Extension’s Experiences with USDA Risk Management Agency

1. Working with New Partners Extension’s Experiences with USDA Risk Management Agency Leslie N. Sturmer University of Florida Shellfish Aquaculture Extension Program Cedar Key, Florida USA

2. 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

3. 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 agents • Private insurance companies/agents

5. 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

6. 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

7. RISK MANAGEMENT AGENCYBackground • 2000 - Agriculture Reform Protection Act (ARPA) • Increased premium subsidies • New crop expansion • Further emphasis on Risk Management Education • Under-served States • Specialty Crop States (Under-served commodities) • Expanded role of private sector in conducting R&D • Contracting and Partnership Agreements

8. 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

9. 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

10. EXTENSION’S INVOLVEMENT IN PILOT INSURANCE PROGRAM • Development • Implementation

11. 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

12. EXTENSION INVOLVEMENT Program Development • Focus workshops organized, 1998-99 • Clam growers interacted with Valdosta RSO • Information shared during meetings • Understanding of crop insurance • Determining risks involved with clam production • Obtaining data on crop value and production techniques • Determining what type of insurance growers want • Follow-up workshops conducted • RMA staff reviewed crop provisions of draft insurance policy with growers

13. 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

14. 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

15. 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

16. 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

17. 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

18. PILOT CULTURED CLAM INSURANCE PROGRAM • States include • Massachusetts • Virginia • South Carolina • Florida • Initiated in 2000

19. PILOT CLAM INSURANCE PROGRAMBackground Crop Value Insurance, or Dollar, Plan • 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 report • Adjustment for changes • Prices in actuarials • Applicable survival factors

20. PILOT CLAM INSURANCE PROGRAMBackground Dollar Plan (continued) • 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

21. PILOT CLAM INSURANCE PROGRAM Coverage Levels

22. 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

23. 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

24. 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

25. PILOT CLAM INSURANCE PROGRAM Example of Loss Payment 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. Note: Example based on 2000 crop year premium prior to approved subsidy rate

26. PILOT CLAM INSURANCE PROGRAM Participation

27. PILOT CLAM INSURANCE PROGRAM Participation * Ratio of indemnity (loss) payments to premium costs

28. FUNDING AND PARTNERSHIP AGREEMENTS • Education • Research

29. 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

30. 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

31. 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

33. CLAMMRS PROJECTClam Lease Assessment, Management, and Modeling using Remote Sensing • “Real time” data posted to web site

34. 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

35. 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)

36. 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

37. 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

38. 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

39. 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

40. 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