Advice on Smoke Taint Solutions for Grape Growers

While “smoked” cocktails like Manhattans are all the rage, smoked wine is not. Infusing ‘Chardonnay’, ‘Pinot Noir’, or juice with smoke is a recipe for disaster. Imagine sipping on an ash tray. Not happening. Fire and smoke damage are all too familiar to West Coast grape growers. In 2020, fires scorched thousands of acres of California wine country, rendering smoke-tainted grapes unsuitable for wine making. That year California grape growers’ fire-related losses topped $254 million. More recently, southern California wildfires have been making big headlines in the last few weeks.

Crop protection experts Laura Hernandez, Senior Risk Management Specialist with the USDA Risk Management Agency, and Scott Zediker, Associate Crop Insurance Consultant with American Ag Credit, advised grape growers in a Wine Industry Network webinar how to protect their farms from going up in smoke.

THE BASICS: MPCI

Since 1990 the USDA has offered Multi-Peril Crop Insurance (MPCI) through its Risk Management Agency. Sold through private crop insurance agents, coverage applies to grapes grown for wine, juice and raisins and indemnifies losses due to adverse weather, natural disasters, wildfire/smoke, wind, hail, disease, insects, and wildlife.

Today the USDA’s MPCI program protects growers in 23 states, including 32 California counties. In 2020 alone, California growers purchased more than 5,000 policies to protect $1.75 billion in liabilities. By 2023, California’s total protected liabilities increased to $2 billion covering 430,000 acres.

Hernandez explains MPCI’s popularity. “First and foremost is peace of mind. The program is federally legislated and funded. Premiums are low and plans are customizable. Some loans require crop insurance so it’s a must.”

MPCI premiums are rated by county and based on actuarial data, acreage, coverage level selected, price election, and optional endorsements. Once a grower signs on, crop losses will not impact future premiums. Rates cannot increase or decrease by more than 20% in any given year. MPCI’s indemnity-to-paid-premium ratio is attractive. In 2020 every $1 in premium collected in California paid $2.38 in indemnity (loss coverage).

STEP UP TO FIP-SI

The Fire Insurance Protection-Smoke Index (FIP-SI) is a special endorsement currently only available to grapes grown in California counties listed in grape actuarial documents. According to Zediker, the FIP-SI endorsement covers a portion of the deductible of Grape Crop Provisions when the insured county experiences a minimum number of 13 smoke events as determined by the Federal Crop Insurance Corporation (FCIC). Claim payments increase with additional smoke events. FIP-SI coverage can be combined with other endorsements, such as Catastrophic Risk Protection.

FIP-SI is attractive because it covers up to 95% of a loss vs. MPCI’s ceiling of 85%. Losses are based on county-wide smoke events rather than farm specific. Any portion of a county impacted by smoke is considered a county-wide event.

The FIP-SI claims process is streamlined. Once FCIC determines a county has met or exceeded the county loss trigger, claims payments to growers are automatic. Unlike MPCI, growers are not required to provide a notice of loss, test results or winery rejection letters. No yield losses are required to be claims eligible. FIP-SI may pay claims even if the crop is harvested and sold.

To be eligible for the FIP-SI endorsement, a grower must have an insurance policy such as MPCI with the same insurance provider. Growers must purchase both FIP-SI and MPCI before the sales closing date of Jan. 31 of a given year.

EXPANDING COVERAGE TO VINES

Introduced in August 2023, the USDA’s Grapevine Crop Insurance Policy goes beyond smoke damage to grapes to cover vines destroyed within the insurance period due to fire, flood, freeze, hail, and naturally occurring irrigation water supply failures. Not eligible are losses due to insects and disease. Partial damage losses are not considered for coverage.

Initial participation among California grape growers has been strong, with some 7.5 million vines currently insured, primarily in Napa, Sonoma, and San Luis Obispo counties. Ninety-four percent of growers opted for CAT coverage level, which compensates growers for crop yield losses exceeding 50% of their average historical yield. Although CAT coverage requires a $655 fee, the protection is a bargain at an average cost of 21 cents per vine.

Growers interested in adding a grapevine policy will have to wait until 2026. The sales closing date for 2025 grapevine policies was Nov. 1, 2024.

In closing the webinar, Hernandez offered this common-sense advice to growers: “If fire-related damage or a loss occurs, contact your insurance agent within three days and do not destroy crop or vines until consulting with a loss adjuster.”