California has now surpassed $101 million in USDA crop insurance indemnities resulting from failure of irrigation supplies for thirsty crops. With three months left in the year, the payouts to growers who purchased policies could rival those of the last major drought.
Presenting to the State Board of Food and Agriculture last week, Jeff Yasui, who directs the Davis regional office for the USDA Risk Management Agency, provided an update on crop insurance losses as of September 2021, focused on both lack of irrigation water supplies and wildfires. Growers are not eligible for coverage if water is sold or reduced because of a regulatory requirement.
For perspective, crop insurance is available for almost all crops, livestock, dairy, poultry and apiculture in California through either specific policies covering about 62 of the state's 400 plus crops and livestock or Whole Farm Revenue Insurance. Almonds are the top commodity insured, with a liability of $1.95 billion, followed by pistachios and rice. Fresno has the lead as the top county in the nation in terms of insurance liability.
In 2020, there were almost 33,000 policies sold in California with a liability of over $12 billion and indemnities paid of almost $747 million, according to USDA's Risk Management Agency. As of Oct. 11, 2021, there were over 33,000 policies sold with a liability of over $11.6 billion and indemnities of $242.5 million paid thus far.
Looking just at crop insurance (excluding livestock policies) in California in 2021, Yasui said there were 25,090 policies sold covering 13.2 million acres. The majority of the policies covered almonds (4,625 policies), followed by grapes (4,233), rice (1,389) and pistachios (716). Almonds are the top commodity insured in terms of liability at $1.95 billion, followed by grapes at $1.79 billion; pistachios ($669.7 million); and rice ($622.6 million). Fresno has the lead as the top county in the nation in terms of insurance liability.
Yasui said 99% of the crop losses due to lack of irrigation supplies were made for prevented planting and the majority of the indemnity payments, about $70 million, went to rice growers. Another $17 million were for ELS cotton and the remainder for potatoes and onions - primarily in the Klamath Basin. That marks a substantial change from the 2015 drought when ELS cotton acreage was much larger and accounted for slightly over $87 million in indemnity payments.
Crop insurance companies also offer policies to cover lack of rainfall for Pasture Rangeland and Forage (PRF) and Apiculture. Yasui said PRF participation is up sharply in California, with indemnities based on rainfall shortages in an area during two-month intervals.
“That's certain to go up,” said Yasui about the level of indemnities. “It only represents about half of the year.”
Last year, insurers paid $58.4 million to cover PRF losses in California.
The program also covers apiculture, with California being the top state in the nation with this type of insurance coverage.
"Ranchers, and apiculture producers too, are realizing that this program is paying pretty regularly because of the lack of rainfall," he added. The state is eighth in the nation for insured acreage, with Nevada being first.
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Ranchers in the Sacramento region, for example, have received payments every month for 2021. Lassen County ranchers have paid $2.1 million into the program this year and received $3.6 million back. Last year the agency paid $5.5 million for insured PRF losses in the county.
Farmers are increasingly losing both crops and livestock due to wildfires and the impact has grown throughout 2020, Yasui noted. In 2014, one of the largest crop losses from wildfires covered 179 acres. In 2020, over 40,000 acres were impacted across 22 counties.
Wildfire damage, including crop destruction from smoke taint, can be covered, as well. These policies have been especially helpful for winegrape growers experiencing damage from smoke taint, but avocados and citrus have also been included. Last year, California had its single highest indemnity ever paid at $234.7 million for wildfire losses—nearly all in grapes. The wildfire losses for grapes in 2020 surpassed the $193 million in indemnity payments to pistachio growers in 2015 by nearly $42 million.
According to USDA's NASS, there are 566,940 acres of harvested grapes in the state. In 2021, 439,317 acres were insured for a participation rate of 77%.
Yasui expects the participation rate for grapes to continue to rise now that fires have brought crop insurance to the forefront. The premium rate will grow next year in some counties affected by wildfire but decline in others, although it is capped at a 20% increase from year to year to prevent dramatic price swings. The agency is working with trade organizations to bump up participation for grape growers and those who might be eligible for other types of risk management programs.
"It doesn't matter if you're big or small, you can get crop insurance," Yasui emphasized.
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