Federal Crop Insurance. Lacey Menasco, Risk Management Specialist

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1 Federal Crop Insurance Lacey Menasco, Risk Management Specialist

2 Disclaimer The purpose of the following material is to promote awareness of risk management concepts and to highlight USDA s risk management products, features, benefits and availability. This material does not change the content or the meaning of current policy provisions, filed actuarial documents or approved procedures.

3 Overview USDA Risk Management Agency (RMA) Our purpose and intent Grape Insurance Policy Overview Whole Farm Revenue Protection Overview

4 What is RMA The United States Department of Agriculture s (USDA) Risk Management Agency (RMA) was created in 1996 Serve America s agricultural producers by strengthening economic stability through crop insurance Regional offices are responsible for increasing effectiveness and awareness Maintain public-private partnership with Approved Insurance Providers (AIP) Responsible for selling and servicing insurance policies RMA backs the AIPs who share the risks Faster way to support agriculture after catastrophic weather even

5 Multi-Peril Crop Insurance For Grapes

6 Grapes are insurable if: You have a share in the crop; They are grown for wine, juice, raisins, or canning; The actuarial table provides a premium rate They are grown in a vineyard that, if inspected, is considered acceptable by the insurance provider; They have reached at least fourth leaf; (third leaf after grafting); and They have produced an average of two (2) tons of grapes per acre during at least 1 of the 3 crop years immediately preceding the current crop year (unless we inspect and allow insurance on such acreage) or as specified in the special provisions. The actuarial table provides a premium rate

7 Grapes are Insurable in: Idaho - Ada, Canyon, Elmore, Owyhee, Payette, and Washington counties. Oregon - Benton, Clackamas, Douglas, Hood River, Jackson, Josephine, Lane, Linn, Marion, Morrow, Polk, Umatilla, Wasco, Washington, and Yamhill counties. Washington - Benton, Chelan, Clark, Douglas, Franklin, Grant, Island, Kitsap, Kittitas, Klickitat, Mason, Okanogan, Pierce, San Juan, Skagit, Skamania, Walla Walla, and Yakima counties. *Coverage may be available by written agreement in other counties. Submit requests to your crop insurance agent. Rates and transitional yields are established by county

8 Causes of Loss You are protected against the following: Adverse weather conditions; Earthquake; Failure of irrigation water supply, if caused by an insured peril that occurs during the insurance period; Fire, unless weeds and other forms of undergrowth have not been controlled or pruning debris has not been removed from the vineyard; Insects, except Phylloxera, regardless of cause, and not damage due to insufficient or improper application of control measures; Plant disease, but not damage due to insufficient or improper application of control measures; Volcanic eruption; or Wildlife.

9 Important Dates Sales Closing: November 20, 2017 Production Reporting Date: January 15, 2018 Acreage Report Date: January 15, 2018 Insurance Period For each crop year that the policy remains continuously in force, coverage begins on the day immediately following the end of the insurance period for the crop year before.

10 Reporting Requirements Acreage Report - You must report to your crop insurance agent all the acreage (insurable and non-insurable) of grapes in the county in which you have a share (your share at the time insurance begins), reporting the crop by type. Production Guarantees Yields are based on actual production records reported to your crop insurance agent and/or insurance company.

11 Coverage Levels One price election and one coverage level for each grape type If you choose Catastrophic Risk Protection (CAT) for any varietal group, all other grapes have that price and coverage level You can choose a coverage level of 50 (CAT) to 85 percent of your approved average yield (in 5-percent increments). CAT coverage is available at the 50-percent coverage level and 55 percent of maximum price election.

12 Price Election Price elections are the price of compensation paid, per ton, in the event of a loss. Please contact a crop insurance agent for prices. Price elections for each type are not required to have the same percentage relationship to the maximum price we offer for each type Insure 100% of Merlot, but then 80% of Chardonnay

13 Price Election Continued Your price contained in grape contract can be used This contract price is without incentives or discounts If more than one contract price exists, will use weighted average of all contract prices for varietal Maximum contract price exists The price is always less than the maximum contract price provided in the actuarial documents for the applicable grape type/variety. For example, in Walla Walla, Cab Sauv has established price of $1,430 per ton, with a maximum of $2,145

14 Price Election Continued Grapes may be insured using the contract price only if: A written contract is in effect between you and a winery or a processor for the current crop year; The contract states the amount that will be paid per ton and number of tons or acres contracted; You provide a copy of the contract(s) before the acreage reporting date; Jan 15 All production from insurable acreage of the variety is grown under a grape contract; and Your acreage is insured at a buy-up coverage level. Not catastrophic (50% coverage level)

15 Loss Example 45 acres of wine grapes 100-percent share 70-percent coverage level 100-percent price election of $1,430/ton of Cabernet Sauvignon in Benton County Average yield of 5 tons (actual production history)

16 Loss Example Continued 5 Tons per acre average x.70 Coverage level 3.5 Tons per acre guarantee x 45 Actual Acres Tons unit guarantee (or $225,225 liability at price of $1430/ton) Tons of actual harvested production (1.5 tons/acre) 90 Ton loss x $1430 Price election $128,700 Indemnity due policyholder (less insurance premium due)

17 Cost Estimator 45 Acres, Irrigated Cabernet Sauvignon Benton County, WA 100% Price Election $1,430 Average yield 5 tons/acre 70% Coverage Level Liability: $225,225 Total Premium: $5,726 Producer Premium: $2,348 Subsidy Amount: $3,378

18 Proving Smoke Taint Insurable loss as long as the fire is the result of a natural causes. Field test must be done to verify increased levels of guaiacol (G) and 4-methylgualacol (4MG) before crushing. Grower needs to show his/her grapes damaged and not others (before comingling). Need to help verify lower/reduced price due to severe smoke taint, and not to market For example-oversupply of variety If the grower proves quantitatively through an independent/certified lab the increased (G) and/or (4MG) levels and the decreased price is a result of the smoke taint and not oversupply of grapes, the grower could qualify for quality adjustment.

19 Smoke Taint More Information Dr. Tom Collins of WSU is a local expert Grapes are most susceptible 7-10 days after veraison May also want to test for Syringol and Cresol which can add smoky flavor Smoke taint with Glycosides can break down over time and release smoke flavors at a later date. A couple labs in the state can test for these. WSU, ETS Laboratories, Vinquiry Laboratories

20 Notice of Loss Provide proper notice of loss by unit, within 72 hours of your initial discovery of damage (no later than 15 days after end of insurance, usually after harvest) Submit a claim 60 days after insurance period

21 Quality Adjustment in the Insurance Process Damage in quality from insurable causes Policyholder s grapes need to fall below 75% of average market price AIPs use contract price as average market price Divide damaged grape value per ton by undamaged grape value per ton Ratio can t be above Multiply this result by number of tons of damage eligible grapes

22 Quality Adjustment Example 20 Acres of smoke tainted grapes Grower averages 100 tons of grapes per year Or 5 tons per acre Grow 100 tons this year $2000/ton market price and/or contracted price Winery/Processor pays $1000/ton for smoke tainted grapes 70% Coverage Level Guarantee of $140,000

23 Quality Adjustment Example Continued $1000 for smoke tainted grapes / $2000 market priced = x 100 tons smoke tainted actual production = 50 tons eligible for quality adjustment 50 tons x $2000 market and/or contract price = $100,000 of quality adjusted revenue $ 140,000 Guarantee $100,000 of quality adjusted revenue =$40,000 given to grower

24 Tree Assistance Program (TAP) FSA Program Covers vines (not the grapes) Has to suffer more than 15% mortality rate Covers part of costs for replanting and rehabilitation Loss must be visible and obvious to the FSA Representative May allow other evidence if no longer visible Cannot exceed 500 acres annually

25 Insurance Participation in Washington Approximately 70% of the grape acres in Washington are insured Of the policies, 25% are CAT, and 75% are Buy-up Average Coverage level is 70%

26 Items to Remember Contact a Crop Insurance Agent. If concerned about meeting 2 ton requirement for once every three years and prices, look into Whole Farm Revenue Protection (WFRP) Go to rma.usda.gov for Cost Estimator and Agent Locator Under quick links

27 Whole Farm Revenue Protection (WFRP)

28 What does WFRP Cover? Revenue from all commodities produced on the farm: Up to $8.5 million of revenue Including animals and animal products ($1 million max) Including nursery products ($1 million max) Commodities purchased for resale (up to 50% of total) Excluding timber, forest, forest products, and animals for sport, show or pets

29 What are the features of WFRP? Coverage levels 50-85% 5% increments Diversification of 3 commodities (commodity count) required for 80% and 85% No catastrophic level of WFRP available Historic revenue is adjusted to reflect farm expansion Automatic indexing process accounts for farm growth historically (Insured may opt out of Indexing) Expanding operations provision allows for up to 35% growth over historic average with insurance company approval Available in every county of the US

30 WFRP Premium Subsidy Premium subsidy is available and depends on farm diversification Farms with 2 or more commodities (commodity count) receive whole-farm premium subsidy Farms with 1 commodity receive basic premium subsidy Coverage Level Basic One Commodity 2 Commodity Count 3 Plus Commodity Count

31 What kinds of farms can benefit from WFRP? Well-suited for: Highly diverse farms Farms with specialty commodities Farms selling to direct markets, specialty markets, regional or local markets, and farm-identity preserved markets Available to all farms or ranches that qualify There are some limits for qualification

32 How is the amount of insured revenue determined? WFRP insured revenue is the lower of: Your current year s expected revenue (determined by your farm plan) at the selected coverage level, or Your historic revenue adjusted for growth at the selected coverage level Does diversification on my farm matter for WFRP? Yes! The number of commodities produced are counted toward the diversification requirement within WFRP which determines Diversification discount Premium Subsidy Allowable coverage level

33 What information do I have to provide? Schedule F farm tax records (5 years plus a lag year) If you don t file a Schedule F then your farm tax forms plus supporting information to complete a Substitute Schedule F. Your farm plan for the upcoming year showing what commodities you plan to produce, how much will be produced, and the expected values. Commodity inventory information, and accounts receivable or payable.

34 What causes a loss payment under WFRP? Natural causes of loss and decline in market price during the insurance period Taxes must be filed for the insurance year before any claim can be made. When revenue-to-count for the insurance year is lower than insured revenue, a loss payment will be made.

35 WRFP Loss Example $2,000,000 Approved Revenue X 85% Coverage level $1,700,000 Insured Revenue (Gaurantee) -1,000, (Revenue for insurance year) $700,000 Revenue Loss (Indemnity payment)

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37 Regional USDA RMA Contact USDA/Risk Management Agency Spokane Regional Office E Sprague Ave., #201 Spokane Valley, WA Telephone: (509) rsowa@rma.usda.gov Lacey Menasco lacey.menasco@rma.usda.gov Nick Gans nick.gans@rma.usda.gov