Risk Management Options for Specialty Crop Growers
March 1, 2023More Info
The 2023 MI Ag Ideas to Grow With conference held virtually, February 27-March 10, 2023, is a two-week program encompassing many aspects of the agricultural industry and offering a full array of educational sessions for farmers and homeowners interested in food production and other agricultural endeavors. Sessions were recorded and can be found online at https://www.canr.msu.edu/miagideas/
So today's topic is on risk management options for Michigan Specialty Crop crop growers, excuse me. And we're going to cover a number of different programs didn't today's presentation. First, we're gonna go through some basics on insurance. And we're going to be covering a number of insurance programs from actual production history to all the way to information on the micro, micro farm program. And also a few new options that are out there. Within the insurance world. The other thing we want to make sure we do today is also take some time to highlight some crop insurance strategies as you think through best-case scenarios to maybe look at utilizing these tools and then the options that are within them. Okay, So starting out, the first thing I want to cover with everyone today is the actual production history. And this is actually a policy that sounds about as straightforward as you can get. Because it's actually looking at your production and your historical production over time as a baseline to design policy for the upcoming year. So just like it sounds, because it's based on production, this actually protects against losses to your crop yields. It's only your crop yield. It's this idea of only focusing on production. And it is based on the farms production history. So if you've got your farm records, those are really important to know what your history has been because that's gonna be the baseline of how this policy actually works. Now there's a number of coverage ranges that can be used within the policy itself. And so the ranges are from 50% to 85% of that APH, or the actual production history of your farm. And it goes up in 5% increments. So you can start out at 15:55, go to 60, all the way up to 85. And many cases. Now there's a little bit of caveat with that because when it comes to fruit, apples are the only fruit that actually gets capped at 75%. The other fruit options within the policy do allow you to go up to the 85% coverage. And so as you think about that for your apple production, you think about what you typically produced in a year, your average production, you're only going to be able to get coverage on 75% of that versus where say Great e.g. would be able to do up to 85. Potatoes and sugar beets are the only vegetables that are allowed to exceed 75%. In the vegetable side, they're kept a little bit more. There's a few more options in there for different types of vegetable crops, but you only get those two that are allowed to go beyond the 75%. So it's some different nuances depending on what you're growing. Definitely what some of the circumstances in terms of the crops. And we'll get a little bit more specific into some of the crops here as we go along as well. The other thing I want to highlight, and you're going to hear me mentioned this a couple of different times throughout the day is that these are premium payments that go along with these policies, but they are also highly subsidized. While there is a cost to the insurance, you're not paying the full thing. And so we'll actually have a point where we will highlight how those subsidies work a little bit. But it's just as important to understand that while there is a cost of the insurance, they are subsidized by USDA and the US government. And so you're not paying the full extent of what the cost is associated for the policy. As I mentioned, we want to talk a little bit more about the insurable crops that actually work in these policies. So let's start with fruit. There's actually only four crops that are covered under the actual production history policy. And that's our apples, blueberries, peaches, and grapes. Now at each one of these, there are some production minimums that you have to reach. And essentially what it is because we're talking about fruit. And we know that the first couple of years, in some cases up to five years for some of these crops. You're really not at a point where you're getting a whole lot of production out of them. They've got a mature to a point where they kinda get to that full fruit bearing capacity. And that's kinda how the insurance looks at it too, is that there's gotta be something there for it too. Try to protect and actually offer coverage on. And so there's some production minimum. Minimum is you have to meet there the historical APH base or basically the amount of years that they're going to look back to try to come up with an average is going to range depending on the crop from the past five years to the past ten years, depending on what you've got available, you don't have to have a minimum of ten years to be able to get insurance, but they're going to want to use ten years if you've got it available. If you've only got three or four, then they'll take that into account. But they're going to look at a longer time period for some are shorter time period for others. The other thing that's important to realize about insurance options is where they're actually allowing the coverage at. One thing that's very true across the board for the idea of insurances isn't widespread across the state. Or is it select counties? And as you think about not just the specialty crops that are grown, but even we start to think about even some of our field crops that are out there. Not every county has coverage. And really what it's based on is, where is the majority of these crops typically raised? So the insurance coverage is based on kind of where we see a lot of this production within the state. In some cases, we're talking a handful of counties, only four or five. In other cases, when we talk about some of the vegetables here in a moment, we may be talking a lot more, maybe 15 to 20 counties within the state, or maybe even a little more than that. But the insurance can also be based on different aspects of the production practices that are going into the crop. So e.g. you can base on the varieties with apples and grapes in certain crops, you can actually look at where you think about growing it for fresh versus processed. And then a lot of cases you've got the option to look at it from organic, organic transition. Or if you're not looking at those kinda more than traditional non-organic is a standard as well. In some cases where you are actually using irrigation, where that's a standard practice that you can see within a crop. You can insure based on irrigated or non-irrigated. And so a lot of that is the same when we think about the vegetable side of things. There's a few more options on vegetables for this policy. We've got cabbage, green peas, cucumbers, mainly for pickles, potatoes, snap in Lima beans, sugar beets, and tomatoes. Now these don't have the production minimums, but they do have rotation requirements. And so this kind of comes back to production practice thinking that you can't continually raise tomatoes in the same field year after year. From production standpoint, we know that's not a good idea. We also know that the same crop year after year can create additional issues of disease. And so the policies are kind of looking at that type of thing too. So the standard that you're going to see a lot of cases is at least the requirement of two years and rotation. There may be more depending on the crop, but often it's usually around two years. The base for all of these in terms of looking at your history, is gonna be ten years for the vegetable crops. So a little bit different on the fruit where we get a little bit more variability there, vegetables a little bit more standard at ten years. Again, only in select counties. We think about where we typically see these vegetables grown at. But they can also be insured based. Again, production practices. So machine harvested, which we think about cucumbers, tomatoes and snap beans, kind of a standard thing. We see. Time of the season is actually an insurable option for cabbage and green peas, and then also the type of plant. So potatoes and processing beans, there are some options with it, those based on the type of plant you're actually raising. Now all of these also have a case where you need to look at grower contracts. There's a requirement that you have to have grower contracts and be able to showcase those to be able to get the insurance. Now a lot of cases that tends to think this is for only large growers. There are cases where we have smaller size farm operations that do have grower contracts. And the important thing is to understand that you've essentially you have a market for that vegetable crop that you're raising. And it's not so much looking at maybe more of a farmers market or a CSA, those type of things. It's looking more at a standardized market that you'd have with the contract. Now within all of these, they're actually a number of options to try to help maximize the yield that the policy is going to cover. And so we look at these, there's a number of different options. The first is a transitional yield or a T yield, and it's often called, There's also yield adjustments, yield cups, or yield exclusions. So we're going to walk through these here a little bit to kind of illustrate how they work. Now in many cases, what we're talking about here with options, these are add-on costs. And so you actually have to pay a little bit extra in that premium to be able to utilize these. But as we're gonna kinda showcase, there are some reasons depending on your situation where it might be worth actually making that payment and then paying for that add-on coverage. Now with a, a T yield, what we're talking about is this is for individuals that don't have that complete production history to create that average APA. And so what it is, it's calculated for each county with or each crop with an accounting, excuse me. And it's often used in the first three years of the insurance policy. And depending on how much production history you have, determines the actual yield number that you're gonna be able to use. So there's a standardized t yield is calculated every year. But based on how much history you have, how much of that T yield you get to use as a factor. So e.g. if you have one year of history, in the other years you get to have 80% of the T yield. If you've got two years, you get to use 90% of the T yield to fill in those other gaps that you don't have. And then if you've got three years of history, then you can use the full t yield amount. I want to show an example of this to kinda help illustrate how this actually looks. So first thing we have is when we're looking here at the table, this is actually a blueberry example. The T yield for the county is this 3,500 pounds. And in the first year, what we see is we've got one year of history at 4,000 pounds. Because we've got one year of history. In the other three years we're looking at here, I'm just using a four-year example. We're using 80% of the T yield to fill in the gap for what we don't have. Now if we move over and we think about two years, once we've got two years of history. Now in these gap years, we're talking 90% of that T yield three years worth of history. Now we've reached the point where we're using the full hundred percent of that teal to fill in that remaining gap in this example. But ideally, we want to get to the point where we're not using the t yield because the idea is that our yields on the farm are gonna be better than these transitional yields. And we want to get to the point where we're really utilizing our own production, increase our coverage. Because one of the things that we can actually see here is that over time, as we start to add more of our production, we're going to see a better and better APH yield that we're using for our coverage. And so that's, that's kinda the idea that the transitional you'll kinda helps to boost up your coverage so that you've got a few more years in there to use for gaps. But ideally you're getting to a point where you're using your own yields to actually create that APH. The other option that we have is what's called the yield adjustments, where maybe as you've gone along, you, you come into this year, you've just got to really, really poor yield was a disaster yield ear. And so you've got a yield that you really don't want to really utilize. You have the option by using a yield adjustment that it'll substitute 60% of that T yield in for that poor yield that you have in that year. And so that's an option to think about where it just kinda flips out that poor yield for 60% of the T yield and kinda helps keep your average up a little bit better. Another option is to look at using a yield cup, where we're talking about where a yield cup does not allow the APH should drop below 10% each year. So even with a 60% T yield, or even if you didn't use a yield adjustment, if that average is going to come down more than 10%, the yield cup actually keeps it up higher, kinda almost creates a little bit of a floor to maintain your coverage. Now this used to be an automatic several years ago. This was something that was kind of a standard option that nobody had to pay for. But here are a couple of years ago, they changed that to now it's an optional add-on. It's actually going to cost you some money to use this. And there are some cases where you want to think about using that and we'll talk about that a little bit more. When we get to the strategy section. The other option is out there as these yield exclusions. And this is where you are actually allowed to take that yield out and excluded from the average. And so instead of basing things on, say, a 10-year average, you would only be basing it on a nine-year averages and just kinda forget that year ever happened. The caveat to this is to be eligible to use it. The county yield has to fall below 50% of its own APA. So you're talking basically about a countywide type disasters that where this actually gets used. So it's not, not a standard to be able to use this all the time. But if you think there's a possibility of something to maybe want to have as a safety net, especially depending on the circumstances that in a county, especially if you're in an area where your production is very similar to the county, this may be something that's worth looking at adding onto your policy just as an added safety net. Now with all these policies in place, one of the things that we want to look at next is how do we actually look at determining the actual coverage that we're gonna be guaranteed here. So the production coverage guarantee is actually calculated using that APH yield that we've just talked about trying to make sure we're maximizing by that percentage coverage of either anywhere 50-85% depending on the crop. So if we think about an example of what this looks like, so yield times coverage equals the guarantee. If we kinda stick with our blueberry example here, and we've got 4,000 pounds is our APH normal or average at 75% coverage, we're looking at about 3,000 pounds that we have as our production guaranteed. So what that means is. If we have a yield loss and how we calculate the yield losses, we're going to compare the actual harvest yield for a year against this guarantee. So if our actual yield is lower than this coverage yield, we're gonna get what's called an indemnity payment or a loss payment for the difference. Now, valuing this yield is done by an elective price that is actually set up by USDA, the Risk Management Agency that governs these insurance policies. The election of that is quite a process to try to understand, but they do release these elected prices. And I want to show you an example of how we think about what this indemnity or this loss payment looks like and how we kinda come up with the payment itself. So we kind of move into our example here where again, we've got our 4,000 pounds of the, of our APH. We're gonna have our 75% coverage. And then the 3,000 pounds for production guarantee, say e.g. that our harvest yield comes in at about 2,200 pounds. So about 800 pounds below are guaranteed. Well, the other factor here is we talked about this elected price. There's actually an option for you to determine how much of that elected price you want to use. And this price percentage actually impacts your premium. Most cases the example as you see on RMA, they're showing 100% usage. But you're going to want to work with a insurance agent to kinda look at how those percentages really impact your premium because there is that cost benefit of the higher price I use, the more I'm going to pay in premium. And at what point does it become too much of a diminishing returns for that to work? But in our example, we're going to say that's worth 100% just to kinda show the math and make this a little easier example. Then we've got our price of $0.87 per pound. And we're going to calculate this to where we essentially are 800 pounds. That's really going to be calculated by $0.87. And we come up with this payment of $696 per acre. Now this is before we've paid for any premium. So remember this is, this is pre premium, premium dollar that you're going to get. But this is essentially how the calculation works, where we walked through, What's our, what's our coverage? We worked down to our coverage guarantee. Then we think about what we actually have for harvest. We value that essentially that loss. And then we work our way back to this indefinitely lost payment that we're going to receive. And so that's essentially how the actual production history policy works. Let's shift gears now and talk a little bit about the actual revenue history. So this is a little bit different because this one protects against losses to farm revenue. So where before we were talking about just production, this is based on revenues. So this is actually a combination of yield and price. But the focus is really on total revenue because this is based on historical revenue records. So your farm records are really important to be able to showcase what's been our typical revenue year in, year out to try to determine what that actual history looks like. Same coverage ranges is what we see with the APH policy. Again, premium payments are subsidized. The only catch with this program, as it, it's only in Michigan allowable for sweet and tart cherries. So if you're erasing cherries, this is something that you want to look at. When we think about the two crops they've got for, we'll start with sweet cherries. There are production minimum's 4,000 pounds and one out of the past five years. Again, we're trying to get to the point where we're at that full fruit bearing level. The base APH is gonna be on ten years and they actually should say ARH, excuse me. The select counties, again, we're only talking about basically our cherry raising counties within the state. But we have a lot of options in terms of insured because with sweet cherries, we're talking about fresh versus process versus those that are going to, even Kanter's is actually a separate category. So depending on how you're raising those, you're talking about a number of options. Plus we've got our organic, organic transition and non-organic options. And then also irrigated versus non-irrigated tart cherries. Same basic idea. The production minimum is a little bit less at 3,900. In one out of the past five years, the history is still based on ten years. Only again in our cheery raising counties. But a few less options that we have for sweet cherries were chart. We're really looking at whether or not it's organic, organic transition, non-organic versus also irrigated or non-irrigated. And you can mix and match some of these. I should highlight that because you can have e.g. organic and irrigated as a category or you could have on the sweet cherries and option of processed organic and irrigated as well. So there's a number of little combination depending on what your production practices are that you can actually get. Um, some coverage based around and make sure you're covering your actual production practices. There is some options to try to maintain the revenue at a higher level, like we saw with the APH, we're trying to maximize that revenue. And we're talking in this case about using a transitional revenues. So a T revenue reality yield before we now have a T revenue. This kicks in where very similar to the eula adjustments so that when the revenue falls below 60%, we can actually use this revenue substitution and put in this T revenue, which is calculated for each crop within the county. But even though this is a revenue policy and revenue is based on yields and prices. There are a lot of features that we talked about in the APH option that are not available. We don't have a yield adjustment, no yield cups, or even a yield exclusion option. This essentially is the only revenue substitutions, the only option within the actual revenue history policy. But calculating the coverage guarantee very similar to what we showed with the APH. Now we're taking our actual revenue history or average, multiplying it by a coverage level and coming up with a revenue guarantee now. So if we have $3,500 in revenue at 75%, we're looking at a little over 2,600 in terms of actual revenue guarantee that we've got as our coverage line. But this kind of highlights why it's really important that we've got good farm records. Because those records determine the revenue base that we're going to use for this coverage. And so when we think about a revenue guarantee, if the actual revenue that we receive in the year is lower than this guarantee, we're gonna get an indemnity loss payment. And I want to highlight that it's really important to have good records because even though we don't have anything for yield, the annual revenue can be lower even with good prices. So understanding what our yields are and how those yields impact the overall revenue. We want to have good records to showcase that total revenue for the farm. Because we can still, even with really good prices, we're not going to be looking at prices in terms of coverage. That's not how army is going to look at this. They want to know how the farm actually did really good farm records is going to make the difference in terms of whether or not this policy is going to be really workable for you as an option. The loss payment really is dependent on two factors. We've got an annual price and then a payment factor. A little bit similar to what we showcase for APH. The annual price though, is what values the production. But they use either an average price of the production that was sold. So we do look at those records for what the price is you received were. But they may also use what's called an appraised value of the unsold production. So they'll do an actual appraisal to try to figure out if you've got, say inventory that you haven't sold, depending on when this is calculated, they're going to try to come up with a value that way to figure out what your revenue is. So again, good records are gonna be really important to help you through this. The payment factor is a percentage that you elect to reduce the premium. So very similar to what we talked about again with a pH. This is going to reduce the indemnity payment. And the default on this starts out at one point and zero or 100%. It can be lower based on the coverage level. And I want to show you an example of how this actually works. Because one thing I forgot to highlight with this is even though this is only for tarp and sweet cherries. This program is kind of a pilot program where they're looking at the option of do we use this for more than just the few crops were trying this out on. This. This may be something that comes along the line, that's another option for other types of crops. So in the loss payment calculation, we've again got our coverage levels here at the top or 50 all the way up to 85%. If we stick with the theme, I'm, I've been using a 75%. This minimum factor of 0.67 comes into play. In what that means is that when you select 75%, the, the actual payment factor can fall anywhere between 0.6, 7.1, 0.0. I'm going to show you how that factors in here. We have our payment calculation, we've taken our revenue, we're going to subtract it from our actual revenue we received. Multiply it by this payment factor that can range between 0.6, 721 to get our actual payment. So we look at an example of this. We start out with our $2,625. Our actual revenue is only came in at $1,750. And so we've got this payment factor that we're going to say, is it 0.85? So kind of in the middle between our range. The final payment is where we figure out what our actual loss was here. Multiply it by that payment factor, and so we get this payment of $743.75. What's really important to remember is that this payment factor is really crucial in an effects that premium you're gonna pay. So it's kinda, this cost-benefit thing kinda comes into play again where we think about, does it make sense to use this? So this kind of highlights the way that the actual revenue history, a lot of math involved with some of these. But the basic idea is you're trying to figure out what your losses, what kind of payment factor you're going to use in figuring out that loss on the revenue side to come up with that indemnity payment or that loss payment. Now with both the actual production and actual revenue history, you can base this coverage on crop units. And so these insurance units are actually really important. The first is what's called a basic units. And these are kind of widespread across to actually multiple policies. You can have a basic unit is you're dividing the crop by the ownership split. So e.g. if all of it was owned and rented or excuse me, all all your own and rented land could be considered a basic unit where you could also have anything that's on a shared rent with your landlord, could be another individual basic unit. So you could actually have a couple of different basic units depending on how the ownership of that crop is really kinda split out. The other option is what's called optional units, where you take the division of basic units by townships section. So we're talking about a bigger area and really getting down into a smaller area and differentiating this out. Optional units are really helpful if you've got fields in different townships that have a lot of significant variability. So maybe you've got some really sandy areas that you're raising some props on or maybe it's more of a clay soil and some others. You want to make sure that you're thinking about the significance in those because you have to keep records on the optional unit. So if you've got by fields or by field, by field, you've got to keep good records to separate out the revenue or the production on those fields to be able to track for the insurance. And so those are essentially the unit options you have. As I mentioned before. The premium is in subsidies is kinda reoccurring theme and I wanna kinda highlight for you how those work. First ones to remember that insurance is not free. There's really no free program out there. And it's a matter of how much you're going to pay for that insurance. And the more coverage you have, the higher that premium is going to be. That premium can be based on those crop units. So if you go to an optional versus a basic unit, you're going to pay more because we're talking about a much smaller area, a much more refined look of coverage. The coverage levels you've got from that 50 to 85% is going to increase or decrease your premium depending on which direction you've got. Those optional add-on features that we've talked about are going to also influence the premium you paid. The important thing though is, as I mentioned, those premiums are really subsidized and that subsidy is actually based on your coverage level. So with this example here, we can see that as we look at 50% coverage are subsidy is at 67%. And so we get most of our subsidy on the lower coverage level. As we go up to the 85% level, we get less subsidy. And the reason for that kinda makes sense if you think it through for a little moment, that at 85% coverage, there's a higher probability that you're going to maybe have a loss compared to the 50% level. And so the subsidy kind of goes down based on that, based on the fact that there's gonna be a higher probability of loss. In that case, they're only willing at the USDA and the US government to offer to cover so much where it's an expected payout. And that's kind of a common thing with insurance in general, is more likely payment, the higher the premium you're going to pay because of that likelihood of them having to pay out money to you for that coverage. So that's kinda how that thought process works a little bit. So that covers the actual production history, actual revenue history. Some of these things are also true as we now shift into looking at the old farm revenue protection. And I want to highlight that this is actually a really good option for folks that have a multitude of commodities, especially if you've got crops and livestock because it will cover both of those. And this is a great option for diversified farms. You can also combine the whole farm revenue protection with other insurance policy. So if you've got crops that have a pH policies, you can look at maybe doing some combination there. You want to talk to your insurance agent about how you want to look at the difference in coverage and pay out in premiums to do that. But you've got an option to mix and match some policies. It's really maximize your protection and minimize your risk potential out there on the farm. For the whole farm revenue protection farms have up to 17 million in insurable revenue. Can be me covered. So that's your cap that you're basically your revenue guarantee caps out at 17 million. And I'll show you example of how they calculate that here in a moment. Purchases for resale have to be less than 50% of the total though. And when you look at that revenue, and then if you've got anything that's value-added, those are not considered insurable revenues. So e.g. grapes, if you're selling wine from those grapes, the wine revenue is not considered part of that insurable revenue. If you're raising lavender flowers that you're going to use, say for lotion. That's value-added as well and would not be considered as part of the insurable revenue. Now, taking that aside, one of the nice things that this program does offer is that the coverage can extend to a lot of different markets. So whether you're talking local or regional, even farm identity preserved is one that they list specialty markets. Even direct-to-consumer markets are the, are actually covered under this program. So you think about your revenue from different markets that you're involved in. You've got quite a lot of different options that you can kinda maintain that coverage. Now, a key phrase that you have to get familiar with is this idea of the maximum farm approved revenue. This is essentially the, the actual revenue history that they're gonna be looking at for the farm. And they're essentially looking at what that approved revenue is, is what they can verify is your is your actual revenue from historical documents. So again, farm record, very important to this. And what it looks at is depending on where your production or your revenue levels are, based on the coverage level. So we see these same coverage levels we've been talking about already for the other policies, depending on how they're structured. So e.g. a, 20,000,085% coverage gets you the 17 million. If you're going down into the 50%, 34 million gets you the 17 million. So you can kinda see how to use those coverages are the coverage levels to get to the 17,000,001. Thing to remember though also is that we see this commodity count. And so you have to have a minimum of at least one commodity to be able to do this, to be able to have coverage in the 80 or 85%, you've got to have at least a minimum of three commodities being grown. So again, this is, we're highly diversified farms. This may be a really good option for you to look at, especially on larger scale farm operations with multiple commodities going beyond three, really good option to think about. To be eligible for the program. You have to meet certain requirements. You've got to have five years of consecutive Schedule F tax forms. And you've got to show some evidence of the farm has been expanding over time, whether that's increased acres, you've added some equipment, e.g. a. Greenhouse that you built or that you're building, or anything that demonstrate that production has expanded beyond just price changes so that revenue has gone up because of actual things you're doing on the farm. Not just because we suddenly had high market prices like we've seen in some cases for some crops here in the last couple of years, there are some caveats are exceptions to that. If you're beginning or a veteran farmer, you only need three years of Schedule F information. If you're physically unable to farm for one out of the five years, you can use a sixth year to actually fill in the gap there. If you for some reason couldn't actively farm for a year. And then there are the cases where we've got some farms that are considered tax exempt entities, we can use some third-party records to actually demonstrate the same history you'd normally see in a tax return. For this program, there is a revenue substitution like we've talked about for the actual revenue history policy. Again, it triggers when revenue falls below 60%. It's using your farms simple average of the allowable revenues. So again, going back to your history, based on a five-year history, and it will replace that poor year with 60% of whatever that average is. If you're below that 60%, it actually will basically kick it back up to 60% of your, of your simple average revenue history. And so that's really a helpful thing that at least kinda tries to maintain your coverage level. As you think about basing that approved revenue, that maximum proved revenue, they're going to try to maximize that a little bit to whole farm revenue also has a revenue cup where like the yield cup, the revenue will not drop below 90% of whatever the previous year's approved revenue was. So whatever that level was the last year, you've got that option to still use that and maintain it at least 90% of that level. This is an add-on you pay for what the premium, but sometimes it's a really helpful one to have. You also have a revenue exclusion. Same basic ideas we've talked about before, where the yield exclusion, you replace or exclude a revenue from a lowest yield or excuse me, Lois year. And then that approved revenue is going to be based on only the remaining four years out of that five. So you go from a five-year average to a four-year coverage on this is very similar calculated to what we've talked about before. Revenue times cover are truly improve revenue times coverage gives you the guarantee. So if you're at 10 million, at 85%, you're looking at 8.5 million, which used to be the old cap number before some changes late last year. Again, farm records very important to determining your proved revenue. And we calculate things in a very similar way. Your actual revenue, if it's lower than the coverage revenue, you're gonna get a loss payments. But one of the things that's really careful about is they're going to actually look to try to confirm your revenue based on income taxes. And there are some other ways to kind of bring out where you can showcase this without just taxes. But taxes are still the number one way they want to be able to verify and confirm what your revenue is. So again, we come back to farm records very important. Make sure you've got your tax information are really important to this program. The micro farm programs. The next one I want to highlight, it's very similar to the whole farm revenue protection. This is for farms up to $350,000 insurable revenue. So a lot lower number than what whole farm is. If you had a micro farm program last year, then you can actually bump that 350 up to 400,000. So that's kind of a nice thing for those that had a policy previously. Key differences from the whole farm revenue. You only need to have three consecutive years of farm tax returns. If the farmer has been expanding, you can actually possibly get that approved revenue increased. So there's ways to actually continue to improve that, that coverage level a little bit. If you can show some expansion, you can reach 80 to 85% coverage without having to have three or more commodities. The only drawback here is really that you can't have it combined with other insurance policy. So they want to use a pH e.g. you'd have to choose between this or the APH policy. But one nice thing it offers is there is an option to have a value-added products as part of the insurable revenue. So again, we think back to our wine or lavender lotion. Those are options you have in this program. So this kinda helps for some of the especially smaller-sized farms are looking to do some value-added products. It's a, it's a nice little add-on that is part of this program. The last program I want to cover and kinda highlight is these insurance options called the SEO or ECO, which is the supplemental or enhanced coverage options. These are County are based on county base yields are actually can be County base yields or revenue depending on what the underlying policy is and it pays after those have been finalized. If you're doing yields based on the county, when those county yields are really finalized, whenever the county revenue is finalized. And again, we're looking at premiums that are subsidized. The thing is that because this is county based, it's not the same as your individual coverage. This is trying to essentially stack on top of what you're already having what it looks to do, e.g. the supplemental coverage will start at 86% and go down to whatever your base coverage level is. So e.g. if you have an APH policy at 75%, it kinda covers that 75 to 86% level. But it's going to base it on county level information versus your individual. The enhanced coverage option goes from the 86% where the SEO stops and goes up either 90 or 95%. To try to give you some additional coverage. I want to show a graph that highlights this. Essentially what we're looking at is when we think about our own risks coverage here on the farm. This is this green and red area. We are covering this example 80% of our risks with the APH policy. We've still got 20% that were on her own. What the SCO and ECO tried to do is try to cover some of this individual risks by using some county information. The, the idea is that if you, depending on where your coverage level is, these can be nice option to have their premium base though B. So you're going to pay for them. So you want to think about where your coverage level is. Because if you're over here on the right and you're thinking about 85%, you're not really getting a whole lot of coverage. You get in 1% of extra coverage with the SEO option. But you'd still be able to get up to another four to maybe 9% on the ECO. And depending on what you look at in terms of how the premium works, that may be advantageous. What I really want to highlight for everybody though, is that the SEO is available for most fruit and vegetable crops. Eco is not yet, but we're in a farm bill year. And there's been a lot of talk about trying to increase insurance options, especially on her specialty crops. And this seems to be a program that RMA is very fond of, is that they really want to try to see promoted and push. So I'm guessing that we're going to possibly see this as an option that comes along in the next farm bill. That's my best guess on this. So something to look into the future option that's sitting out there. I also want to go over here some of these strategies and recommendations to think about. I've, I've thrown a lot of policy stuff at you. I do see some questions in the chat that we're going to start covering here in just a moment. I really want to highlight for folks that is you're looking at the APH policy and especially from the and even the actual revenue policy would probably follow some of these same recommendations. You want to start thinking about the 60 to 65% coverage area. I've talked to a couple of different crop adjusters and they kinda give me the same message for the best value tends to be starting out in that 60 to 65% range. 70 to 80% coverage is going to depend on the premium. The premium is gonna be different in each county that the farm is located in. So wherever your base County is, your home base, as I should say, for your county, you want to look at those premiums because as you go up, you're going to have a higher premium. If you've got the option to go to 85%, that is going to be very dependent on premium because there's often a noise full jump, 80-85% coverage when it comes to that, that premium payment. If you're irrigating, you may want to consider something below 60%. Because really if your biggest concern is drought and you've got irrigation to offset the concerns of drought. You have to think about is what are you asking the insurance to cover and what is appropriate for those non drought related risks. And again, your best coverage level, it's going to vary by county. And so you're going to want to work with a really good insurance agent that knows your county and knows the crops there to kinda help give you some guidance on what makes sense for your farm. I recommend people think about basic units unless you've got really significant yield differences to warn going to optional, the jump between basic and optional units. And again, in this premium costs can be pretty large. Basic units are definitely the cheaper option and in most cases they're the most practical sense. But, um, It's a case of where you've gotta look at where that difference is for your farm. Beginning farmers. Yield cups are especially helpful in the early years. In my opinion, something to really look at. Very helpful to kind of keep those those APH or the ARH up at the arcsine, the APH up at certain levels. The nice thing is for beginning farmer, you get a lot of added benefits, e.g. for yield adjustments. Instead of having a 60% replacement, you get to use 80% of that T yield to replace a poor yield. If you are a beginning farmer or you've never plan on a crop before. So you can be established farmer and it can be a brand new crop to you. You can actually use 100% of the T yield to calculate your APH starting out. So that's a really nice advantage for folks. The other thing is that the beginning farmer, your premiums get an additional 10% off. So that's something to think about and looking at these policies that you've got a few little other options. And then I also highlight for beginning farmers that the micro farm program is really good for starting out diversifying the firearm, especially if you're looking at those value-added products, which seemed to be very popular and the smaller the beginning farm area, just trying to find some additional revenue, it's really good option to look at. The whole farm revenue is really good for the larger farms that are very diversified. Especially if you don't have any pH policy for the other available crops on your farm. Just some strategies think about as in cases where you want to pick through, maybe thinking about what your situation is and where you're starting out from. A really helpful. We do have some information here, some bulletins that we put together to MSU that highlight the insurance options for fruit growers. And we'll get those in links to those in the chat here, but I've got them up on the screen. And then I'm going to change the screen here. And like I said, I'll get those links in the chat for everybody. And we're gonna go ahead and open it up for questions here. I do want to ask everyone to please take some time to complete the evaluation survey for our sessions. Credit keep that they're on the screen for an extra moment there. But with that, we will go ahead and I will go ahead and actually, in this presentation, then the other thing I will do, I will get that QR code back up here for everybody. There we go. Alright, so a couple of questions here. I don't want to get those links in the chat. Both of those are, are there now for those resources. And I do want to encourage, if you've got questions and you want to open up your mic, feel free to do so. One question I see you, you're gonna chat. Does the entire risk management section focused on your insurance options as you can tell? Yes. Yet for most part, it does. We is the payment factor in, opt in, or out reflected in premium amounts? As you think about other crops especially, and you're looking at what some of your options are. There, are there's not really an opt in or opt out on the payment factors. It's really what you want to set it at. So you're going to have to pick a, pick a factor that you want to use in kinda think about how that works as you're looking at the different crops, there's going to be different payment factors. I should example on the screen earlier. The but you're gonna have a different thing to look at with your insurance agent to kind of figure out what's the right mix of coverage in premium. And so you think about what you're going to get this potential payout versus the coverage. And one of the thing to remember about the when it comes to risk, insurance, we're not going to get rich with insurance. The idea is we're trying to our best insurance as the ones we never get a payment on. We it's kinda like I always reference back to like car insurance. We never want to be in a car accident, but we have the insurance just in case something happens. Crop insurance is the same way. We would much prefer to have a good year with good revenue, is good production, and not have to worry about the wind to use our insurance. We're trying to figure out what's the right amount of a safety net that we want to use? So as you're thinking about payment factors, what are, what's that safety net needs to look like for your farm operation? And that question is going to be different for every farm, every location. Especially as you're thinking about looking at maybe basic or optional units, you've got some different things to consider. There.