Fruit growers in the eastern United States got a demonstration of the value of crop insurance this year as Mother Nature wiped away their crops in a series of spring freezes, hail storms, and summer drought.

Now, they, and fruit growers everywhere in the U.S., have until November 20 to decide whether to sign up, renew, cancel out, or modify their multi-peril crop insurance for 2013. They also need to decide whether to go with the basic catastrophic (CAT) model or buy up to a higher level.

Don’t wait until the due date. There are a lot of records to review and paperwork to fill out if you’re new to crop insurance.

Fruit crop insurance is a hybrid operated by the insurance industry and controlled by the USDA’s Risk Management Agency, and it’s complicated. Nonetheless, an estimated 70 to 80 percent of eligible Michigan fruit growers had at least basic coverage when disasters struck this year.

Chris Shellenbarger, a 25-year insurance industry veteran and an agent for the Spartan Insurance Agency in Michigan, explained the options to growers during a meeting at the Southwest Michigan Research and Extension Center in Benton Harbor last week.

Her agency sells policies for a half-dozen companies, but which you choose doesn’t matter. The rates are all the same, mandated by the Risk Management Agency.

Not every fruit crop is insurable. Apples, peaches, blueberries, and grapes are insurable, all with similar terms, and the sweet cherry pilot policy has been expanded to include more counties in some of the pilot states. The sweet cherry insurance policy is different from the others. It is a dollar value policy, while the others are yield guarantee policies. Growers of other fruit crops—like tart cherries, pears, or plum—don’t have access to this insurance.

Fruit growers not covered by the federal crop insurance programs have until November 20 to sign up for the Farm Service Agency NAP insurance policies. NAP is the acronym for the Noninsured Crop Disaster Assistance Program. NAP coverage is not available for any crop that is insurable under the catastrophic insurance.

Tart cherry growers, whose crop was virtually wiped out in the eastern production states this year, may get access to the insurance, but not soon. Hearings—listening sessions—have been scheduled for November 8 and 9 in Michigan and November 18 in Utah. For more information, go to www.choosecherries.com.

To be insurable, the orchards or vineyards have to be located in specified counties with historical production, but growers in outlying counties may be insured with special application. There are other insurability requirements—age or yield of plantings, for example.  Apples are insurable the year after they have picked 150 or more bushels per acre. Peaches are insurable in their fourth leaf.

Basic CAT policy

The basic policy is quite simple: The grower pays $300 per fruit crop insured. It’s charged on a county basis, so if a grower has orchards in more than one county, he pays for each county.  A grower with peaches and apples in two counties would pay $1,200 total—two crops, two counties.

This basic insurance, created by and subsidized by the government, is essentially a fee for participation, with almost all of the actual premium paid by the government to the participating insurance companies.

The payout is also simple.

Producers are eligible for payment when yields are reduced by adverse weather, fire, infestations by insects, wildlife, or diseases beyond what a grower would be expected to control, earthquakes, and volcanoes.

If one or more of these things cause yield to fall below 50 percent of the established actual production history yield for the farm, the grower gets 55 percent of the established price on the missing bushels between his actual yield and 50 percent of his yield. Price is established for both fresh and processing apples and peaches, depending upon what he grows, and by the state and county where the grower is located. Local insurance agents can provide those prices.

The established price this year for Michigan fresh apples is $13.60 a bushel and the price for processing apples is $3.95. To qualify for the higher fresh price, a grower must have sold more than half his apples as fresh in one of the previous four years. So the payout on lost fresh apples is 55 percent of $13.60 ($7.48) on bushels lost above 50 percent of the crop, based on actual production history.

Buying up

From that basic CAT level, things get more complicated, and more expensive.

All policies that have a level higher than CAT receive 100 percent of the established price election. An apple grower can also qualify to insure Group A or Group B apples. Group A contains the higher valued apples.

He can also buy up the levels above which damage begins to be paid for, in 5 percent increments, from 50, the lowest, to 75 percent, the highest.

At that highest level, a grower can be assured of receiving the best price of $17.25 a bushel (the Michigan price for varietal group A) for the best varieties of fresh apples when his yield of marketable apples falls by 25 percent or more.

To buy such a policy, however, would be expensive. Instead of $300 for the entire farm’s apple crop for the basic policy, a grower with a 500-bushel average yield would pay $1,029 per acre. That would guarantee 375 bushels per acre at a USDA Fancy or better grade at the 75 percent yield level. Note the premium cost is per acre, not per farm.

The basic buy-up with a guarantee of USDA processing or better grade, the one that boosts the payout level from 55 percent to 100 percent, would cost an apple grower about $173 per acre above the basic $300 per crop fee.

Premium subsidy

The premiums are subsidized by the federal government. At the basic level, the subsidy is essentially 100 percent except for the $300 per crop fee. At the buy-up level, the government pays 67 percent of the premium for coverage at the 50 percent damage level, 64 percent at the 55 and 60 percent level, 59 percent at the 65 and 70 level, and 55 percent at the 75 percent level.

While premiums may seem high, they would be more than twice as high without the subsidy. And, given those high premiums, it is evident that the insurance industry and the government consider fruit production very risky business.

Shellenbarger suggests that growers look at it that way, too. They need to insure at a level such that, in the event of a crop disaster, they will be able to farm again the next year.

“This is not a one-size-fits-all decision,” she said, “and it is important to evaluate this decision each year.”