and excess precipitation.

•   Earthquake

•   Failure of the irrigation water supply, if caused by an insured peril during the insurance period.

•   Fire

•   Insects and plant disease, except for insufficient or improper application of pest or disease control measures.

•   Wildlife or

•   Volcanic eruption

     Additionally, we will not insure against:

•   Phylloxera, regardless of cause; or

•   Inability to market the grapes for any reason other than actual physical damage for an insurable cause of loss.

  Risks are different depending on growing regions throughout the US.  Regional issues play a large part in decisions on whether or not crop insurance is right for you.  And then how much coverage is needed for the risks involved in making a profitable crop.  Are you concerned with late frost or freezes?  Have there been issues with wildfires?  Do you have a wildlife problem in certain areas of your vineyard? 

  Grape crop insurance is an Actual Production History (APH) policy. This means it uses the vineyard’s historical production per variety 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. Essentially you are insuring your future crop not your vines.

  You can cover your historical production from 50% to 85% in 5% increments.  You cannot cover 100% of your production.  Because of this there is a built in “deductible”.  For example, if you chose to cover 75% of your production then you would have a 25% production deductible.  If your average is 5 tons per acre, at 75% you would be covered for 3.75 tons per acre.  Your deductible would be 1.25.  If you harvest less than 3.75 tons per acre you would have a payable loss. 

  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. 

  Crop insurance premiums are partially subsidized through the USDA Risk Management Agency.  Take advantage of this valuable tool to keep yourself in business.

Crop Insurance Sales Closing Dates

Cyndi Leave a comment

By: Trevor Troyer, Vice President Agricultural Risk Management, LLC

Crop Insurance is unique in the insurance world with its deadlines.  You can only sign up for crop insurance at certain times.  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, with the exception of 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.  That being said you may be able to obtain coverage through a special Written Agreement with the USDA in one of those counties where it isn’t.

  If you want to make changes to an existing policy it needs to be done by the Sales Closing Date.  For those growers in states other than California that time has passed.  Right now, there is still time for vineyards in California to sign up for coverage for 2023.  California has a SCD of January 31st. 

What changes might you want to make by the SCD? 

The obvious ones are:

1.   Add coverage

2.   Cancel coverage

3.   Increase coverage levels

4.   Decrease coverage levels

 What about other 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 very important.  And what about price election or percentage, what’s that?

  Yield Adjustment is option that allows you to use a higher yield, in a disaster or in place of a really bad year. This would replace your actual yield, in the database that is used to calculate your average tons, with a higher one.

Here’s 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.  I will go into more detail on these in another article.  But the main point is that Yield Adjustment allows you to use a higher yield to calculate your average.  This can make a huge difference. 

  I saw many vineyards in California and Oregon a few years ago 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 important 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.  Some 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.  You can check with your agent on these dates and availability or visit rma.usda.gov.

  There were some changes in Contract Pricing a year ago.  It used to be that if CP was allowed in your county, then all the grapes in your vineyard had to be grown under contract.  If they weren’t, you could not get CP.  The change allows for vineyards to have some grapes grown under contract and some not.  A weighted average is used to determine the per ton price.

Here is an example out of 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 use $2004 per ton instead of $1622.  Of course, 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.

  What is price election or percentage? Simply put it is a percentage of the price you are getting per ton.  For example, with CAT (Catastrophic Coverage) the level is 50% and the price percentage is 55%.  So, you are getting paid 55% of the value of the grapes.  If your price per ton is $2000 then at CAT coverage you would get 55% of that for every ton of loss. In other words, you would be paid $1100 a ton on a claim instead of $2000.

  Some of you are probably thinking that I am getting very complicated and getting down into the “weeds” on how crop insurance works.  Bear with me a little more.  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. 

  Here is an example let’s 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 have to 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 didn’t 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 a 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 you are concerned with.  These are some tools you can use to mitigate your risks.  Hopefully this helps.

Does Crop Insurance Cover Losses to My Vines?

Cyndi Leave a comment

By: Trevor Troyer, 
Vice President 
Agricultural Risk Management, LLC

  Does crop insurance cover losses to my vines? What can I do about my vine loss? Half of my vineyard got burned down due to wildfires. I have major freeze damage on my Vitis vinifera my natives are fine though. What can you do? Crop insurance only covers losses to your grape crop not your vines. Is there any vine coverage or assistance for that?

  Yes there is! I get a lot of questions on this so thought to address it in this article.

  The Agricultural Act of 2014 (the 2014 Farm Bill) authorized the Tree Assistance Program (TAP) to provide financial assistance to qualifying orchardists and nursery tree growers to replant or rehabilitate eligible trees, bushes and vines damaged by natural disasters. – fsa.usda.gov. This is not administered through a crop insurance agent or agency. This is not an insurance product. It is disaster assistance administered through the USDA.

  There are limitations to this program on who can receive money. A lot of large vineyards will not be eligible. There is size limit of 1,000 acres. There is an income limit as well. In applying the limitation on average adjusted gross income (AGI), a person or legal entity is ineligible for payment under TAP if the AGI of the person or legal entity for the relevant tax years exceeds $900,000. – FSA Disaster Assistance Tree Assistance Program

Ok what is considered an eligible loss?

•    A requisite death loss must first be sustained; a stand of eligible trees, bushes, or vines must have suffered more than a 15 percent mortality loss (after normal mortality) due to a natural disaster;

•    Mortality loss on a stand of eligible trees, bushes, or vines is based on:

•    Each eligible disaster event, except for losses due to plant disease; and

•    For plant disease, the time period as determined by the FSA for which the stand is 
infected.

•    The loss must not have been preventable through reasonable and available measures;

•    The loss must be visible and obvious to the FSA representative; if the loss is no longer 
visible, FSA may accept other loss evidence and determine whether that other evidence 
substantiates that an eligible loss due to natural disaster occurred; and

•    FSA may require information from a qualified expert to determine extent of loss in the 
case of plant disease or insect infestation. – fsa.usda.gov 
Payments are calculated as follows: 
For tree, bush, or vine replacement, replanting and/or rehabilitation, the payment calculation is the lesser of the following:

•    65 percent of the actual cost of replanting, in
excess of 15 percent mortality (adjusted for normal mortality), and, where applicable, 50 percent of the actual cost of rehabilitation, in excess of 15 percent damage or mortality (adjusted for normal tree damage and normal mortality); or

•    The maximum eligible amount established for the practice by FSA. -fsa.usda.gov

  What you do as a farmer is important. Whether your grapes are going to make wine or juice it is something that feeds and nourishes us, both physically and spiritually. I sometimes hear from growers that they don’t want assistance whether it is crop insurance or disaster relief. I understand. Our farmers and ranchers are independent people that, most often, can handle what mother nature throws at them. Our tax dollars go into these USDA programs, to me, it’s alright to get help when needed. Why shouldn’t you get some of your tax dollars back to keep you growing. It might seem like a pain to fill in the applications etc. The FSA employees are dedicated to helping you. Take advantage of what is available, you paid for it.

  The Tree Assistance Program is administered through the USDA Farm Service Agency. To find your local FSA office, go to farmers.gov. You can also find more information at disaster.fsa.usda.gov.

Winery Owners Most Important Opportunity

Cyndi Leave a comment

Why So Many are Missing It

By: Catherine Tindall

  The Employee Retention Tax Credit (ERTC) is one of the best ways for those in the beverage industry to regain their footing in a post-COVID age. Unfortunately, according to current estimates, many eligible businesses are missing out on this historic opportunity. For those who received or may otherwise be familiar with the Paycheck Protection Program, also known as the PPP, the concept is similar, but there are key differences that make the ERTC a much more generous program overall.  To understand why I will outline some of the key provisions and eligibility parameters, explain the process for claiming the credit, and answer some common questions I encounter in my own practice, such as “why haven’t I heard of this before?”

  The ERTC is a tax refund credit entitling employers to up to $26,000 per employee, depending on the number of quarters a business qualifies for. Eligibility is determined by either revenue disruptions or government orders on a quarterly basis. Many wineries are unaware that they are eligible for the ERTC due to the capacity and operation restrictions on their indoor dining and/or tasting rooms that occurred during the pandemic. Financial disruptions to that aspect of the business trigger ERTC eligibility for all the divisions of the winery, not just the restricted segment.  We routinely see businesses qualify for six or seven-figure credits under these parameters.

  There are a number of features that set this credit apart from other programs designed to aid businesses affected by the pandemic, like the PPP. Unlike the PPP, the credit itself comes back as paper checks from the IRS, and also unlike the PPP funds, which were restricted to certain uses, a business owner is free to use the ERTC however he or she sees fit. This is because the credit is actually a refund of wages and payroll taxes your organization has already paid. A consequence of this is that there is no overall program limit on the funds to be disbursed through the ERTC, in contrast to the PPP which had a limited fund pool. Businesses affected by government orders are entitled to every cent they qualify for. Taken together, all of these factors are what gives this program its power. The only limitation is time. This credit will begin to be phased out in April of 2023, meaning that business owners need to ensure they submit their claim as soon as possible. 

  Given the tremendous upsides, every business owner in the beverage space should try to see if their business qualifies, even if it seems doubtful. There is no need to become experts in the credit’s provisions, which can often be nuanced. The important thing is to find the right professional, and, to this point, one must be careful. There are unfortunately a lot of bad actors in this space looking to make a quick buck, and many of them are very good at seeming legitimate. 

  The following are some of the most asked questions associated with the ERTC.

  Should I get a second opinion? Because of the substantial nature of these credits, it’s often worth speaking to multiple providers for the credit to get a sense of the relative merits of each, and to look to the expertise and experience of those working on your case rather than fancy marketing or smooth sales tactics.

  Why haven’t I heard about this before? There are several reasons why many business owners have not heard of this important credit. One is that, in contrast to the PPP program, the ERTC has not been well advertised by the government (after all, since when did the IRS advertise refunds you’re entitled to). Another is that many tax practitioners are hesitant to pursue it given the sometimes complex nature of the claims if this isn’t their area of expertise. Finally, we commonly find that too many CPAs mistakenly believe that their clients do not qualify for the credit, and so never bring up the possibility of claiming it with them.

  I would encourage all winery owners to explore eligibility actively. The potential benefits of qualification, hundreds of thousands of dollars in obligation-free money from the IRS, is one of the highest value things you could do for your business in the current environment of economic uncertainty.

  There are certain pitfalls to avoid, such as dishonest companies operating in the space, but if you choose the right firm or professional to partner with, the process is remarkably painless. Just be mindful that this is an opportunity with a time limit attached. With less than a year before it begins to phase out, now is the time to claim the credit you’re entitled to.

About the Author

  Catherine Tindall is Partner & CPA, Dominion Enterprise Services (DES), a full-service CPA firm providing tax planning and consulting alongside specialty tax credit processing. The firm has more than 50 years of collective experience and recently announced the launch of its Employee Retention Tax Credit (ERC) Division to help restaurants assess their eligibility for the ERC and properly secure the maximum refund allowed. Learn more at https://dominiones.com

What Records Do You Need at the Time of a Claim?

Cyndi Leave a comment

By: Trevor Troyer, Vice President Agricultural Risk Management, LLC

So, you have opened up a claim in your vineyard due to freeze/frost damage. What’s next? When do you get paid? How much do you get? When is the adjuster going to come out? How does the claims process work? What do you need to provide to the adjuster that shows your loss?

  I wrote a month ago about when you should open up a claim. To summarize, you should open up a claim any time that you might have a loss. You should not wait to see if you have a loss but open the claim up right away. The loss has to be caused by an insurable trigger.

  The Causes of Loss per Grape crop provisions are:

1)   Adverse weather conditions;

2)   Fire, unless weeds and other forms of undergrowth have not been controlled or pruning debris has not been removed from the vineyard;

3)   Insects, except as excluded in 10(b)(1), but not damage due to insufficient or improper application of pest control measures;

4)   Plant disease, but not damage due to insufficient or improper application of disease control measures;

5)   Wildlife;

6)   Earthquake;

7)   Volcanic eruption; or

8)   Failure of irrigation water supply, if caused by an insured peril that occurs during the insurance period.

  Adverse weather conditions could be anything that could cause damage to your grapes. For example; drought, frost, freeze, excess moisture etc. Wildlife could be bird damage, deer etc. Fire would also include smoke taint as that is a result of a fire. Crop insurance does not cover, inability to sell your grapes because of a buyer’s refusal or contract breakage. It also doesn’t cover losses from boycotts or pandemics. Overspray or chemical damage from a neighboring farm is not covered either.

  An average of your historic production is being covered per acre per variety. You can cover 50% to 85% of your production average. Obviously, the premium for 50% is cheaper than the premium for 85%. If you chose 75% coverage then you have a 25% production deductible. If you have a 4 ton per acre average then you would be covered for 3 tons per acre. Your deductible would be 1 ton an acre. You would have to have a loss over 1 ton per acre to have a payable claim.

  At the time you sign up for crop insurance you report your past production per variety and vineyard location. We do not need any weigh tickets, pick records, or sales receipts from wineries at this time to verify your production. You will be asked to show this year crop year’s production records during a claim. The adjuster may want to verify past production records as well. It is important that when we set up your production database with your history that you have records to prove the data.

  Per the Common Crop Insurance Policy – Basic Provisions; Production record – A written record that documents your actual production reported on the production report. The record must be an acceptable verifiable record or an acceptable farm management record as authorized by FCIC procedures. FCIC is the Federal Crop Insurance Corporation.

  Here are some of the items that may be needed for a claim. A. Supporting 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. – Crop Insurance Handbook (CIH) 2023. These records would also be needed to support your historical average.

  It is important to keep these items for the future as well. It is not enough that you have your tonnage written down. You need weigh tickets, receipts etc. These documents need to be verifiable, not in a spreadsheet on your desktop computer.

  It can get tricky if you are “vertically integrated” and grow grapes and make wine yourself. You might not have third party weigh tickets or sales receipts. Some wineries sell some of their grapes and make wine with the rest. Some of the records for the adjuster could be sales receipts and the rest would need to be certified scale weight records.

  The scale has to be certified though.

B. Certified Scale Weight Records  Certified scale weight records alone are considered to be acceptable production records, unless the CP requires a pre-harvest appraisal and/or records of sold production. Certified scale weight records must be legible and include all of the following to be acceptable.

1)   The insured’s name.

2)   The name of the crop.

3)   The date of harvest or the date weighed.

4)   The unit number or the location of the

      production.

5)   The practice, type, and crop year.

6)   The quantity/weighed production. For wineries that process their own grapes, the weight can be recorded on the form used for reporting to the Alcohol and Tobacco Tax and Trade Bureau. – Crop Insurance Handbook (CIH) 2023.

  There is a lot of information on what is an “acceptable verifiable record”, much more than I can put in one article. For the full information on what is acceptable you can look at the Crop Insurance Handbook, the Loss Adjustment Manual and the Grape Loss Adjustment Standards Handbook. You can find all of these at the USDA Risk Management Agency’s website at www.rma.usda.gov

  To run through the questions at the beginning. You have called your agent and opened up a claim. The adjuster will contact you in few days. They may want to see the damage right away or wait to see how much you harvested. I always recommend to vineyard owners to take pictures of the vineyard if the damage is visible. Once you harvest and production is verified by the adjuster, they will send the information in to be reviewed. Once approved you will be paid the difference of your guarantee (average of your historical production multiplied by your coverage level.)

  I cannot stress enough the importance of keeping good records.