Crop insurance on for sweet potatoes?

Since 1998, the Federal Crop Insurance Corp. has offered crop insurance coverage to sweet potato producers in three Louisiana parishes and selected counties in other states as part of a pilot program. The program has proven to be an effective risk management tool, and growers who farm outside the pilot parishes want the program to be fully implemented.

However, several modifications are needed before it can be fully implemented and consideration was recently given to suspending the program while program modifications were being made.

"There was talk that the USDA Risk Management Agency would do away with the sweet potato crop insurance program altogether," said Rep. Rodney Alexander, D-Monroe. "The delegation got together and sent a letter to the RMA urging them to keep a program in place."

According to Alexander, the move by the state's Congressional delegation provides for the continuation of the program through the 2004 growing season, albeit on a more limited scale. Members of Congress and state farm groups are working to have the program fully implemented.

Last year Louisiana lost nearly one-third of its sweet potato crop to rains from Hurricane Lili and Tropical Storm Isidore. The wet conditions kept farmers out of their fields, leaving nearly 7,000 acres to rot. Producers who had crop insurance coverage were able to recover some of their losses, which otherwise would have been chalked up to Mother Nature.

"The pilot crop insurance program has proven it has the potential to be a viable risk management tool in Louisiana," said Brian Breaux, associate commodity director for the Louisiana Farm Bureau Federation.

“However, we agree that several changes are needed before fully implementing the program nationwide. We just didn't want to cut off coverage in 2004 while they made the changes. The Louisiana Congressional Delegation did a good job of convincing FCIC to keep the program alive for 2004

Breaux said some Louisiana sweet potato farmers hardest hit by the last four years of drought and hurricanes need crop insurance in order to get a crop loan. “We hope the coverage offered for 2004 will be enough to keep our producers in business."

The board of directors of the Federal Crop Insurance Corp. voted Oct. 29 to implement a series of changes in the sweet potato pilot insurance program to improve its effectiveness. However, those changes target fraud, something that hasn't been a problem in Louisiana.

"Our growers use the program for legitimate reasons," Breaux said. "Louisiana growers look forward to better field monitoring and hope it catches those involved in fraud. However, the other changes such as rate increases and the reduction in coverage levels could negatively impact some growers."

The Federal Risk Management Agency initiated a review of the pilot program by hiring the consulting firm Watts & Associates of Montana. In its report the firm cited several reasons for a proposed overhaul, including sweet potato losses that could not fully be explained by weather.

In states outside Louisiana the study found "remarkably high" loss ratios for sweet potatoes in counties where other commodities were unaffected.

The pilot program, in place for the last five growing seasons, covers certain counties in Alabama, California and North and South Carolina. In Louisiana, sweet potato growers in Morehouse, West Carroll and Avoyelles parishes are eligible for the program. The counties and parishes in these states make up 25 percent of total sweet potato acreage planted nationwide, according to USDA.

Farm groups like the Farm Bureau fear the loss of such a program, or even one on a limited basis, could impact a sweet potato grower's ability to get a production loan at planting time.

"Any reduction in coverage means a producer would have to put up more collateral when seeking a production loan," said Duane Lacour, executive vice president of Cottonport Bank. "That's tough for some producers to do right now, given the state of the farm economy. This year has been a good year, but last year, despite crop insurance, we lost four or five sweet potato producers.

“If the program goes away, I doubt half of those sweet potato farmers would be able to qualify for loans."

Lacour, whose bank makes about 15 sweet potato production loans a year, said crop insurance is essential, not only to sweet potato farmers, but to the entire Central Louisiana farm economy.

"We make about $4 million in loans a year to sweet potato growers and about $25 million in crop production loans through our 11 branches in Avoyelles and Pointe Coupee," he said. "If there's a condition that jeopardizes those loans, that's about $30 million we're not making money on. Loaning money is how we make money."

Given that many of the recommendations made by the RMA's consulting firm could not be implemented in time for the 2004 crop season, the Federal Crop Insurance Corp. recommended other options that could be used to improve the program in the short term. Those options include:

  • Continue the program revisions made for the 2003 crop year, including the requirement that an insured producer must have grown sweet potatoes for commercial sale three out of the five previous years, and that acreage insured for the current year may not exceed 110 percent of the greatest number of acres grown in any one of the three previous crop years;
  • Evaluate and make appropriate rate changes in each county up to the maximum statutory amount of 20 percent, as necessary, based on program loss experience;
  • Limit the availability of insurance coverage to not more than the 60 percent coverage level;
  • Institute a comprehensive field-monitoring program to focus on program delivery and implementation, including agent and loss adjuster performance, and to include producer compliance with rules and procedures; and
  • Strengthen yield determination and loss adjustment procedures, as practical, to improve consistency in determining production to count, and to strengthen requirements regarding the adjustment of unharvested production appraisals.
Michael Danna is a writer for the Louisiana Farm Bureau Federation.

e-mail: [email protected]

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