Crop Insurance Reform for Citrus Needed Now

Swamped citrus in Southwest Florida

Got crop insurance? Hurricane Irma was a wake-up call for the Florida citrus industry in more ways than one. Photo by Monica Ozores-Hampton

Hurricane Irma was a catastrophic event for the Florida citrus industry, resulting in damage to almost every grove and exposing an entire industry to significant loss. The storm occurred after almost a decade of challenging financial times for the citrus industry as it battles HLB. Irma exposed more than 80% of all citrus groves to Category 1 (or greater) hurricane force winds. In addition to the wind, many groves experienced flooding from — in some cases — more than 15 inches of rainfall. Florida Citrus Mutual (FCM) believes we may lose up to 60% of the 2017-2018 crop.

Compounding the direct loss is the fact growers had already spent a full year of input costs and will not be able to generate enough revenue to cover 2018-2019 input costs.

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Fortunately, the federal government in February appropriated $2.36 billion for agricultural disaster relief. Because of an intense lobbying effort involving much coordination between our industry, the Florida Congressional delegation and our senators, Florida citrus is expected to receive $760 million commensurate to damage estimates by the Florida Department of Agriculture and Consumer Services (FDACS).

As of this posting, details were still being hashed out on how the USDA is going to get the money to growers, but the funding should go a long way toward future sustainability.

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Under the Umbrella
Beyond the tangible impact unleashed on our groves, Irma exposed major flaws in the federal crop insurance program for citrus. In a nutshell, deductibles are too high, premiums are many times unaffordable, and indemnity payments are not consistent with current crop values.

The arcane program is one of the few options to manage risk in Florida citrus despite an unknown return on investment. Growers hit by Irma still expect to lose +$2,000 per acre even with crop insurance.

We have some terrific crop insurance agents and firms in Florida. But the products are managed by the USDA’s Risk Management Agency (RMA) so the agents are hamstrung, too.
There are many problems with the citrus fruit program:
● Payment of crop loss per box is based on data RMA provides, not the growers’ fruit contracted prices for that season. These will almost always be lower than what the fruit would have been worth undamaged.
● The “buy ups” that are supposed to increase coverage and reduce deductibles are inadequate.
● Coverage is not available for crops grown on trees less than four years old and the coverage available for crops grown on young trees does not factor the increase in tree density and technology improvements.
● Deductibles are very high — 50% in a standard policy — and many operations have never met the threshold for a tree insurance claim. Growers would like more options to lower deductibles and keep costs affordable.
● Because citrus is a long-term tree crop, it requires separate coverage for crop loss and tree damage. As a result, a grower is economically precluded from carrying additional insurance on both crop and trees due to the economic challenges endured over the past decade.

Seeking to Ensure Solutions
The bottom line is that current citrus crop insurance is a deficient safety net and will not provide adequate indemnity payments to help the industry rebuild after Hurricane Irma. FCM, through its Crop Insurance Advisory Committee, is looking into the possibility of submitting a new citrus fruit policy to the USDA’s Risk Management Agency under the 508(h) process. Initiated in 2000, the 508(h) concept was promoted by Republicans frustrated with the pace RMA was expanding crop insurance and wanted to give private companies more input.

The Agricultural Risk Protection Act of 2000 was spelled out in an amendment to section 508(h) of the Federal Crop Insurance Act, creating a process under which private groups — farm organizations, insurance companies, and others — could present new insurance concepts to the Federal Crop Insurance Corporation Board of Directors and, if approved, have them incorporated into the Federal crop insurance system, eligible for subsidy and re-insurance.

FCM is working with College Station, TX-based AgriLogic to see if the 508(h) process is a good fit. At the very least, we might be able to tweak RMA’s existing fruit policy and increase potential indemnity payments by accounting for higher, more accurate fruit values than currently exist in RMA data.

It’s going to be a difficult but necessary lift, and we look forward to input from growers. If a major hurricane or other natural disaster hits, we need adequate crop insurance. In all likelihood, the federal direct payment faucet is tapped out.

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