Crop Insurance Sales Closing Dates

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?

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

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?

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.

When is the Correct Time to File for a Claim?

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

When should I file for a claim? That’s a question I get a lot. Some growers think that they should wait until they know that they have a loss. They want to harvest to see if they have a loss. That is not the correct answer to me. You should turn in a claim as soon as there is a weather event or other cause of loss situation. This helps to document what is happening during your growing season as it unfolds.

  This spring in California there was a late frost/freeze event for several nights. Primary buds in many counties were killed. Some areas like Sonoma and Napa Counties had mild to moderate damage. Other counties in California had much worse damage. Oregon also had a lot of areas that were damaged. Some areas were quite severe with all the primaries frozen.

  Obviously if the buds were all frozen you should contact your crop insurance agent and have him open a claim up. But what about damage you are not sure about? You know that you will still make a crop but are not sure if it will reduce your tonnage by any large amount. Depending on your coverage level you may think that you won’t have a loss. At this point don’t worry about the deductible percentage of your crop insurance policy. Call your crop insurance agent and open up a claim.

  It is always better to have a claim open than not in this type of situation. There’s no way at this point in the season to determine how much your yield will be down. But if the claim is open and documented its better. This gives time to have an adjuster assigned, time to do an inspection and to document the damage. Damage done may not be as visible several months later. Damage can very well be cumulative as well. During the year you may have several weather events and other things that could reduce your yield.

  Here’s what it says in the Basic Provisions of the Common Crop Insurance Policy:

14. Duties in the Event of Damage, Loss, Abandonment, Destruction, or Alternative Use of Crop or Acreage

Your Duties -


(a) In the case of damage or loss of production or revenue to any insured crop, you must protect the crop from further damage by providing sufficient care.

(b) You must provide a notice of loss in accordance with this section. Notice provisions:

      (1) For a planted crop, when there is damage or loss of production, you must give us notice, by unit, within 72 hours of your initial discovery of damage or loss of production (but not later than 15 days after the end of the insurance period, even if you have not harvested the crop).

  Per the USDA Risk Management Agency you have from 72 hours of the original cause of loss or until you discovery it and up to 15 days after the end of insurance. I do not recommend waiting till 15 days after the insurance period. It does happen though and I am sure I will have growers do it again. I have had vineyard owners call me and say that their tons are down for a certain variety. Then we have to piece together what happened. What was the cause of loss? When was it? Was this the only thing or were there other weather events? Is the loss only showing up only on one variety?

  Losses will get paid but it is much easier on everyone if you report causes of loss right after they occur. That doesn’t mean you have to know for sure that you will have a loss, just that some event happened that may cause your crop to be reduced.

Here are the Causes of Loss out of the Grape Crop Provisions from the USDA RMA:

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 occurduring 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.

  Number 1 on the list is Adverse weather conditions. This could be just about anything, frost, freeze, drought, excess moisture, hail etc. Fire is listed as well and because of this there can be damage many miles away from the fire due to smoke. Insect and disease damage are covered but you must show that you have application records for spraying etc. Wildlife is another one that can cause problems – deer, raccoons, birds and so on. I have even had a claim turned in for a bear. Earthquake and Volcanic Eruption I have never seen a claim turned in for. I am sure, unfortunately, that there will be one for an earthquake. Number 8, Failure of irrigation water supply, is something that can be a big problem for growers. Certain areas in California and Washington State rely heavily on irrigation. If there is a drought and your well or reservoir dries up then that is a payable cause of loss.

  Don’t wait to contact your agent about a situation or adverse weather that may reduce your crop. That is what we are here for! For more information please contact Agricultural Risk Management LLC.

Office: (239) 789-4743

Email: info@agriskmgmt.com

Website: www.agriskmgmt.com

Why Should I Buy Crop Insurance?  

By: Trevor Troyer, VP, Agricultural Risk Management

That is a question I hear a lot. For some it makes sense to purchase crop insurance, depending on the growing risks they are dealing with.  For others it might not be as good a fit for them. Often times large growing operations may “self-insure” as they have reserves set aside for the upcoming season.  For some this is not an option as a large portion of the previous year’s income is being re-invested into the new crop.  If they don’t make a crop and sell it this year, they might not have enough money for next year. 

  How does this apply to a vineyard?  Perennials are very different from traditional row crops or vegetable crops.  But a lot of the risks are very much the same.  Drought, freeze, wildlife damage, fire/smoke and the list goes on. From what I see the risks can actually be more with perennials.  It doesn’t matter if it’s an apple orchard, avocado grove or vineyard, your investment is subject to the elements all year round.  Things may happen after you harvest that might affect the following year’s crop production. 

  Risks are different depending on growing regions throughout the US.  You might have grower in Chautauqua or Erie County in New York worried about frost/freeze and then a grower in Sonoma County in California worried about smoke taint.  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 good profitable crop.

  With rising production costs this makes decisions on crop insurance even more tricky.  Chemical prices are rising, fertilizer is at an all-time high shipping and labor costs are also up.  Can you afford to purchase crop insurance? Or can you afford not to have it with how much you have invested now? These are questions that have to be asked.  I have had growers ask about reducing their coverage as these other costs go up.  You then have to ask how much of a loss can you sustain and not have it affect your ability to keep growing.  Can you lose 20% of your tonnage?  What about 40%?  That is something, you as a grower, have to think about.

  Crop insurance is designed to help a grower have enough money to be able to produce a crop the following year.  It is not set up to replace profits lost from an insurable cause.  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 loss. Crop insurance does not cover the production costs of making wine or juice etc.  Only Causes of Loss that are nature related are being insured against.  It doesn’t cover the inability of a grower to sell his grapes or broken contracts with wineries or processors. 

  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

•   Volcanic eruption.

Additionally, we will not insure against:

•   Phylloxera, regardless of cause.

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

  Crop insurance is partially subsidized through the USDA. Premiums are subsidized from 100% at Catastrophic Coverage (there is an administrative fee though) to 38% depending on coverage level chosen.  A lot of growers “buy-up” coverage from 65% to 80% and their premium subsidy is around 50% to 60%. In my opinion it has to be subsidized, as crop insurance is more likely to pay out a claim than any other type of insurance. Premiums are more expensive than many other types of insurance. You do not hear too often of people that have had an auto accident 3 years out of 5 with a claim paid each of those years.  But that being said, I have seen vineyards have payable losses 3 out of 5 years.   No one wants to have a loss but they do unfortunately happen.

  Hopefully you don’t have a lot situations where you have a loss.  But as a grower you need to assess your risks.  These risks/concerns are more than just the causes of loss mentioned above.  Though these have to be taken into consideration for the growing region your vineyard is located in. Here are some other questions to ask yourself. What are your break-even costs?  Do you know your cost of

production with projected inflation? Have you evaluated the risk of a severe crop loss? What varieties are planted in your vineyard?  Some types of Vitis vinifera are more susceptible to weather issues than others. Are you able to repay current operating loans without crop insurance in the event of a loss?

  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 state.  Crop insurance may not be available in all counties in these states. 

  Our job as a crop insurance agent or crop insurance agency is not to convince you that you need crop insurance.  It is to help you make an educated decision, based on your risks, to whether or not you need crop insurance.  And then, if it is a good fit to mitigate your risks, to determine how much coverage is needed. 

How is Your Crop Insurance?  

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

Luxury Brands Up Their Marketing Game

By: Susan DeMatei, Founder of WineGlass Marketing

Coco Chanel once said, “The best things in life are free. The second best are very expensive.” The mistress of iconic fashion couldn’t have stated it more succinctly. Luxury today, as it was in Coco’s time, is not essential but continues to be highly desirable and prestigious because of the quality, price, and prestige it confers on its consumers.

  However, when it comes to marketing, luxury brands are like any other brand. They market themselves to those who can afford to buy them and those who aspire to own something, anything, created by them. Like all brands, they battle for share of mind and wallet.

93% of Consumer Engagement with Luxury Brands Occurs on Instagram (Source: Digimind)

  COVID accelerated a trend already in the making – the economy saw a massive shift to eCommerce, and marketing shifted accordingly to digital platforms. Not surprisingly, luxury fashion, jewelry, cars, and retail brands were the first to commit to social media. They immediately recognized that absent the ability to go to a store, the stories and images shared in the new virtual market will make up the building blocks of a brand’s image and equity. And these touchpoints, albeit digital, make for real and tangible engagement, interest, loyalty, and connections with their audience online, particularly on Instagram.

The Face of Affluence Is Changing

  Affluent consumers are no longer just Baby Boomers and Generation X. Wealth is now multi-generational as large numbers of Millennials and Gen Z are prosperous and buy luxury goods. By 2025, Millennials and Gen Z will make up 50% of the total luxury market. Their spending habits will define and redefine what luxury goods and experiences will be in demand.

What We Do Know Is:

•   Quality, prestige, brand reputation, plus a brand’s social values will drive luxury purchase decisions.

•   They will look to social media, influencers, and reviews for confirmation of their brand choice.

•   They will expect to be able to find the luxury brand they choose online and on Instagram.

  As with any consumer audience, identifying demographics is only the first step. In their recent book “Luxury Wine Marketing: The Art and Science of Luxury Wine Branding,” Peter Yeung’s and Dr. Liz Thach’s research identifies four categories of luxury wine buyers: The aspirational buyer, the luxury buyer, the wine collector, and the wine geek. Each persona has its price points, brand loyalty, and trusted referral sources. A wine collector will listen to critics and other wine collectors, while celebrities and influencers might influence an aspirational buyer. Understanding your target and the segment(s) your wine resonates with is the key to success in this evolving landscape.

New School Marketing Tools for Old School Brands

  A recent Social Media Industry Report on Luxury Brands by NetBase Quid digests and synthesizes the kind of social interactions driving authentic engagement and brand passion and how luxury brands are capitalizing (or not) on these experiences to drive consumers to do business with them. The report is a deep dive into the detail of several luxury brand’s social presences. While not everything in the report applies to wine, what is apparent from the research is that digital advertising, social media engagement, search engine optimization, and influencer marketing are now a staple for what could be called “old school luxury brands” like Hermes, Chanel, Burberry, LV, Ferrari, Jaguar, Gucci, Chopard, Cartier, Neiman Marcus, and Harry Winston.

  So the next time you think that you’re too “unobtainable” to be on social media, luxury wines should take heed. The marketing tool kit has forever expanded to include digital channels, not by luxury brands themselves, but by today’s affluent consumers. The consumer desire to have access to everything right now and the desire to buy into luxury brands are successfully forcing luxury marketers to straddle the fine line of relevance and exclusivity.

  Susan DeMatei is the founder of WineGlass Marketing, a full-service direct marketing firm working within the wine industry in Napa, California.  For more information please visit…www.wineglassmarketing.com   

Vineyard Crop Insurance

By: Trevor TroyerVice, President of Operations for Agricultural Risk Management

Risk Management is always something that is subjective to a grower. How much risk do you feel comfortable with? Or maybe how much risk are you willing to take, even if you aren’t that comfortable? Farmers are naturally risk takers, otherwise they would not be farming. Mother nature is unpredictable, just when you think everything is going to turn out right it doesn’t. Obviously, it turns out ok more often than not. But what about those years when it doesn’t? Sometimes you can have several bad years in a row. Crop Insurance is a good tool for that.

  The Federal Crop Insurance Corporation (FCIC) was created in 1938. Originally coverage was limited to major crops. It was basically an experiment at that time, until the passage of the Federal Crop Insurance Act in 1980. The 1980 Act expanded the number of crops insured and areas in the US. In 1996 the USDA Risk Management Agency (RMA) was created. RMA’s purpose was to administer the Federal Crop insurance programs and other risk management related programs.

  Grape Crop Insurance goes back to 1998, the current policy was written in 2010. Crop insurance is a partnership with Insurance companies and the FCIC. Crop insurance is partially subsidized through the USDA. Currently there are 13 Approved Insurance Providers authorized to write crop insurance policies with the USDA. Prices and premiums are set by the USDA per crop, state and county. There is no price/premium competition from one company to the next because of this. Independent insurance agents sell for these 13 different insurance providers. They may specialize in crop insurance or other lines of insurance. It is always best to work with an experienced agent that has crop insurance as their main focus.

  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 though. Insurable varieties are also different between states and counties. As I mentioned before prices are different between states and counties as well. The USDA price for a ton of Pinot Noir in Oregon is different than a ton of Pinot Noir in New York.

  Grapes are insured under an Actual Production History (APH) plan of insurance. An average of the vineyard’s production per variety is used. Grapes need to be in their 4th growing season to be insurable. A minimum of 4 years is needed to do the average, if the grapes have just become insurable then a Transitional Yield (based on the county and variety) is used in place of any missing years. A maximum of 10 years can be used to determine the average if a vineyard has been in production for that amount time. Basically, you are insuring an average of your tons per acre per variety.

  With crop insurance 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. It comes back to how much risk you feel safe with. You can also For example, if you have Cabernet Sauvignon in California and your average is 5 tons per acre. At the 75% coverage level you would be covered for 3.75 tons per acre. You would have a 25% deductible (1.25 tons per acre). To have a payable loss you would have to lose more than 25% of your average production.

  The Causes of Loss per the policy are; 1. Adverse weather conditions; 2. Fire; 3, Insects; 4. Plant disease; 5, Wildlife; 6. Earthquake; 7. Volcanic eruption; and 8. Failure of irrigation water supply. There are more details to the causes of loss, you can’t have a loss due to plant disease if you are not applying sufficient and proper applications of control measures. Adverse weather conditions can be excess moisture, drought, extreme heat, frost, freeze etc. Fire can cause “smoke taint” and that is covered. Inability to market the grapes for any reason other than physical damage from an insurable cause is not covered. Damage due to phylloxera is also not covered.

  There are sign up deadlines with all crop insurance policies. This is the same for Grape crop insurance as well. The deadline for all states other than California is November 20th. For California the deadline to sign up is January 31st. Premiums are not due at the time of sign-up; premium billing is done in August.

  Agricultural Risk Management is a national crop insurance agency with offices in Florida, California and Pennsylvania. 2022 will be our 20th year of selling crop insurance.

 For more information, please email info@agriskmgmt.com or call (239) 789-4742, Trevor Troyer: Vice President of Operations for Agricultural Risk Management