Crop Insurance Can Save Your Vineyard If Disaster Strikes

The continuing impact of drought and wildfires continues cutting into crop yields for agricultural operators in the Golden State.

Surface-water deliveries were reduced by nearly 43% in the Central Valley as a whole in both 2021 and 2022. Compared to 2019, statewide irrigated crops dropped by 563,000 acres in 2021 (7.4% of the total acreage) and by 752,000 acres last year (nearly 10% of acreage).

These record cutbacks resulted in a direct statewide economic impact from crop revenue losses of $3 billion in 2021 and 2022 combined.

The wine industry has seen its share of damage as well, not so much from water deliveries but from record heat and wildfires.

Many wine makers in Napa and Sonoma reported yields that were down 25 to 30% and smaller grapes due to high heat in 2022, in particular one spell of 115-degree days around Labor Day.

And Sonoma Coast vintners were hit with extraordinarily cold and windy conditions, resulting in grapes one-third the normal size and crops down 60 to 70%.

In 2020, it was smoke from wildfires that damaged grapes, resulting in a crop that was 13% smaller than the year prior in Sonoma, Napa and Monterey counties, according to the U.S. Department of Agriculture.

Crop Insurance Protects

One way to mitigate risks of a poor harvest is through a federal crop insurance policy for grape growers. These policies cover grapes grown for wine, juice, raisins or canning.

The federal crop insurance program is a subsidized insurance plan that provides coverage against perils for your growing crops, including:

• Adverse weather conditions, including natural perils such as hail, frost, freeze, wind, drought and excess precipitation;
• Earthquake;
• Failure of the irrigation water supply, if caused by an insured peril during the insurance period;
• Fire;
• Insects and plant disease, except for insufficient or improper application of pest or disease control measures;
• Wildlife; or
• Volcanic eruption.

There are a few exceptions. It will not cover:

• A winery’s costs to dispose of the wine;
• Phylloxera, regardless of cause; or
• A policyholder’s inability to market their grapes for any reason other than actual physical damage for an insurable cause of loss.

Policies must be purchased by January 31 every year for growers in California. In all other states, policies must be secured by Nov. 21.

Coverage in California starts Feb. 1 and ends Nov. 10 or at harvest, whichever comes first.

After you purchase coverage, you’ll need to provide an acreage report that includes all of your land — both insurable and uninsurable. There are two deadlines for this reporting, depending on your state:

• May 15 — California, Idaho, Oregon and Washington
• Jan. 1 — All other states

There are deadlines and other requirements policyholders must adhere to when filing claims:

• If you discover damage to your crop, you must file a notice of damage within 72 hours, but not later than 15 days after the end of the insurance period.
• You are required to protect the crop from further damage by providing sufficient care;
• If you’ve already given notice of crop damage, you must also provide notice at least 15 days before the start of the harvest if you intend to file your claim.
• If you plan to forgo harvesting, you are required to notify your broker at least three days before the date the harvest should have started.
• You may not destroy the damaged crop until you are given written consent to do so.

You are also required to provide the insurer with production reports that include:

• Last year’s production,
• The number and ages of fruiting vines,
• Any changes that may adversely impact yield potential, such as vine damage or removal, or changes in cultural practices, and
• Other information required by the policy.

A policyholder filing a smoke-damage claim is required to obtain a chemical lab test that uses a gas chromatograph mass spectrometer to obtain data that indicates smoke damage. If a grower is selling their grapes, they are typically required to also provide client letters rejecting the lot.

Premium Subsidies

Premiums are reasonable thanks to generous subsidies from the federal government. The lower the percent of your average yield you insure, the higher the subsidy you will receive. Here’s the breakdown:

• Coverage level 50% — Your cost is 33% of the premium, with subsidies accounting for the rest.
• Coverage level 55% — Your cost is 36% of the premium.
• Coverage level 60% — Your cost is 36%.
• Coverage level 65% — Your cost is 41%.
• Coverage level 70% — Your cost is 41%.
• Coverage level 75% — Your cost is 45%.
• Coverage level 80% — Your cost is 52%.
• Coverage level 85% — Your cost is 62%.

Learn more about crop insurance at our Introduction to Crop Insurance Seminar on January 10th and 11th!