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Important Changes to
the Federal Crop Insurance Program for Quahog Farmers...continued
Scenario One: Seed Die-Off
In the spring of 2005, the farmer discovers that
the seed (Stage 2 clams) had low survival rates due to winter cold
temperatures. An insurance adjuster comes out and determines that
only 10,000 of the Stage 2 clams have survived. The adults (Stage
3 clams) were unaffected. The farmer had selected the 65 percent
coverage level.
Old program
• The market value of the farm’s crop prior to any loss
would have been (60 % survival rate x 300,000 clams x $0.18/clam)
or $32,400.
• The market value of the farm’s crop after the loss
would be (130,000 clams x $0.18/clam) or $23,400. [10,000 Stage
2 clams @ $.18 each, plus 120,000 stage 3 clams (60% survival for
the 200,000 Stage 3 clams) @ $.18 each]
• The loss, therefore, would be calculated as the market value
prior to the loss ($32,400), minus the market value after the loss
($23,400), or $9,000.
• At a 65 percent coverage level, the farmer’s deductible
would be (35% x $32,400) or $11,970. Since the deductible exceeds
the loss, no payment would have been made.
New program
• The market value of the farm’s Stage 2 crop prior
to any loss would have been (60 % survival rate x 100,000 clams
x $0.09/clam) or $5,400.
• The market value of the farm’s Stage 2 crop after
the loss would be (10,000 clams x $0.09/clam) or $900.
• The loss, therefore, would be $4,500.
• At a 65 percent coverage level, the farmer’s deductible
would be (35% x $5,400) or $1,890. The farmer, therefore, would
have received the difference between the loss ($4,500) and the deductible
($1,890), or $2,610.
Scenario Two: Adult Die-Off
In the summer of 2005, the older quahogs (Stage
3 clams) are affected by a QPX outbreak. Once the disease has run
its course, an insurance adjuster comes out and determines that
only 40,000 of the Stage 3 clams have survived. The seed (Stage
2 clams) were unaffected. The farmer had selected the 55 percent
coverage level.
Old program
• The market value of the farm’s crop prior to any loss
would have been (60 % survival rate x 300,000 clams x $0.18/clam)
or $32,400.
• The market value of the farm’s crop after the loss
would be (100,000 clams x $0.18/clam) or $18,000. [40,000 Stage
3 clams @ $.18 each, plus 60,000 Stage 2 clams (60 percent survival
for the 100,000 Stage 2 clams) @$.18 each]
• The loss, therefore, would be calculated as the market value
prior to the loss ($32,400), minus the market value after the loss
($18,000), or $14,400.
• At a 55 percent coverage level, the farmer’s deductible
would be (45% x $32,400) or $14,580. Since the deductible exceeds
the loss, no payment would have been made.
New program
• The market value of the farm’s Stage 3 crop prior
to any loss would have been (60 % survival rate x 200,000 clams
x $0.18/clam) or $21,600.
• The market value of the farm’s Stage 3 crop after
the loss would be (40,000 clams x $0.18/clam) or $7,200.
• The loss, therefore, would be calculated as the market value
prior to the loss ($32,400), minus the market value after the loss
($18,000), or $14,400.
At a 55 percent coverage level, the farmer’s deductible would
be (45% x $21,600) or $9,720. The farmer, therefore, would have
received the difference between the loss ($14,400) and the deductible
($9,720), or $4,680.
Scenario Three: Mass Die-Off
In the spring of 2005, the farmer finds that ice
has inflicted serious mortality on all the clams, regardless of
size. An insurance adjuster comes out and determines that only 30,000
clams survived, of which 10,000 are seed (Stage 2 clams). The farmer
had opted for the 50 percent coverage level.
Old program
• The market value of the farm’s crop prior to any loss
would have been (60 % survival rate x 300,000 clams x $0.18/clam)
or $32,400.
• The market value of the farm’s crop after the loss
would be (30,000 clams x $0.18/clam) or $5,400.
• The loss, therefore, would be calculated as the market value
prior to the loss ($32,400), minus the market value after the loss
($5,400), or $27,000.
• At a 50 percent coverage level, the farmer’s deductible
would be (50% x $32,400) or $16,200. The farmer, therefore, would
have received the difference between the loss ($27,000) and the
deductible ($16,200), or $10,800.
New program
• The market value of the farm’s Stage 2 crop
prior to any loss would have been (60 % survival rate x 100,000
clams x $0.09/clam) or $5,400.
• The market value of the farm’s Stage 2 crop
after the loss would be (10,000 clams x $0.09/clam) or $900.
• The Stage 2 loss, therefore, would be calculated as the
market value prior to the loss ($5,400), minus the market value
after the loss ($900), or $4,500.
• At a 50 percent coverage level, the farmer’s deductible
would be (50% x $5,400) or $2,700.
• The market value of the farm’s Stage 3 crop
prior to any loss would have been (60 % survival rate x 200,000
clams x $0.18/clam) or $21,600.
• The market value of the farm’s Stage 3 crop
after the loss would be (20,000 clams x $0.18/clam) or $3,600.
• The Stage 3 loss, therefore, would be calculated as the
market value prior to the loss ($21,600), minus the market value
after the loss ($3,600), or $18,000.
• At a 50 percent coverage level, the farmer’s deductible
would be (50% x $21,600) or $10,800.
• At a 50 percent coverage level, the farmer, therefore, would
have received the difference between the Stage 2 loss ($4,500) and
the deductible ($2,700), or $1,800 for the Stage 2 losses, plus
the difference between the Stage 3 loss ($18,000) and the deductible
($10,800), or $7,200, for a total payment of $9,000.
As illustrated by the scenarios and in Table 1 (showing
the highest and lowest coverage levels offered), the new program
significantly improves the potential for payments to farmers
in instances where mortality is concentrated on one stage.
Although there is a slight decrease in payments made in cases of
mass mortality (all stages), this was not reported as a common occurrence
by growers.
Table 1
Insurance Payments Shown under the Old and New
Programs
under Different Scenarios
| Seed (Stage 2 clams) Die-Off |
0 |
$1,800 |
0 |
$3,150 |
| Adult (Stage 3 clams)
Die-Off |
0 |
$3,600 |
$6,300 |
$9,000 |
| Mass Die-Off |
$10,800 |
$9,000 |
$18,900 |
$15,750 |
  
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