Jul 2, 2012
Growers need crop insurance to be more transparent

Fruit growers don’t tend to be big fans of federal crop insurance, said Mark Seetin, director of regulatory and industry affairs for the U.S. Apple Association.

“If you ask 100 farmers, ‘Raise your hand if you like crop insurance,’ you wouldn’t have a pile of hands,” he said. “Everybody seems to find shortcomings.”

Here are a few examples of those perceived shortcomings:

  • Todd Gulick, a grower in Bangor, Pa., said “the new rules for fresh apple insurance have caused me to have no apple insurance in a year that I needed it the most! They wanted ‘proof’ that I sell my apples pick-your-own and roadside retail, which has been the only way we have marketed for over 50 years. We are a small roadside market that deals in cash only – no good for insurance companies. They want a signed receipt from each customer. That does not work here in the real world!”
  • Dave Hartshorn, a grower of certified organic fruits and vegetables in Waitsfield, Vt., said, “It has been nine months since our crops were destroyed in tropical storm Irene. No compensation has been received.”
  • Timothy Dahle, a grower in The Dalles, Ore., said, “drop sweet cherry insurance. There are too many loopholes that allow insurers to avoid payment on valid claims.”

Despite such complaints, however, Seetin said it’s a “head scratcher” why more growers don’t buy crop insurance — particularly catastrophic coverage.

“All you have to pay is the paperwork and processing fees,” he said. “I don’t understand why you wouldn’t take advantage of that.”

As a former grower and crop insurance agent, Seetin has experience in both worlds. He said crop insurance can’t replace lost fruit, but it can provide an economic safety net to get you through a disaster.

Brett Anderson, a crop insurance agent based in Sparta, Mich., put it this way: “The cost of buying crop insurance is the cost of staying in business one more year.”

Bridging the gap

Ken Nye, a horticultural specialist with Michigan Farm Bureau, knows there is a disconnect between fruit growers and the crop insurance industry. He’d like to bridge that gap by gathering fruit growers, commodity groups, Extension experts and insurance representatives to discuss the mechanics of federal crop insurance. Growers need to know what’s covered and what isn’t, the advantages and pitfalls of buying insurance, and that their concerns will be addressed. For their part, federal crop insurance representatives need to see the “real world” problems growers and agents deal with every day, Nye said.

The need for good crop insurance became clearer than ever this year, when a warm March followed by freezes devastated tree fruit crops in the eastern half of the country, Nye said.

About 70 percent of U.S. specialty crops, a category that includes fruit, are covered by federal insurance policies, said Laurie Langstraat, vice president of public relations for National Crop Insurance Services. The nonprofit organization represents the interests of private crop insurance companies.

In all, 83 percent of total U.S. crops are insured. Compared to that, 70 percent “isn’t too bad,” Langstraat said.

Nye, on the other hand, would like to see a higher percentage for fruit growers.

“Why don’t we have 90 percent of growers buying these things?” he asked. “What’s holding us back?”


Perhaps the complexity of federal insurance policies – Seetin described them as “Byzantine” – is what frustrates and intimidates growers.

USDA’s Risk Management Agency (RMA) manages federal crop insurance. RMA contracts with more than a dozen insurance companies, which provide the actual policies that agents sell to growers. In 2010, RMA managed more than 1.1 million crop insurance policies on about 256 million acres, worth nearly $78 billion, according to RMA.

Despite those numbers, some fruit crops – like tart cherries – still aren’t covered by insurance. Those that are include apples, apricots, blueberries, sweet cherries, cranberries, grapes, nectarines, peaches, pears, plums, prunes and raisins, according to RMA.

Each qualifying fruit crop has its own unique coverage, said Jeremy Forrett, a crop insurance agent based in New York state.

So, why aren’t some fruit crops covered?

According to an RMA spokesperson, the Federal Crop Insurance Corporation’s board of directors decides which crops get covered (RMA manages FCIC). Crops that aren’t covered have either not been brought before FCIC’s board for approval or they have been, but are still going through the lengthy approval process.

RMA is in the midst of expanding coverage for specialty crops. The agency introduced new insurance products for strawberries, olives and tangerine trees this year. When the agency creates a new policy, however, it must go through a pilot stage. Coverage can become permanent if the pilot is successful, but the entire process takes money, training and time, Langstraat said.

Creating policies specific to individual specialty crops can be more difficult than designing those for commodity crops like corn, soybeans and wheat. Commodity crops, in general, are grown in bulk and traded on open markets. Clear price structures are in place. Specialty crop acreages, on the other hand, are generally smaller, and the crops are often sold in so many small markets that prices aren’t as defined, she said.

There are ways to insure crops that don’t have specific coverage, such as whole-farm insurance policies. Those policies, however, are more complicated and work off income and tax records, which makes them less popular with producers, Langstraat said.


Nearly 56 percent of eligible U.S. apple acres are insured through federal policies, Seetin said.

Apple policies have evolved over the years.

In 2005, RMA significantly improved what’s called the “fresh option.” Prior to that, the fresh option protected fresh apples from hail damage only. Now it protects a U.S. fancy-grade apple from weather-related damage beyond hail – from freeze and wind damage, for example, Forrett said.

For the first time last year, apple growers were allowed to declare their acres as either fresh or processing. If a grower has 100 acres, for example, he can declare half the acres fresh and the other half processing. Before last year, he had to declare the entire block as one or the other. It took a few years to get RMA to change that policy, Seetin said.

For growers to insure apples as fresh as opposed to processing, they must prove, using records, that they sold at least half their crop in the fresh market in one of the last four years, Forrett said.

New York state, Forrett’s home turf, offers an instructive example of the growth of apple insurance over the last 15 years. In 1997, 237 producers in the state had insurance on 23,537 acres, with a total liability (money available to protect the apples) of more than $14 million. Last year, 319 producers had insurance on 31,152 acres (74 percent of the state’s total acreage), with a liability of $84 million, Forrett said.

When Forrett started selling insurance in 1997, growers all told him the same thing: We don’t experience severe weather events.

That didn’t last long. Severe weather since then, combined with increased operating costs, has driven more growers to protect their investments by purchasing crop insurance, he said.

Forrett said coverage levels for apple policies range from 50 percent to 75 percent, in 5 percent increments. A producer with a 50 percent coverage level, for example, has a 50 percent deductible, where a producer with 65 percent coverage has a 35 percent deductible. Higher coverage levels are more expensive, Forrett said.

He gave an example: Let’s say there’s an apple grower whose five-year average yield is 700 bushels. With a 65 percent coverage level, he would have a yield guarantee of 455 bushels. If he yielded 300 bushels this year, he would be paid a loss on 155 bushels. In New York state, he’d get $10.90 per bushel. For that level of coverage, he would have paid about $350 per acre. He can renew, change or abolish his coverage every year, Forrett said.

Farm bill changes?

What effect will the 2012 Farm Bill have on crop insurance policies?

No one could say for sure in June, when Congress was still assembling the bill. However, people in the industry said prospects for federal insurance were looking good. For one thing, Congress wants to cut down on the direct payments traditionally provided by the farm bill. That won’t affect fruit growers because they don’t get direct payments, said crop insurance agent Brett Anderson.

Also, crop insurance is a cost-sharing program between growers and USDA – and legislators like the idea of a cost-sharing program, said crop insurance agent Jeremy Forrett.

By Matt Milkovich, Managing Editor

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