1. 1 Extension’s Experiences with USDA Risk Management Agency Leslie N. Sturmer University of Florida Shellfish Aquaculture Extension Program Cedar Key, Florida USA

2. 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. 3 CROP INSURANCE Background 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. 4 CROP INSURANCE Background 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. 5 RISK MANAGEMENT AGENCY Background 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. 6 RISK MANAGEMENT AGENCY Background 1996 – Federal Ag Improvement Reform (continued) – Emphasis on Risk Management and Education (RME) – New program development – Crop expansion Authorized to investigate aquaculture insurance

7. 7 RISK MANAGEMENT AGENCY Background 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 R&D Contracting and Partnership Agreements

8. 8 AQUACULTURE INSURANCE Background 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. 9 AQUACULTURE INSURANCE Background 1998 – RMA selects hard clams (quahogs) as first candidate for crop insurance – Crop’s 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. 10 Development Implementation EXTENSION’S INVOLVEMENT IN PILOT INSURANCE PROGRAM

11. 11 EXTENSION INVOLVEMENT Program 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. 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. 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. 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. 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. 16 EXTENSION INVOLVEMENT Program 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. 17 EXTENSION INVOLVEMENT Program 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. 18 States include Massachusetts Virginia South Carolina Florida PILOT CULTURED CLAM INSURANCE PROGRAM Initiated in 2000

19. 19 PILOT CLAM INSURANCE PROGRAM Background 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, it’s the same as the grower’s clam inventory report – Determined value includes Number and ages of clams on inventory value report Adjustment for changes Prices in actuarials Applicable survival factors Crop Value Insurance, or Dollar, Plan

20. 20 PILOT CLAM INSURANCE PROGRAM Background 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 Dollar Plan (continued )

21. 21 PILOT CLAM INSURANCE PROGRAM Coverage Levels Level (%)Price (%) CAT50 55 Limited50100 55100 60100 Additional65100 70100 75100

22. 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. 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. 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. 25 PILOT CLAM INSURANCE PROGRAM Example of Loss Payment Coverage Level Inventory Value Premium Loss Payment CAT$27,4310$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 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.

26. 26 PILOT CLAM INSURANCE PROGRAM Participation Crop Year Policies Sold Liabilities $ 200034736M 200142941M 200255359M

27. 27 PILOT CLAM INSURANCE PROGRAM Participation Crop Year Total Premiums ($) Indemnity Payments ($) Loss Ratio* 20001,126,7802,045,9031.82 20011,401,0052,218,1561.58 20022,158,0513,133,9821.45 * Ratio of indemnity (loss) payments to premium costs

28. 28 Education Research FUNDING AND PARTNERSHIP AGREEMENTS

29. 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. 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. 31 SOFTWARE PROGRAM Companion User’s Guide – Easy-to-follow explanation Business tool to enhance record keeping and inventory management Documentation for crop assistance programs

32. 32 CLAMMRS PROJECT Clam 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. 33 CLAMMRS PROJECT Clam Lease Assessment, Management, and Modeling using Remote Sensing “Real time” data posted to web site

34. 34 CLAMMRS PROJECT Clam 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. 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. 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. 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. 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. 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. 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