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Proposed cuts to crop insurance could hit state

By Dan Verel, Business Journal Staff Reporter

Source: North Bay Business Journal

Wine grape growers, other state agriculture fear losing safety net

CALIFORNIA  — Proposed cuts to federal crop insurance totaling nearly $7 billion have the potential to reduce services and various safety measures for farms and wineries throughout the state, particularly in the North Bay, according to insurers and the Crop Insurance Professionals Association.

As a means of paying for some of the USDA’s other projects, the Risk Management Agency arm of the federal agency has proposed the roughly 35 percent cuts to the private delivery system that ensures some level of protection for farms across the country.

California accounts for less than 5 percent of the nationwide crop insurance program, but the cuts would still be acutely felt by the agricultural sector, according to Jordan Roach, vice president of Mary Roach Insurance Agency in Fresno, which provides crop insurance services to about 40 wine grape growers in Sonoma and Napa counties as well as farms in Marin County.

“It’s especially important in California because it’s basically the only safety net we have,” he said. Whereas much of the corn-growing regions in the Midwest receive farm bill benefits, California farmers and grape growers have only crop insurance, Mr. Roach said.

“The Midwest has other safety net options,” he said.

John Balletto, president of Balletto Vineyards in the Russian River Valley, said that as a grape grower he is concerned about potential cuts, but it’s early in the process and difficult to assess what impact, if any, they would have on growers.

“Naturally as grape growers, we’re concerned,” Mr. Balletto said.

Mr. Balletto also said he thinks the insurers themselves would be hit harder by the cuts, although there is concern that growers will experience a drop off in services,
“If they’re having to make internal cuts themselves, I would expect there to be some decline,” he said.

Crop insurance currently protects a grower’s stock crop from natural disasters and weather-related issues, such as severe heat or cold, which could severely damage the crops. The level of protection is based on the production level of a crop and varies from one crop to another – wine grapes have a different policy than table grapes or raisins, and oranges have a different policy than avocados, for example.

The insurance does not protect against quarantine, theft, man-made losses or, for most California producers, a drop in prices.

Mr. Roach said private insurance companies aren’t capable of providing such insurance on their own, given that the risk associated with a broad geographic disaster is too great. As such, the federal government pays a fixed-rate portion of the premiums for insurers as a means of incentivizing them to provide coverage. The government designs most of the premiums, sets the rates and dictates procedures, and private companies in turn offer services to farmers, Mr. Roach said.

The cuts will hurt California because the level of specialty growers here versus in other agriculture regions is much higher, he said.

“Unlike row crops, insurance is the only form of safety net these growers have,” he said.

In Sonoma County, more than 35,000 acres of wine grapes are insured, or about 62 percent of all 56,000 bearing acres in the county, according to the USDA, and there are 565 policies in place. In Napa, the ratio is roughly 22,000 of insured acres to 43,000 bearing acres, or 51.4 percent.

Growers and farmers in Sonoma and Napa counties paid $2.6 million in crop insurance premiums, Mr. Roach said, and more than $200 million in coverage was provided to growers.

The cuts would undermine educational trainings that crop insurers provide for growers and could significantly increase the wait-time to process claims, Mr. Roach said.

Rather than imposing steep cuts, Mr. Roach said the Crop Insurance Professional Association is urging for a broad reduction in costs of premiums. Mr. Roach called such a prospect of reduced premiums a “proverbial win-win situation” because it would reduce costs for both the federal government and farmers alike.

He said the cuts are largely a response to costs associated with an increase in corn prices in 2008. But the federal government is correcting that one-year problem by applying it to all years and all regions.

“Instead of looking at percentages, they’re just looking at dollars. Even corn has come down since 2008, but they’re focusing on that one-year high,” Mr. Roach said. “We all understand the current economic environment and the need to curb spending, but this is not the way to do it.”

Sonoma County reported a value of $653,236,600 for all gross agricultural production in 2009, a 12 percent increase over the previous year. Napa County reported a gross value of $502,236,581 in 2009, a 22 percent increase over the past year.




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