Mississippi cut flower grower Terri Doyle had looked into crop insurance before the 2005 growing season. Her insurance agent had little advice for her based on the limited information he was able to find for cut flower coverage. In the end, she gave up and forged ahead in the field.                     

The tropical climate of the Mississippi gulf coast favors an extended season with strong returns possible through the fall. Terri was hoping a successful fall crop would finance the addition of several hoophouses. In August the destruction of Hurricane Katrina put hoophouses on the back burner. There was no fall crop to finance the hoophouses and there was so much cleanup, repairing damaged structures took priority over building new structures.                    

Terri’s story brought to light a need for information about crop insurance and the coverage options available to flower growers. The first question most growers want to know is, “How much does it cost?” But there are other considerations, including an assessment of the risk of crop failure and the benefits available in the event of such catastrophe.             

Certainly, no one plans for a hurricane, but some growers may say to themselves, “I hope there’s not a hurricane this year.” Obviously, those growers have more risk to contend with than those who never consider the possibility. Just as hurricanes are one   type of natural disaster, specific to one geographic region, other regions of the country must contend with different weather events that are perilous to delicate flower fields.                                                                

Why Crop Insurance?

As with most insurance, crop insurance is a risk management tool. In the event of low production or damaging weather, crop insurance enables businesses to meet their financial obligations. Since many small businesses are family owned and operated, a crop failure one year may not only strap the business financially, it may affect the owner’s ability to pay personal debts.         

Some people think of insurance as an investment, but over time, it is more likely that the cost of premiums will exceed the payments received. But isn’t that good? If disaster were to strike year after year, many growers would likely be looking for a new job—for their financial well-being and their sanity. The “bottom line” is that crop insurance allows farmers to be prepared for the small probability of   a large loss that could create an undue financial burden on the business or the family.                                                                        

Traditional Crop Insurance

The federal government regulates all crop insurance and, as Terri’s agent discovered, crop insurance coverage for cut flowers is not as straightforward as it is for other agricultural commodities. For crops such as corn, soybeans, and even containerized and field-grown nursery crops, there is a federally subsidized insurance program through the Federal Crop Insurance Corporation, an agency of the United States Department of Agriculture. For specialty crops such as honey, mushrooms, sea oats and floriculture, traditional crop insurance is not yet available though research is constantly conducted to determine the feasibility of offering coverage to various specialty commodities.                

A 700-page document from the Federal Crop Insurance Services lists   the eligible crops and insurable value of nursery crops based on the size of the plant. While some cut flowers are listed due to their value in the nursery industry, most are not. Some cut flower growers do take advantage of the nursery crop program, but they typically grow crops such as roses, carnations, and alstroemeria in a greenhouse.             

While property insurance covers the facilities and structures, crop insurance is designed to cover the cost of the crop, the profit loss and the potential profit loss in the event of a natural disaster, fire or other catastrophe.

In late 2002, the Risk Management Agency accepted   the Cut Flower Research Report from National Crop Insurance Services and decided not to proceed with the development of a cut flower and cut foliage crop insurance program because of “insufficient actuarial data and lack of interest by the cut flower and cut foliage growers.”                

Though the government regulates the rules of coverage, many commercial insurance agencies can write policies according to the federal nursery crops program.  Hortica Insurance is the only company that works exclusively with floriculture. John Hodapp of Hortica explains that agents visit the growing facility and evaluate the exposure to loss, which determines the insurance premiums. For example, southern coastal areas will likely have higher premiums than inland areas due to the potential threat of hurricanes. He also identifies the high risk of wind and hail damage as one of the primary reasons field-grown cut flowers are not covered.                

In 2001, the Risk Management Agency within the USDA identified cut flowers and cut cultivated floral greens as a development project to conduct research on the best techniques for insuring these specialty crops. In late 2002, RMA accepted the Cut Flower Research Report from National Crop Insurance Services and decided not to proceed with the development of a cut flower and cut foliage crop insurance program because of “insufficient actuarial data and lack of interest by the cut flower and cut foliage growers.”                    

The RMA also considers the potential participation in a program and the type of coverage participants would be interested in. They found that because there are few growers of in-ground or field-grown floriculture the potential market for such a policy would be limited. Also, with the exception of coastal regions prone to hurricanes, their assessment of the market for cut flower insurance found that most  growers would apply for the minimum catastrophic coverage.  Given these findings in several rounds of preliminary research, RMA has, up to this point, dismissed further de-velopment of a specific federal crop insurance program for cut flowers and cut greens.                                                                
But wait! There is another option. The Farm Service Agency (FSA), another branch of the USDA, offers the Noninsured Crop Disaster Assistance Program (NAP). NAP’s goal is to provide financial assistance to producers of noninsurable crops when low yields, loss of inventory, or prevented planting occurs due to natural disasters. Natural disasters include hail, frost, excessive wind, earthquakes and flooding.            

Alternative Crop Insurance


But wait! There is another option. The Farm Service Agency (FSA), another branch of the USDA, offers the Noninsured Crop Disaster Assistance Program (NAP). NAP’s goal is to provide financial assistance to producers of noninsurable crops when low yields, loss of inventory, or prevented planting occurs due to natural disasters. Natural disasters include hail, frost, excessive wind, earthquakes and flooding.

The annual gross revenue of the business applying for coverage cannot exceed $2 million for eligibility of NAP. Growers must apply for coverage by a specific closing date determined by each state. The closing dates, generally set prior to the beginning of a crop season, ensure coverage will be available for the entire life of the crop—from seed to harvest.                         

When a natural disaster occurs, the application for payment must be filed within 15 days of the: 1) natural disaster occurrence, 2) final planting date, if planting was prevented by the disaster, 3) date damage to crop or reduced yield becomes apparent to the grower, 4) normal harvest date.                 

NAP covers the amount of loss greater than 50% of the expected production at a rate of 55% of the average market price for the commodity. It may not seem like much, but if a natural  disaster strikes, it could take out nearly 100% of the crop, in which case, even some assistance is substantially better than nothing.                    

The NAP regulations stipulate that the facility or acreage must be managed and maintained using good floriculture growing practices. These include, but are not limited to: providing adequate and proper fertilization, irrigation, weed control, insect and disease control and rodent and wildlife control. While drought is considered a major peril for many agronomic crops, floriculture operators are expected to have systems and practices in place to ensure that crops have adequate, quality water.                    A service fee replaces the concept of an insurance premium. The annual fee is $100 per crop per county or $300 per producer per county, not to exceed $900 per producer with farming interest in multiple counties. The typical cut flower grower who has multiple species of plants (multiple “crops”) would pay $300 for NAP coverage.            

FSA also requires NAP participants to submit an annual report of how their crop acreage is used and a summary of that year’s production. These reports are used to calculate the expected production yield for a crop year based on past production history.                 Every operation is different and finding the right risk management tool may require some research. Feel free to contact your regular insurance agent first, but don’t be surprised if they have little to offer. If you grow primarily in greenhouses, Hortica should be able to assist you in finding a suitable coverage option and cost estimate. Field-grown cut flower growers should visit their local FSA office (FSA is managed at the county level) to discuss their eligibility and determine the filing dates for next year.

Resources:

Farm Service Agency, http://www.fsa.usda.gov To find contact information for your county, click “Your Local Office” on the left navigation pane.