Federal Crop Insurance for Massachusetts
What do quahogs have in common with soy beans, cranberries, and
corn? All are recognized as agricultural crops by the federal government
for inclusion in a federally subsidized crop insurance program.
In a pilot program currently being developed by the United States
Department of Agriculture (USDA) Risk Management Agency, quahog
farmers in Massachusetts, Virginia, and Florida will be eligible
for crop insurance in 1999-2000. The pilot insurance program is
scheduled to be available to quahog farmers in Massachusetts during
the fall of 1999.
Crop insurance is a federal program designed to protect insured
farmers from crop losses resulting from 'unavoidable damage'. Natural
phenomena, such as storms, disease, or changes to the local environment
due to natural processes, can cause catastrophic losses to a crop
and, in doing so, potentially devastate a farm. In terms of economics,
the farm business is dependent on the farmer bringing the crop to
Since the Dust Bowl days of the 1930's, the USDA has offered farmers
an opportunity to purchase insurance to protect the farm by compensating
farmers in the event of devastating losses to the crop. Crop insurance
works in much the same way as homeowner's insurance does: a farmer
purchases the insurance annually by paying a predetermined premium.
If a loss occurs, the insurance company determines the value of
a loss, less the deductible amount (see notation below), and compensates
Under the federal crop insurance program, each type of crop is
insured based on a specific risk model developed by the USDA Risk
Management Agency. A crop insurance program is tailored to the individual
crop, in terms of:
- the type of farming practices conventionally used to grow the
- the location of the farm and the relative productivity of the
- the value of the crop throughout the growing period (not just
at harvest), and
- the deleterious impact that various naturally occurring events
may have on the crop.
These factors are used to develop a risk model that predicts the
probability of loss for each crop.
Every dollar that is invested into the crop insurance program by
the farming community is paid out in crop loss compensation. In
addition, the USDA Crop Insurance Program is subsidized by the federal
government: for every $1 in premiums that the farm industry pays
for insurance purchases, the program will pay out $1.075 to its
policyholders. The federal government also covers the administrative
costs associated with the program. The subsidy schedule and risk
assessment model are used to determine insurance premiums for each
How will crop insurance work for quahogs?
Extension agents from Woods Hole Oceanographic Institution (WHOI)
Sea Grant Program and Cape Cod Cooperative Extension have been working
with the Massachusetts Division of Marine Fisheries (DMF), the quahog
growers in the region, and the USDA Risk Management Agency to gather
the information that USDA needs to develop the risk models and to
initiate the insurance program.
These groups are working together to define the following parameters:
- characterization of local differences in growing areas,
- estimation of production levels and production times for farmed
quahogs in Massachusetts, and
- determination of methods to assess the standing crop, for both
the farmer and the insurance adjuster.
The USDA Risk Management Agency will use these data and procedures
to define the risk under which the crop production operates and
to determine a way to define the standing crop. When these are in
place, the quahog crop insurance program will be published in the
Federal Register and it will be contracted out to local insurance
companies as a federally subsidized program.
How will this work for the farmer?
Although the pilot program is just being developed, a likely scenario
will be that the quahog grower must purchase the insurance from
a local insurance agent, just as would be done for a house or automobile.
The quahog farmer will need to define the amount of coverage desired
and to provide proof that the crop is in the ground. Finally, an
insurance adjuster may inspect the farm and measure the standing
crop. Following those simple steps, the crop is insured.
Making a claim for a loss
In the event that the farmer has a loss due to a cause other than
poor husbandry or poor growth, the farmer can make a claim against
the policy. What does this require? The farmer will be required
to document the loss and offer evidence that the loss is due to
causes that are covered in the policy. An insurance adjuster will
visit the farm, assess the loss, and the farmer will be compensated
for their loss based on the fair market value of their crop and
on their policy coverage.
It should be emphasized that this is a pilot program for aquatic
crops. And, as a pilot program, it will probably be limited to the
grow-out stage of farmed quahog production in 1999-2000. As the
program develops, the USDA will expand crop insurance to other aquaculture
crops, and will include shellfish hatcheries and nurseries and finfish
operations. According to the USDA, species that may be added to
the program over time include oyster, scallop, salmon, tilapia,
striped bass, and others.
What does this mean for the aqua-farmer?
Federally subsidized crop insurance is a very exciting development
for the aquaculture industry. The most obvious benefit is that farmers
can be compensated for naturally occurring disasters that can reduce
their productivity and potentially eliminate their profits. A less
obvious benefit, but one that is potentially more valuable: crop
insurance adds legitimacy to the aquaculture industry. For example,
lending institutions may be much more willing to negotiate with
aqua-farmers for business loans if they have crop insurance. It
is possible that crop insurance will open many doors that have been
open to terrestrial farmers but closed to water farmers.
If you have questions about this pilot program, contact:
Marine Resource Educator,
Cape Cod Cooperative
Extension (Barnstable, MA)
Insurance Management Specialist,
USDA Risk Management Agency (Ballston Spa, NY)
Fisheries and Aquaculture Specialist,
WHOI Sea Grant Program & Cape Cod Cooperative Extension (Woods
For this program, coverage will be available
for between 60 - 75% of the total crop value. The "deductible"
amount is equivalent to the difference, or uninsured, portion of
the crop, 25 - 40%.