1 Extension’s Experiences with USDA Risk Management Agency Leslie N. Sturmer University of Florida...
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1 Extension’s Experiences with USDA Risk Management Agency Leslie N. Sturmer Leslie N. Sturmer University of Florida University of Florida Shellfish Aquaculture Extension Shellfish Aquaculture Extension Program Program Cedar Key, Florida USA Cedar Key, Florida USA
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Transcript of 1 Extension’s Experiences with USDA Risk Management Agency Leslie N. Sturmer University of Florida...
1
Extension’s Experiences with
USDA Risk Management Agency
Leslie N. SturmerLeslie N. SturmerUniversity of FloridaUniversity of Florida
Shellfish Aquaculture Extension ProgramShellfish Aquaculture Extension ProgramCedar Key, Florida USACedar Key, Florida USA
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OVERVIEW
History of Crop Insurance and RMA Extension Experiences in an Aquaculture
Crop Insurance Program– Development– Implementation
Pilot Cultivated Clam Insurance Program Other Partnership Opportunities
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CROP INSURANCEBackground
1930s– Authorized by Congress to help agriculture recover from Great Depression and Dust Bowl
1938– Federal Crop Insurance Corp (FCIC) created
to carry out program
Activities limited to major crops in main producing areas
4
CROP INSURANCEBackground
1980 – Federal Crop Insurance Act – Expanded to all states and primary field crops– Authorized a subsidy of premium– Dual delivery sales
FCIC contract agentsPrivate insurance
companies/agents
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RISK MANAGEMENT AGENCYBackground
1996 – Federal Ag Improvement Reform Act (FAIR)– Risk Management Agency (RMA) created in USDA
to administer FCIC programs– Regional Services Offices (RSOs) directed to work
with producers, groups, universities
All sales & loss adjustment– Private companies/agents
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RISK MANAGEMENT AGENCYBackground
1996 – Federal Ag Improvement Reform (continued)– Emphasis on Risk Management and Education
(RME)– New program development– Crop expansion
Authorized to investigate aquaculture insurance
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RISK MANAGEMENT AGENCYBackground
2000 - Agriculture Reform Protection Act (ARPA)– Increased premium subsidies– New crop expansion– Further emphasis on Risk Management Education
Under-served StatesSpecialty Crop States (Under-served commodities)
– Expanded role of private sector in conducting R&DContracting and Partnership Agreements
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AQUACULTURE INSURANCEBackground
1996 – RMA begins investigating aquaculture insurance programs– Listening sessions throughout U.S.– Fact finding tours conducted regionally– Participation in industry meetings
1997 – RSOs identifies areas and species – Additional data gathered– Time lines determined
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AQUACULTURE INSURANCEBackground
1998 – RMA selects hard clams (quahogs) as first candidate for crop insurance– Crop’s resistance to diseases and other perils– Clams grown within a defined area– Strong interest shown by growers– Availability of producer records– Strong congressional support– Need for regional experts willing to work with RMA
provided through extension
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• Development • Implementation
EXTENSION’S INVOLVEMENT IN PILOT INSURANCE PROGRAM
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EXTENSION INVOLVEMENTProgram Development
Network created in participating states Electronic mail group established
– Hosted by USDA Cooperative State Research, Education, and Extension Services (CSREES)
– Facilitated exchange of information and ideas among agents and RMA
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EXTENSION INVOLVEMENT Program Development
Focus workshops organized, 1998-99– Clam growers interacted with Valdosta RSO– Information shared during meetings
Understanding of crop insuranceDetermining risks involved with clam productionObtaining data on crop value and production techniquesDetermining what type of insurance growers want
Follow-up workshops conducted– RMA staff reviewed crop provisions of draft insurance
policy with growers
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EXTENSION INVOLVEMENT Program Development
Growers’ production records obtained– Actuarial documents were based– Premium schedule determined
Appraisal methods for assessing crop losses established– Incorporated in loss adjustment manual
Tours for RMA staff and insurance providers conducted
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EXTENSION INVOLVEMENT Program Development
Pilot program policy approved by FCIC, 1999 Workshops held for RMA to introduce eligible clam
growers to program Policy provisions Reporting requirements Types of coverage Examples of premium costs, indemnity payments Insurable causes of crop loss
Program announcement in newsletters and extension publications
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EXTENSION INVOLVEMENT Program Implementation
Emphases shifted from educating RMA and growers to insurance providers, 2000-02 – Private insurance agents, loss adjustors,
compliance officers Hosted Clam Crop Insurance School with
National Crop Insurance Association– Representatives from reinsured companies
introduced to clam aquaculture and biology– Shellfish experts provided info on clam tolerances
and susceptibility to losses covered in policy
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EXTENSION INVOLVEMENTProgram Implementation
Other activities included – Maintaining list of insurance agents– Keeping growers informed of important dates
Purchase policy, File inventory report
– Instructing new growers in eligible counties on provisions and benefits of program
– Consulting with growers and loss adjustors on crop losses
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EXTENSION INVOLVEMENTProgram Implementation
Formed regional team with risk management and extension faculty at UF and Clemson University– Requested by RMA due to initial interpretation of
ARPA, 2001– Submitted proposal to make recommendations,
develop course of action, and conduct subsequent tasks to pilot clam program
– Funding for partnership not approved– New guidelines released by FCIC allows RMA to
begin implementing revisions to clam policy, 2002
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• States include• Massachusetts• Virginia• South Carolina• Florida
PILOT CULTURED CLAM INSURANCE PROGRAM
• Initiated in 2000
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PILOT CLAM INSURANCE PROGRAMBackground
Insurance guarantee based on dollar amount Crop Value Before Loss
– Value of undamaged insurable clams prior to occurrence – At start of crop year of policy, it’s the same as the grower’s
clam inventory report– Determined value includes
Number and ages of clams on inventory value reportAdjustment for changesPrices in actuarialsApplicable survival factors
Crop Value Insurance, or Dollar, Plan
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PILOT CLAM INSURANCE PROGRAMBackground
Crop Value After Loss– Value of insurable clams based on prices contained
in actuarials, following occurrence of a loss as determined by appraisal
– Plus any reduction in value due to insured causes Loss, and resulting indemnity, occurs if inventory
value of crop is less than amount of insurance based on the coverage level
Dollar Plan (continued)
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PILOT CLAM INSURANCE PROGRAM Coverage Levels
Level (%) Price (%)CAT 50 55
Limited 50 100
55 100
60 100
Additional 65 100
70 100
75 100
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PILOT CLAM INSURANCE PROGRAM Insurable Causes of Losses
Oxygen depletion– Vegetation, microbial activity, harmful algal
blooms, high water temperatures Salinity increase/decrease Freeze Disease Hurricane Tidal or storm surge Windstorm
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PILOT CLAM INSURANCE PROGRAM Causes of Loss Not Covered
Any cause that occurred prior to or after the insurance period
Inability to market clams Loss of market value Vandalism Theft Pollution Predation Dredging
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PILOT CLAM INSURANCE PROGRAM Practices
Age 1 – Nursery Bag– Clams a minimum of 5 mm shell length– Florida only
Age 2 – Growout Bag Age 2 – Round Pen Age 2 – Bottom Culture
– Clams a minimum of 10 mm shell length
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PILOT CLAM INSURANCE PROGRAM Example of Loss Payment
Coverage Level
Inventory Value Premium
Loss Payment
CAT $27,431 0 $13,715
50/100 $49,875 $585 $24,937
65/100 $64,837 $1,826 $39,900
Note: Example based on 2000 crop year premium prior to approved subsidy rate
Grower has 1 million growout clams (Age 2) and 0.25 million nursery seed (Age 2) planted in bags on a lease in Levy County.
Grower experiences a 75% crop loss due to hurricane.
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PILOT CLAM INSURANCE PROGRAM Participation
Crop Year
Policies Sold
Liabilities
$
2000 347 36M
2001 429 41M
2002 553 59M
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PILOT CLAM INSURANCE PROGRAM Participation
Crop Year
Total Premiums
($)
Indemnity Payments
($)
Loss Ratio*
2000 1,126,780 2,045,903 1.82
2001 1,401,005 2,218,156 1.58
2002 2,158,051 3,133,982 1.45
* Ratio of indemnity (loss) payments to premium costs
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• Education• Research
FUNDING AND PARTNERSHIP AGREEMENTS
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EDUCATIONAL SEMINARS
Series targeting management of risks by Florida clam producers, 2000-01
Financial support from Valdosta RSO Specialists invited to address topics
– Genetics in seed production– New marine mollusks for aquaculture– Marketing– Product quality
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SOFTWARE PROGRAM
Development of simplified computerized spreadsheets, 2000-01
Funded by RMA through CSREES C.L.A.M., Computer Logbook
And Management Specific to practices of
Florida clam culture industry
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SOFTWARE PROGRAM
Companion User’s Guide– Easy-to-follow explanation
Business tool to enhance record keeping and inventory management
Documentation for crop assistance programs
32
CLAMMRS PROJECTClam Lease Assessment, Management, and
Modeling using Remote Sensing
Funded by USDA, 2001-2004 Endorsed by RMA Create database to be used by
insurance program to document events associated with crop loss
Installation and operation of water quality and weather equipment at lease areas
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CLAMMRS PROJECTClam Lease Assessment, Management, and
Modeling using Remote Sensing
“Real time” data posted to web site
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CLAMMRS PROJECTClam Lease Assessment, Management, and
Modeling using Remote Sensing
Continuous data base– Details of temporal variability– Trends in environmental
conditions in relation to clam health emerging
– Allows growers to make informed decisions
– Refine production management practices
Water Temperature
50
55
60
65
70
02/0
8/02
02/0
9/02
02/1
0/02
02/1
1/02
02/1
2/02
02/1
3/02
Date
Tem
pera
ture
(F)
Salinity
20
25
30
35
02/0
8/02
02/0
9/02
02/1
0/02
02/1
1/02
02/1
2/02
02/1
3/02
Date
Sal
init
y (p
pt)
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OTHER PARTNERSHIP AGREEMENTS
Targeted Commodity Partnerships for Risk Management Education– FCIC, 2002
Research Partnerships for Risk Management Development and Implementation– FCIC, 2002
Partnerships for Risk Management Education Grants Program – USDA CSREES, 2002-03– Southern Regional Center (Texas Cooperative Extension)
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ORGANIZATIONAL STUCTURES AND STRATEGIES
Funded FCIC, 2002-03 Provide workshops to introduce clam growers to
agriculture and aquaculture industry organizations Conduct assessment of
successful associations Develop informational flyer
that discusses need for organizational structure
Develop strategies for Florida clam culture industry
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MARKETING EDUCATION FOR FLORIDA CLAM FARMERS
Funded FCIC, 2002-03 Florida Department of Agriculture and
Consumer Services Identify preferences of buyers
for Florida clams Identify approach to reach
potential buyers Develop training and materials
for growers to use in market expansion
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SUMMARY
Extension played integral role in development and implementation of pilot crop insurance program
Insurance minimizes environmental and catastrophic risks beyond control of clam grower
Insurance provides important financial protection to clam aquaculture industry
Pilot program legitimizes aquaculture in “eyes” of federal government
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SUMMARY
Evaluation of clam culture insurance program thwarted by APRA in 2000
No changes incorporated in policy or loss adjustment procedures during 3-year pilot program
Aquatic crops present unique risk and underwriting challenges
Turn over of reinsured company representatives who service policy high
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SUMMARY
Crop insurance programs can cause “moral hazard”
Fraud, waste, and abuse can cause detriments to industry– Change culture practices– Change market price structure
Other complaints – Encourages investment growers– Keeps marginal growers subsidized
