Extension

1
Working with New Partners

• Extensions 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 RD
• 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
• Crops 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
EXTENSIONS 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, its the same as
  the growers 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
Level () Price ()
CAT 50 55
Limited 50 100
55 100
60 100
Additional 65 100
70 100
75 100
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.
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
26
PILOT CLAM INSURANCE PROGRAM Participation
Crop Year Policies Sold Liabilities
2000 347 36M
2001 429 41M
2002 553 59M
27
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
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 Users 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