All signs point to lower crop insurance premiums for farmers in the U.S. – especially in the nation’s Corn Belt – according to an Iowa Ag Review report in its Fall 2009 issue. Through analyzing trends in corn crop drought tolerance in its “Drought Tolerance and Risk in the U.S. Crop Insurance Program” report, it looks like the current risk to American crops is low enough to no longer justify current crop insurance premiums.

Corn and Soybean Crop Losses Ratios Have Been Declining

Iowa’s report shows a significant difference between crop losses in the 1990s compared to the first decade of the 21^st Century.  According to the report:

“…the overall loss ratio for the U.S. crop insurance program has indeed been declining. The average loss ratio from 1989 to 1999 was 1.12. The average from 2000 to 2008 has been 0.88. And there has not been a loss ratio above 1.0 since 2003. However, a declining loss ratio, in and of itself, is not proof that crop risk has been reduced. For example, the decline could be due to good growing-season weather. There have not been widespread losses in the Corn Belt due to drought since 1988, and Corn Belt states account for more than half of the total liability in the program. Before we can conclude that risk has been reduced, we need to account for whether the decline in loss ratios could have been caused by a string of better-than-average growing seasons that could change in the future.”

Corn Crop Drought Tolerance Is Increasing Over Time, Too

The Iowa Ag Review report also found that data suggests that crops like corn and soybean have become more drought resistance, compared to how crops dealt with similar conditions over the past few decades.

“…the data seem to support the idea that corn has become more drought-tolerant over time. The evidence for soybeans is a bit mixed. Percentage yield loss due to drought is lower in 2000–2008 than in 1980–1989 for all droughts except for the most severe category, while there is no clear pattern for bushel-per-acre loss. But for both corn and soybeans, the evidence seems strong that the percentage of yield lost due to drought has declined over time.

For corn, a return of a 1988 drought would reduce yields by 31 percent in 2008, which is far below the 45 percent losses from the same drought in 1988. This is a reduction in yield risk from drought of 31 percent. For soybeans, there has been less of an increase in drought tolerance than for corn. But for a 1988-style drought, estimated losses have been reduced from 28 percent of drought-free expected yields to 23 percent—a reduction in drought risk of about 18 percent.”

Crop Insurance Premiums Are Based On Past Risk, So Reduced Risk Demands Reduced Premiums

In simple terms, U.S. crop insurance rates are determined by the history of risk associated with that particular crop. Since that risk has been demonstrated as declining from the 1980’s and 1990’s compared with the 2000’s, it is reasonable to assume crop insurance premiums would decline, as well.

“The maintained hypothesis that underpins all premium rates for the U.S. crop insurance data of a constant percentage yield risk over time is not supported by the data. Both corn and soybean yields in the Corn Belt are more tolerant of drought today than they were in the past. Because drought is such an important source of yield risk, this finding implies that Corn Belt crop insurance premiums are too high.”

And the impact of lower premiums would be incredibly helpful to farmers saddled with high insurance premiums where most pay in much more than they draw out.

From the report:

“The impact of lower premiums on farmers is straightforward: if premiums were to drop by 40 percent, then the premium that farmers would have to pay for the same level of coverage would fall by 40 percent. Consequently, farmers would greatly benefit if increased drought tolerance were accounted for in crop insurance. The amount that crop insurance companies receive as an expense reimbursement would also drop by the same percentage because expense reimbursements are calculated as a proportion of premiums. This drop in expense reimbursement could be lower if farmers responded to a premium decrease by buying more expensive coverage.”

Live Asset Insurance Offers Options That Federal Crop Insurance Is Unable To

Live Asset Insurance provides growers insurance that covers fewer crops than the government programs at a lower cost. Live Asset provides coverage as a private company – unsubsidized by the federal government – against wind, freeze, hail, fire and flood, among others.

For more information on how our policy differs than what data suggests is an unnecessarily bloated government crop insurance program, check out our crop insurance options.

U.S. crop insurance companies, especially those subsidized mainly by tax dollars, are doing quite well from their perspective—revenue is skyrocketing. 

However, the Risk Management Agency of the USDA (United States Department of Agriculture) points to excessive gains on the part of those companies that rely greatly on taxpayers for their revenue, proportions of it that would otherwise be paid by actual customers in those companies unsupported by the government.  In essence, the federal crop insurance industry is getting extremely rich at the expense of people whose relationship to it is at best indirect.

A Crop Insurance Program Behaving Badly

This is not to say that tax dollars shouldn’t be spent to help some of the businesses that help the farmers. After all, each and every one of us depends on farmers for the food in our pantries.  However, when an organization is so reliant upon federal subsidies, one has to wonder what’s going on when they begin to report disproportionate increases in revenue that are, as implied, not accounted for by inflation or other legit factors.

Iowa State University’s Center for Agricultural and Rural Development discussed the RMA’s criticisms of the federal crop insurance program in its Iowa Ag Review (Fall 2009, Vol. 15 No. 4) – Examining the Health of the U.S. Crop Insurance Industry. 

IAR

According to the Iowa Ag Review analysis, the conclusion the RMA reached is equivalent to the one we all would reach if we looked at the reports surrounding federal crop insurance’s finances:  something strange is going on.  As is often the case when large amounts of money passes through a large amount of hands, finding out who did what and why is not the easiest of tasks.

“Insurance companies obtain revenue from premiums paid by their customers and obtain additional revenue from invested capital. This revenue must cover claims paid out, the cost of adjusting claims, any cost of reinsurance, as well as other overhead costs such as salaries. Profits are positive when total revenue exceeds total costs. The big difference between the crop insurance industry and unsubsidized insurance industries is that about 80 percent of the premium revenue that would be paid by customers is actually paid by taxpayers. This 80 percent number consists of the 60 percent of premiums that are paid by taxpayers and the 20 percent expense reimbursement. In addition, taxpayers provide crop insurance companies subsidized reinsurance in exchange for the requirement that the companies must sell insurance to all farmers in areas in which they do business.

That such a large portion of premium is paid by taxpayers heightens the importance of determining whether the RMA report of a 72 percent excessive rate of return does, in fact, accurately describe the current situation.”

Why Live Asset Insurance Is Not Like Federal Crop Insurance

In the interest of fairness, Live Asset Insurance does not cover row crops like corn, wheat or soybeans. The one portion of the agriculture market we do cover is nurseries. That being said, our policies and coverage function much differently and more efficiently than federal crop insurance models.

Since Live Asset Insurance relies exclusively upon individuals for revenue, this kind of scenario is extremely unlikely to occur, and it actually highlights the advantage that we bring. 

An increased price for your policy means a more encompassing policy—a rule that was apparently violated in the case of those companies receiving tax dollars. The quality of the policies sold remained the same while their prices soared.  If any merchant, tax funded or not, just suddenly demanded a heightened price/budget for a service or product without any corresponding gain on your end, you would rightly wonder about the legitimacy of the exchange. 

Live Asset Insurance provides simple, easy, effective crop insurance coverage where federally subsidized policies fall short.  This critical assessment of federal crop insurance programs is more reason to consider Live Asset and explore the difference between federal coverage and our crop insurance.

Live Asset Insurance earned some major industry visibility and credibility when it was featured recently in Wines and Vines Magazine’s December 2009 issue. The piece focused on the services Live Asset offers, as well as the reasons growers should strongly consider the grapevine insurance Live Asset provides.

 Shortcomings In Federal Crop Insurance Plan Demands More Options

Live Asset Managing Director David Teed was interviewed for the Wines & Vines article as the leading expert in the grapevine insurance industry.

“The company focuses on protecting perennial crops — not just vines but also trees, shrubs and other plants at locations such as parks, orchards, tree farms, golf courses and even zoos. It covers the trees at the San Diego Wild Animal Park, for example, and also covers Christmas tree farms.

David Teed, managing director of Live Asset Insurance, says the company recently targeted winegrapes as well. “Government crop insurance covers grapes and raisins, but not the vines themselves. They had a pilot program in Napa Valley to cover vines, but realized they weren’t allowed to compete with private industry, so they backed off.” He claims that his service is unique.

Teed adds that the insurance companies that protect wineries typically avoid exterior assets or set very low limits on coverage; in fact, the company is now receiving referrals from some of these insurers.”

Find More Information On Live Asset’s Vineyard Insurance

Check out the full article at the Wines and Vines Magazine website and be sure to learn more about vineyard insurance from Live Asset.

ANLA’s – or the American Nursery and Landscape Association – endorsement of Live Asset Insurance means good news and great options for the nursery industry, including wholesale plant growers, and for the landscape industry.

This new partnership is quite simple. Live Asset offers coverage for nursery, greenhouse, landscape and retail plants against extreme and damaging weather occurrences. ANLA is a group of thousands of green-industry businesses left to self-insure for natural disaster damage or left to rely on the federal government’s crop insurance program that isn’t able to provide full coverage.

ANLA members receive a 10% discount off their premiums.

This new ANLA endorsement brings expanded, valuable insurance coverage to both the nursery industry and the landscape industry, as well as plant growers, retailers and distributors in the 19 states Live Asset currently offers coverage in.

Nursery and Landscape Industry Insurance That Protects Where Other Coverage Falls Short

As the national association for the nursery and landscape industry, ANLA has been representing companies providing landscaping and nursery design services, as well as plant growers, retailers and distributors, for more than 130 years. ANLA is the leader in the green growing industry and acts as the national voice for its members and the nursery and landscape industries.

Live Asset Insurance is a firm established to address a gaping hole in current insurance options for growers of all kinds by providing coverage for live assets against extreme natural disasters.

Normally, companies offering landscaping services and the nursery industry self-insure against the risk of an acute weather event damaging their crops. In an already-fragile economy, wholesale plant growers can’t afford to lose a whole season of product and income, or wait (sometimes years) for plants to recover from flooding, hail, wildfire, or other natural disaster.

Essentially, Live Asset Insurance offers a natural disaster insurance product that is available to anyone, more affordable, and easier to use than government subsidized crop insurance.

The Details of the New Live Asset Partnership with ANLA

The details of the partnership between Live Asset Insurance and the American Nursery and Landscape Association means proper protection for companies offering landscaping services and for the nursery industry.

Coverage is available for up to $10,000,000 per policy and specimen plants can be insured for up to $100,000 per tree and $1,000 per shrub (with larger limits available on a case-by-case analysis). Field, container and greenhouse grown landscape plant material is eligible to be insured as well. Multiple locations can be insured up to $10,000,000 per location for the total at risk amount.

Live Asset Insurance coverage for the nursery and landscape industries was developed in conjunction with the ANLA board of directors and Grower Division Board. Under each policy, value of the live asset will be determined using the leading national plant valuation system, along with input from professional horticulturists and arborists.

On the Heels of ANLA’s Endorsement, Live Asset Earns additional 3-State Backing; Georgia, Alabama and California.

Not only did Live Asset Insurance earn the endorsement of the American Nursery and Landscape Association, but California, Georgia and Alabama are partnering to allow access for growers and landscapers to this unique natural disaster insurance.

That means that Live Asset Insurance for the landscaping and nursery industries is available in 19 states, including the three recent endorsements and the ANLA endorsement. This program is currently available in AL, AR, AZ, CA, CO, GA, KY, LA, MS, NC, NM, NV, OK, OR, SC, TN, TX, UT and VA. And Live Asset Insurance can be purchased either directly or through your existing insurance broker in these states.

Contact David J. Teed, CIC at Live Asset Insurance, at 800-644-0178; dteed@liveassetinsurance.com; or check out the Live Asset Insurance website for more information on natural disaster insurance.

The number of celebrity vineyards that are popping up all over the world is growing as process of growing grapes and making wine grows in popularity.  Actors, directors, and even politicians are using a part their substantial incomes to open up their own “grape-stomping grounds,” and some are actually achieving quite a bit of respect from many people within the wine community for the quality of their output—and not just for the celebrity-factor.

Vineyards require a great deal of investment of both time and money, and it’s worth taking look at the famous names that have done a fine job with the allocation of each.

A Rundown of a Few Top Celebrity Vineyards and Their Locations

Mario Andretti – The winery of this Indy/Daytona 500 victor (Andretti Winery) is located in the Oak Knoll portion of Napa Valley, California, and is well known for its pinot grigio, merlot, and chardonnay.  It spans 42 acres and, along with being quite a sight unto itself, boasts a large wine club membership; a significant roster of special events; and frequent tastings. 

Sam Neill – Sam Neill received a significant boost to his fame with his role(s) as Grant in the Jurassic Park films, and has since obtained a similar benefit with his notable efforts toward his vineyard Two Paddocks, located in the Central Otago region of New Zealand.  Though now expanding, Two Paddocks has for quite some time been known for its pinot noir and ecological friendliness.

Francis Ford Coppola – Well known for his capacity for filmmaking, Francis Coppola is also quite the wine connoisseur and owns a reputable vineyard entitled the Rubicon Estate in Rutherford, California.  He has owned the property for over 20 years and, from what many well established authorities report, has improved dramatically thanks to Coppola’s fastidious efforts.  Like Andretti above, Coppola’s winery features a wide range of features for wine buyers and functions as a prominent attraction of the area.

With more and more of the wealthy population pouring their capital into developing wineries, it is apparent that there are burgeoning risks.

All Vineyards Need Protection, Even Celebrity Vineyards

Burning through capital needlessly for disasters and mishaps that could have easily been covered by our vineyard insurance is frustrating and inconvenient, even if you have a ton of it. The visibility of celebrity wineries and the growth the industry demands that viable protection exists in the event of damage to the vines and infrastructure of a vineyard. Live Asset is the pioneer and the leading expert in the field.

Check out our recent blog posts on vineyard start-up costs; how to protect your vineyard investment; and a recent report on starting a vineyard.

In our last post, I talked about the multi-year gap between starting a vineyard and having government-subsidized crop insurance kick in to protect your vineyard investment. Live Asset Insurance offers protection for those vineyard start-up costs that would otherwise be left exposed to potential disaster.

One of the examples given to attempt to quantify vineyard establishment costs was the seemingly endless variety of products offered by a company like Orchard Valley Supply. Purchasing the infrastructural materials they offer would costs thousands on their own, not to mention the cost of acquiring land; getting that land into growing condition; installing things like trellises and irrigation system; and more.

So what would be typical vineyard establishment costs?

The real answer is, “It depends.” But that would make for a very short blog post.

It really does depend on many factors – size of land, geographic location, desired production amounts, etc. The folks with the Arizona Wine Growers Association posit the following:

The capital requirements needed to become successful in the wine business depends on ones goals. The cost can range from as a few thousand dollars for those who own an acre of vines and sell their grapes to a winery, to millions of dollars to develop vineyards, a winery and market a brand of wines. The Per-Acre cost of bring a vineyard into production is estimated at between $6,000 and $15,000. It will take 3-5 years for grapes to mature enough to be used in wine production. There are additional cost for land, equipment, machinery, staff, consultants, marketing and other expenses.

Just to reiterate – that between $6,000 and $15,000 per acre to get a vineyard into production.

So, For A 15-Acre Operation, The Vineyard Start-Up Costs Would Be Significant

The AWGA also created a draft of Vineyard Investment Costs for a 15-acre vineyard with 10 acres in production.

According to their numbers, nearly $300,000 later, you’d have yourself 10 acres of productive vineyard. Now, remember that the first three to five years of that time, your investment is not eligible for coverage under the federally-backed crop insurance programs. That would leave you with hundreds of thousands of dollars invested with no protection.

Vineyard Start-Up Costs Are Too Big To Leave At Risk

Now that you have some sample numbers to ponder, the need to protect what you’ve purchased becomes too clear. With the vineyard insurance that Live Asset provides, you can protect your sizeable vineyard investment during a vulnerable period. It wouldn’t make sense not to protect the future of your vineyard.

Undoubtedly, if you are thinking of buying a vineyard or creating one from the ground up, the challenges are many and a vineyard investment is a huge one indeed. Of course, that shouldn’t deter you. But, a realistic estimate of vineyard costs should be the crux of your vino-venture.

The Real Investment Cost & Risk Of Starting A Vineyard

In our last post, we focused on a University of Arkansas report discussing considerations for starting a vineyard. That report fell far short of incorporating all of the costs, most notably vineyard insurance.

However, even protecting your vineyard assets with insurance is not a cut-and-dried prospect. Did you know that the time between starting or buying a vineyard and the time it starts producing certain amounts of viable grapes, your assets are not eligible for coverage under the federally subsidized crop insurance program?

The investment required to create a vineyard is hefty, so the protection provided to your investment should be thorough.

In other words, say you start a vineyard and purchase all the land, labor and equipment needed to start growing grapes. Until your vines start producing a certain tonnage of grapes, all of those assets – all of that vineyard investment – is left uninsured against potential destruction.

That’s Three To Five Years Of Vineyard Costs Left Exposed To Risk

On average, it takes three to five years for a start-up vineyard to produce viable grapes. During that time, all of the infrastructure and the costs associated with installing that infrastructure are waiting to be destroyed. It’s a bit of a grim statement, but the stakes are that high.

Take a look at Orchard Valley Supply, one of the top suppliers of things like trellises; stakes; harvest supplies; irrigation equipment; and too many other products to list. A healthy vineyard investment would consist of thousands of dollars of equipment from a place like Orchard Valley Supply, in addition to land purchase (if applicable); labor and equipment to get the land in growing condition; irrigation; quality rootstock; and more.

We’ll cover the costs of starting a vineyard in more depth in our next post.

The point is that all of this time and capital invested in creating your vineyard will not be protected through crop insurance programs until your vines start producing mass amounts of grapes.

And that’s where Live Asset Insurance can help you avoid the risk of potential destruction of your vineyard investment. We are the only firm to cover that vital vineyard infrastructure until the federal crop insurance kicks in. We effectively protect your vines and their life support system from in the event that they are destroyed or damaged by natural occurrences – like wild fires, for example.

Live Asset Insurance Coverage Protects Your Vineyard Investment

The first three to five years of the life of your vineyard is crucial for future success. It is truly the infancy of your venture. Leaving the future of such a huge investment to the whims of Mother Nature doesn’t make financial sense. That timeframe of risky exposure for your vineyard is unnecessary when Live Asset can provide protection during those vulnerable years.

At Live Asset Insurance, we are used to explaining our unique insurance coverage to brokers and owners themselves. When it comes to vineyard insurance, we educate people on where government crop insurance drops the ball; where traditional coverage falls short; and how our coverage picks up the slack. 

Our vineyard insurance covers the live assets, vines in this case, and supporting systems like trellises and irrigation systems.

So, winery insurance in general takes some effort to understand and our specialized insurance options for vineyards from Live Asset takes some explanation. You would think that insurance options for anyone starting a winery would be a part of any basic description of how to start a vineyard, right? That sentiment is, apparently, wrong.

University of Arkansas Report Makes Little Mention of Insurance When Starting a Winery

I almost couldn’t believe what I was seeing when I came across this U of Arkansas Division of Agriculture report, “Considerations for Starting a Winery,” by Justin R. Morris, director of the Viticulture and Enology Program.

Trying to figure out how to start a winery or vineyard? There's more to it than what's in this report.

The report covers everything from regulatory approvals to the process of winemaking. I imagine that most would take it as an all-inclusive guide for how to start a winery. Morris makes just two mentions of insurance in about 77 pages and both mentions are passing references.

Only two times does this report mention insurance and the value imparted by those references is zero. Don’t get me wrong, it’s not a bad report and the information that is in there is quality. It’s the omission of discussing insurance that is extremely questionable – especially given that many, many commercial wineries are in California and subject to any number of natural disasters.

Winery Insurance is One of The Most Important Issues to Address When Starting a Vineyard

Obviously, I have a vested interest in letting people know about the unique  insurance options Live Asset offers to wineries and vineyards. But, it does a disservice to not only those who insure wineries, but those trying to learn how to start a vineyard, when a discussion of starting a winery ignores insuring the very plants and equipment that requires so much investment.

Regions of northern Central Park were heavily damaged by an intense storm that moved through the area on August 18^th, 2009.  Although the period of time in which the storm was at its worst is considerably brief (about 30 minutes), the amount of destruction left in its wake is truly immense.  More than a thousand trees sustained wind damage, and more than 500 required removal due to Central Park storm damage.

Overall, it has been estimated that the cost to repair the damage is around $3 million.

The storm damage also caused two playgrounds to close.  Furthermore, the large price tag that accompanies the restoration efforts is only one part of the tragedy; a number of highly valued, and aged, trees are among the victims (one of which was planted by the designer of Central Park well over a century ago), which are quite beyond monetary value.

But monetary value is nonetheless a big deal when it comes to storm damage, especially when it is to the degree that Central Park sustained it.  The present estimate of the damage inflicted on Central Park is in the area of several hundred thousand dollars to a few million—not an insignificant amount by any means.

Trees Need Protection From Storm Damage, Even In Central Park

As Central Park continues to raise money to recover from the extensive storm damage, this serves as an example of how swiftly a natural disaster can devastate valuable live assets.  Although some Central Park workers will undoubtedly embrace the challenge of replanting, the fact that the repair project is in part dependent on donations indicates a need for greater protection. 

The same holds for any live asset arrangement. Having to raise money for a vast recovery venture in response to a disaster is a considerable expense, and one that could be avoided with the right policy for support.

This Degree of Storm Damage to Central Park is About More Than Money

If you love trees, you have lost a piece of yourself when you lose such a large part of your beloved, favorite park – no matter where the park is located. 

Although after such a damaging storm the trees are gone forever, but the compounding of the emotional hit with the economic hit makes it hurt twice as bad. It is like losing a loved one without having life insurance to provide solace. You never want to lose a loved one, but the economic blow is softened when there is protection in place to rebuild after the loss. After losing a loved one, things aren’t the same anymore. But with the right planning, the loss is cushioned on many levels, and the rebuilding begins.

Landscape architects should hope their work stands the test of time like Olmsted and Vaux (the original park planners in the mid- to late-1800s and considered the founders of the profession of landscape architecture in America) and maybe with the right protection it will. Take a look at how Live Asset insurance could have helped Central Park in its recovery efforts with a natural disaster insurance policy insuring these trees against such a storm event.

The federal tax credit for reforestation is one of the best tax breaks available to landowners.  It allows qualified property-owners to claim a 10-percent reforestation tax credit up to $10,000 for expenses associated with planting trees.  In addition, forestation costs up to this limit may be deducted over a period of 7 years.  This reforestation tax credit amidst recent carbon market legislation brings about questions for tree farmers and landowners on how to best take advantage of this growing carbon offsets market?

Find out if you qualify for the reforestation tax credit and why you may consider obtaining the reforestation credit.

As mentioned in our last post on Carbon Credits & Trees, recent legislation has allowed for the exchange of carbon credits when land owners take steps to become climate-neutral.  However, the risks associated with reforestation compel qualified landowners to insure these trees.  So who may qualify for the reforestation credit?

Do you Qualify for the Reforestation Tax Credit?

There are certain criteria that must be met in order to qualify for the reforestation tax credit.  In general, the following requirements must be met:

• Must use native tree species
• Plantings must be from nursery stock
• Reforestation must be guaranteed with a type of surety measure, which may include tree insurance.

With these requirements, the reforestation tax credit aims to promote reforestation where forest has been cleared as well as to encourage additional forest development and planting in agricultural fields. 

Why Consider the Reforestation Tax Credit?

The reforestation tax credit and other tax credits that benefit the environment represent the largest group of tax credits currently available.  For tree farmers, it is a smart tax credit to look into seeing as it could recapture some of the costs associated with preparing a site, seeds, labor and tools (including depreciation on equipment). 

If you’re considering applying for the reforestation tax credit, one important point to keep in mind is that the reforestation credit means trees cannot be disposed of before a 5 year period.  For the 7-year amortization, a 10 year time period is put into place.