Growing grapes can be a risky business, from escalating input costs and labor shortages to climate disasters such as heat domes, early fall freezes and wafting wildfire smoke. Increasingly, grape growers are turning to crop insurance. That’s why we invited Nick Gans, a risk management specialist with the U.S. Department of Agriculture Risk Management Agency’s regional office in Spokane, Washington, to share some updates on trends in crop insurance utilization in the grape sector and how some changes underway may make the program more attractive to wine grape growers. Gans shared similar updates at the Washington State Grape Society annual meeting in November.
Good Fruit Grower: The climate has dealt wine grape growers some real challenges recently. What does that look like from the crop insurance perspective?
Gans: Agriculture is an inherently risky business that farmers and ranchers need to regularly manage from various forms of loss, including adverse weather. Federal crop insurance is the preeminent risk management solution for farmers and ranchers, providing effective coverage that helps them recover after severe weather and bad production years. For a grape grower, crop insurance could make the difference between staying in business or going out of business after a disaster due to weather.
GFG: What is the role of the USDA Risk Management Agency in the world of crop insurance?
Gans: RMA provides innovative crop insurance products to America’s farmers and ranchers. Approved insurance providers (AIPs) sell and service federal crop insurance policies in every state through a public/private partnership with RMA. RMA backs the AIPs who share the risks associated with catastrophic losses due to major weather events. In addition, RMA assumes some of the risk generated by the crop insurance program.
GFG: In major grape regions, what trends are you seeing in crop insurance utilization?
Gans: In Western Oregon, RMA has seen a noticeable increase in interest about crop insurance and higher insurance utilization by grape growers. The recent wildfires and impacts from smoke in this region have put a spotlight on crop insurance.
RMA provides guidance to insurance companies to ensure losses are assessed correctly and with consistency. RMA has made some recent modifications to the grape t-yields — transition yields based on county averages that growers without four successive years of production history can use as a basis for their claim — with some dramatic increases for younger grape blocks, which could help a producer obtain higher and more effective coverage. In Oregon, between 2018 and 2022, the number of grape policies and insured acres has more than doubled.
In Washington, 74 percent of the grape acres are insured, similar to the 71 percent insured in California. In Idaho and Oregon, utilization of the program has been lower, with 43 percent of the acres in Idaho and 35 percent in Oregon insured in 2022.
GFG: There’s a much wider range in grape prices, reflecting different viticultural practices and eventual wine price tiers, than in many other agricultural commodities. How does RMA account for this?
Gans: RMA offers what is called an “established price” for each grape variety. Grapes are a unique commodity in that the price of grapes from one vineyard, compared to a neighboring vineyard with the same variety, may have a significantly different price based on a multitude of factors. To address this, RMA allows contract pricing for grapes, which means that a grower could use the price from their contract — up to a maximum contract price factor of 2.0 over the established price (raised from 1.5 in 2021). That means that if the established price for the type and practice in the county is listed at, for example, $1,500, then the maximum contract price for grapes would be $3,000 for that type and practice in that county. RMA is currently working on gathering even more data from grower organizations to continue to improve the accuracy of these prices.
GFG: What else does RMA do to design policies that support the grape industry?
Gans: RMA continually evaluates each of their crop insurance programs to sustain or improve program integrity. The grape industry, particularly the region covered by the Spokane regional office, is a unique and energetic industry that is active in wanting to improve crop insurance for its growers. RMA continually looks for data and research that can make crop insurance policies and procedures align with the challenges that the industry needs for risk management.
Programs that cover the tree/vine or enhanced coverage for smoke exposure are currently in research with RMA, alongside the educational community and industry leaders. RMA works on maintaining consistent contact throughout the industry and is open to improvements. For example, RMA recently changed the acreage reporting date from Jan. 15 to May 15 in the Spokane region, after learning that grape producers often do not have their grapes contracted until later in the year. This change will allow more producers to use their contract prices to more accurately capture the value of their crop.
GFG: And I’ll have to ask you about the big elephant in the room: wildfire smoke. How does crop insurance currently handle claims of smoke damage, and how could that be improved, based on further research?
Gans: The research and science currently underway about wildfire smoke and its effects on grape production and wine quality continues to evolve. Crop insurance currently covers smoke exposure if certain conditions are met. The grape crop provisions do not provide coverage for the inability to market the grapes for any reason other than actual physical damage from an insurable cause of loss, such as a wildfire. Therefore, lab tests are required to substantiate that the loss is from smoke due to a wildfire and was the result of an insured cause of loss — and not due to market-related conditions. Lab tests must be performed by an independent, accredited lab, or other credible source, to prove the elevated levels of chemical markers that indicate smoke exposure.
The industry is actively looking into these chemical markers and weather conditions to better predict when grapes are more susceptible to smoke exposure. RMA may be able to assist the grape industry even more in the future with wildfire and smoke exposure as this research continues to develop.
—by Kate Prengaman