Crop insurance failing many area avocado growers, agriculture experts say

By: DARRYN BENNETT - North County Times | Monday, December 3, 2007 2:06 PM PST ∞

SAN DIEGO COUNTY - Many area avocado growers taking stock of their losses after last month's wildfires burned 5,880 acres of county groves have discovered that they have ineffective crop insurance coverage - if they have any at all - agriculture and insurance officials said last week.

That's because poorly written, complex and overpriced policies have left avocado growers with few good options, said Wayne Shortes, chief executive officer of Golden State Crop and Insurance Services, a leading California crop insurance brokerage.

"Avocado policies try to protect against too much and don't accomplish the goals set up for them," he said.

Like most crops nationwide, avocado insurance is subsidized by federal funds. Sixteen private companies are authorized to sell and service the insurance, and the premiums are shared by the government with the goal of offsetting the need for disaster aid funds.

But weak political support has hampered the process of streamlining coverage and reducing the costs of the avocado program, which was written under the 1999 amended Crop Insurance Relief Act and is still in its pilot phase in Congress, Shortes said.

Of the estimated 62,000 acres devoted to avocados, only 53 percent - or 33,133 acres - was insured last year, according to the Federal Crop Insurance Corp., an arm of the U.S. Department of Agriculture.

Agriculture officials said last week that those numbers prove that avocado insurance isn't nearly as effective as other crop insurance plans.

Pricey policies

Although other crops don't necessarily receive higher subsidies, avocado policies are more expensive because the federal crop insurance program was designed to protect against market fluctuations, in addition to production losses, Shortes said.

Of the state avocado growers who are insured, at least 90 percent have policies written at a level called CAT, short for catastrophic coverage, Shortes said. Premiums for that plan are 100 percent subsidized and growers only pay $100 in administrative fees annually. But the plan only pays out on crop losses greater than 50 percent, and only at 55 percent of the market rate.

"If you think of coverage as a ladder, (catastrophic coverage) is the bottom rung," Shortes said. "But for avocados, to get to the next rung is a big jump in cost."

In the Midwest, the "heartland of crop insurance," soybean and corn farmers, for example, can purchase double the level of catastrophic coverage much cheaper than avocado growers can. Increased coverage costs as little as $12 an acre for most crops, but avocado growers are charged as much as $100 an acre for the same "buy up" protection, according to federal crop insurance guidelines.

Mike Hillebrecht, an avocado grower with catastrophic coverage on his 65 acres in the San Pasqual Valley and Southeast Escondido, didn't lose many trees in the recent fires, but said he had plenty of fruit damaged by Santa Ana winds that blew through in 90 mph gusts. He may receive some compensation from his insurance plan, but he said that even if he doesn't he could never consider buying up on his policy because of simple economics.

"It's pretty pricey," he said.

Complexities and confusion

The other complication local farmers face is that because of some of the complexities of avocado policies, some insured growers might not receive compensation for lost crops until early 2009, insurance experts said.

If a crop is a total loss, the farmer may collect reasonably quickly within their policy limits. But if growers only have a partial loss, even a sizable one, they usually have to wait until the salvageable crop is harvested before the claim is settled.

The harvesting of avocados on the tree now begins in February and will run through October 2008. Insurers normally wait for the California Avocado Commission to release the annual seasonal average price for the fruit, which the insurance industry uses to value the crop and losses.

That report is scheduled for February 2009, according to the commission.

However, even growers with well-insured crops will have to dig deep to find money to replant trees or melted plastic irrigation pipes which aren't covered under crop policies, Golden State's Shortes said.

In Fallbrook, Bob Schaar, 52, grows avocados on his Rancho Los Lobos on Stewart Canyon Road. He lost his home and at least $200,000 in crops in the Rice fire last month, he said.

"That (the ranch) was my dream and it went up in smoke on Oct. 22," he said, adding that he's not expecting much from his catastrophic insurance.

Schaar said an insurance adjuster told him that if he "doesn't pick one piece of fruit" all year he'd get a check for about $23,000, but that if he salvages any of his harvest the deductions start adding up quickly. Either way, Schaar said he won't see any money until next year at the earliest.

"That's bullcrap," Schaar said. "The governor stood here on my ranch, shaking my hand and telling me he was going to help me rebuild. But all the politicians can do is posture."

Schaar's ranch was one of the devastated properties Gov. Arnold Schwarzenegger viewed during his October tour of the county.

Still, some agriculture officials said in recent interviews that part of the problem rests with the avocado growers.

Risk perceptions

"The risk perception has been low in the past for farmers who think they can control God and everything else," he said. "But, you know, farming is inherently risky and I've already had farmers telling me, 'Aw, hell, this (fires) will never happen again," Shortes said.

Mike Crouse, a Bonsall avocado grower who says he doesn't have crop insurance, said that owning a policy might have helped him out last January when he lost 12,000 pounds of fruit during the frost.

"I just don't know the ins and outs of how the programs work," he said.

Crouse's crops weren't damaged in the recent fires, but Shortes said his mindset is typical of many avocado growers in the state. Some agriculture and insurance officials said that in addition to rewriting the program, efforts to educate growers about insurance options need to be beefed up.

"Crop insurance is confusing. People think it works like auto or home insurance and it's nowhere near that way," said Eric Larson, executive director of the San Diego County Farm Bureau. "People get discouraged."

In Fallbrook, Schaar said that although depression is starting to set in, he has no plans of closing the ranch.

"I'm not giving up," he said. "That's not in my makeup."