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Extension

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Extension s Experiences with USDA Risk Management Agency Leslie N. Sturmer University of Florida Shellfish Aquaculture Extension Program Cedar Key, Florida USA – PowerPoint PPT presentation

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Title: 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
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