Policy of Protection

The nursery industry is a dynamic and complex industry and with this complexity comes risk. In this production system, perishable products are exposed to the hazards of inclement weather, pests and diseases, and various market forces to name just a few of the risks. Nursery crop insurance is one tool which can provide protection against some of these risks and offset potential loss of live plants. Nursery crop insurance is underwritten by the Federal Crop Insurance Corporation (FCIC) administered by the Risk Management Agency (RMA) which subsidizes the premiums.

There are three federal insurance products available for nursery and floriculture producers. Nursery crop insurance is available nationwide and uses an eligible inventory value approach. Adjusted Gross Revenue (AGR) and Adjusted Gross Revenue-Lite (AGR-Lite) are similar and use a whole operation revenue based approach. Nursery crop insurance can be combined with AGR or AGR-Lite where available, but the two AGR products cannot be combined for one operation. Nursery crop insurance is offered in all states while AGR and AGR-Lite are available in select states (Fig. 1). Table 1 lists some characteristics of the different types of products.

Nursery crop insurance is available to operators of nurseries that meet certain criteria. These include that the operation receives more than 50 percent of the income from wholesale marketing of nursery plants, that plants are on the eligible plant list, and that they are grown in appropriate medium. Operations must meet all requirements for insurability and the nursery must be inspected and approved as acceptable before insurance coverage can begin. Both field and container grown plants are eligible for insurance, but a few exceptions include plants grown for Christmas trees, stock plants or cut green foliage. Containers combining different species, cultivars, varieties or genera are also not eligible for this insurance.

Insurance can be purchased for the current crop year until May 1 and coverage extends from June 1 until May 31 the following year. After the initial sales closing date deadline of May 1, an insurance policy can be obtained anytime during the insurance period up to April 1st with a 30 day waiting period before insurance begins.
 

Is it for you?
The following steps will give nursery operators an initial idea of whether nursery crop insurance will assist them in better managing risk. The first step is to evaluate whether the insured causes of loss are a threat in your area. Are adverse weather conditions such as a freeze, wind or hurricane, or fire, wildlife and failure of irrigation supply due to drought a risk for your operation? The insurance requires operators to follow best practices for growing and adequately protecting plants from such hazards.

The next step is to evaluate whether only container plants, field-grown plants, or both should be insured. Consult the eligible plant listing and plant price schedule at www.rma.usda.gov/tools/eplpps. Creating a crop inventory valuation report is the most time-consuming task to calculate the plant inventory values based on the lower of the nursery’s “lowest wholesale price” in the insured’s nursery catalog or the prices contained in the plant price schedule. It requires that each plant species and cultivar is listed by botanical and common name, container size and number of plants in the inventory at the time when the insurance is purchased. Further information for each plant includes the hardiness zone for field-grown material and winter protection that is required for container plants in different counties. Software is available at the website to help create this list. A wholesale nursery catalog is required with the crop inventory valuation report.

Coverage levels between 50-75 percent of the plant inventory value can be purchased with premium subsidies. The most basic coverage is the catastrophic coverage level which is available for a flat administrative fee of $300, the premium fully subsidized, and covers 27.5 percent of the plant inventory value. At coverage level of 50 percent of the plant inventory value, the premium is subsidized by two thirds, and one third is paid by the nursery. Under the highest coverage level of 75 percent, the premium subsidy is 55 percent and the nursery pays 45 percent of the premium.

A closer look at AGR
Adjusted Gross Revenue and AGR-Lite are whole-farm, revenue-protection plans of insurance and provide coverage for multiple agricultural commodities in one product. Both plans provide protection against low revenue due to unavoidable natural disasters and market fluctuations that affect income during the insurance year.

AGR and AGR-Lite are suitable for operations that produce a number of plant products such as nursery plants in containers, cut flowers, fruit in an orchard and possibly some animal products. Either insurance can be used to cover all commodities. AGR and AGR-Lite insurance eligibility requires that farms have five consecutive years of 1040 Schedule F tax records or comparable information. The period of a one year insurance coverage is for the operations tax year either calendar or fiscal year filing and insurance closing dates are in January and March for AGR and AGR-Lite respectively. Crop insurance agents for both products can be located at www3.rma.usda.gov/tools/agents/companies.
 

Applying for AGR or AGR-Lite coverage requires a historical 5-year narrative of income and expense data based on tax records, a farm report listing commodities and quantities to be produced and expected prices. Further requirements are a listing of beginning inventories if available and expected changes in the current year that may lead to lower revenue compared to previous years. More information on AGR policies can be found at: www.rma.usda.gov/policies/agr.html.

AGR and AGR-Lite coverage levels and payment rate eligibility vary with the number of commodities produced and only one coverage amount can be selected as follows. The 65 percent coverage level with a 75 percent payment rate is available to producers of agricultural commodities regardless of the number of crops grown. The same applies to a 75 percent coverage level with 75 percent or 95 percent payment. However, to be eligible for highest coverage level of 80 percent with a 75 percent or 90 percent payment rate, an operation must produce at least three crops where expected revenue for the crops is balanced rather than dominated by any one.

While there is some overlap between the three insurance products, especially between AGR and AGR-Lite, Nursery Crop Insurance and both AGR products cover a portion of loss due to adverse weather and other natural disasters. Businesses that produce a number of different crops and have some income from animals or animal products may find AGR and AGR-Lite more flexible because it covers a range of commodities compared to nursery crop insurance which only covers plants.

Trent Teegerstrom is Arizona FRTEP project director and associate extension specialist at the Department of Agricultural and Resource Economics, and Ursula K. Schuch is extension specialist at the School of Plant Sciences, University of Arizona, Tucson; tteegers@ag.arizona.edu.