NFAPP's Newsletter December 1995

Featured Articles :

"Legislative Update.....Crop Insurance", by Pamela Mischen
Topic: Frederal Crop Insurance Reform Act of 1994

"Market Watch.....U.S. Processed Grapes - Trends and Outlook", by Richard Adu-Asamoah
Topic: The U.S. Processed Grape Market

Just as many growers are becoming aware of the Federal Crop Insurance Reform Act of 1994 which changed the eligibility and procedure for obtaining weather related disaster assistance, Agricultural Budget Reconciliation may change the rules again. As a result of the 1994 Act, growers must purchase, at the minimum, catastrophic (CAT) yield coverage for those commodities for which crop insurance is available, or register with their local USDA office under the newly formed non-insured assistance policy (NAP) for those commodities for which crop insurance is not available in order to receive disaster assistance in the case of a natural disaster. Also as a result of the 1994 Act, growers are required to purchase, at the minimum, CAT coverage for any crop of "economic significance" in order to remain eligible for price supports and other government programs. However, if the latest Budget Reconciliation Bill is passed, purchase of CAT coverage will be voluntary, provided that growers waive all of there rights for emergency crop loss assistance in connection with the crop.

Motivating the 1994 reform act was the desire to reduce the amount of disaster assistance and encourage growers to purchase crop insurance. In order to qualify for assistance under NAP regulations, two triggers must be activated. First, there must be a 35% "area" loss (although not all areas have been defined, it is useful to think of the area as the county), and a 50% individual grower loss. Growers will be paid at 60% of the market price for 50% of their actual production history yield. As a result of these reforms, growers will be less likely to receive disaster assistance than under the previous ad hoc system.

There are payment limitations associated with NAP as well. A grower is not eligible for NAP if his/her farm operations have qualifying gross income of $2 million or more, and the operation can receive no more that $100,000 in NAP payments per year.

If coverage is available for a commodity and a grower elects CAT coverage, he/she will receive payments if his/her yield loss is greater than 50% of the actual production history. Payment is made at 60% of FCIC's price election. However, there is no "area" trigger. CAT coverage is subject to an administrative fee of $50 per crop per county with a $200 limit per county and a $600 maximum per producer for all counties.

Many fruit and vegetable commodities will fall under NAP provisions. However, crop insurance is available for potatoes, grapes, tomatoes, apples, citrus, almonds, onions, sweet corn, peaches, pears, walnuts, cranberries and green peas in selected counties through out the U.S. (Availability continues to change, so please contact your local USDA office for insurance availability in your county.)

In an effort to improve coverage for fruits and vegetables, ASU researchers are investigating the demand for three types of crop insurance policies: price/yield coverage, cost of production insurance and revenue insurance. Over 3000 fruit and vegetable growers nationwide will receive a survey which will be used to gather information regarding growers' risk attitudes and risk reduction methods, yield history and willingness to pay for crop insurance. The survey, which is anonymous and confidential, will assist investigators in determining the cost of providing insurance to fruit and vegetable growers, the features of available insurance product, and an efficient delivery system for such an insurance product.

If you happen to receive one of these surveys, your assistance in completing it will be greatly appreciated. By providing the information requested, the researchers at ASU will be better able to describe an insurance program that meets the needs of growers and conforms to government budget guidelines.

If you have any questions regarding the study or would like to receive a copy of the final report, please contact Dr. Timothy Richards or Ms. Pamela Mischen at (602) 965-5470. For more information regarding crop insurance or NAP coverage, please contact your local USDA office.

Processed Grapes - Trends and Outlook

Total production of all grape types has increased, since 1970, due to both increases in acreage and higher yields made possible through advances in production technology, such as improved cultivars, cultural practices and harvesting techniques. Total bearing acreage for all grape types has fluctuated from 1970-1994, but is trending upward overall reaching a high of 782,200 acres in 1985 from a low of 531,100 acres in 1972. Bearing acreage for 1994 was 761,000 acres. Average yield for all grape types has also fluctuated substantially but is trending upward as well over the same time period (Figure 1). On average 88% of all utilized production is processed. Utilized production increased from 2.58 million short tons in 1972 to 6.03 million short tons in 1992, but has declined since 1993 to approximately 5.9 million short tons in 1994.

Between 1970 and 1994 most of the processed grapes went into making wines (61%), followed by dried grapes (30%), juice (8%), and canned products (1%). There has been a substantial increase in the production of wine and raisin type grapes, especially in California, through acreage expansion and the introduction of more productive varieties. California has consistently produced an increasing share of the total U.S. grape crop, and hence the total production that goes into processing. The four major producing states have ranked differently in the past two decades. Since 1986 the top four have been (in decreasing order of importance) California, Washington, New York and Arizona.

While per capita utilization of fresh market grapes has more than doubled from 2.89 lbs. in 1970 to 7.33 lbs. in 1994 (fresh weight equivalent), per capita consumption of processed grape products has either only moderately increased, stayed constant, or declined. On a per capita consumption basis, however, processed grapes rank first among processed noncitrus fruits, including apples, pineapples, peaches and strawberries. Except for grape juice, increasing allocation of processed grapes to the major product categories (wine and raisins) reflects the relative grower prices of these products. Since 1985 grower prices of grapes for wine, raisins and canned products have increased. Prices have leveled since 1992. Grapes for juice price increased from 1985 to 1990 and has sharply declined since.

Since the bulk of all utilized production of processed grapes goes into wine, the health of the processed grape sector depends on the health of the wine industry. Therefore, U.S. consumption of processed grape products alone may not be enough to drive increased production of processed grapes. Wine consumption in the U.S. has stayed low with respect to other nations and has declined since 1986 (Figure 2). In 1994, the per capita consumption of all wines was 1.76 gallons. Consumption levels in the U.S. do not compare favorably with other wine-consuming nations. For example, in 1994 the per capita wine consumption in France was approximately 17.6 gallons and Italy and Portugal each had per capita consumption of approximately 16.4 gallons.

Since 1986 only table wine consumption has increased. Consumption of fortified wine, sparking wine, and wine coolers has declined while vermouth consumption has stayed constant. Per capita consumption of raisins has been declining since 1988. Imports have been sporadic, but exports have been increasing since 1985. Exports increased from 166.3 million pounds in 1985 to 268.5 million pounds in 1994. Again, it appears that revenues can be improved by pursuing export markets. Canned grape utilization has stayed low over the years (an average of 0.33 pounds per capita in fresh weight equivalent since 1985.) Grape juice utilization has also stayed low around an average of 3.4 pounds (fresh weight equivalent) since 1985.

Unlike juice and canned grapes, wines and raisins have potential for export expansion and increased domestic consumption. Table wines, especially red wines, may start enjoying increased consumption as more people become aware of the suggested beneficial attributes of moderate amounts of such wines at mealtime. In the domestic market juice and canned grapes face too many cheaper substitutes (apple, orange and imitation fruit juices and canned pears and pineapples) to experience dramatic consumption increases in the short run. Production trends for 1994-95 will continue into 1996. Bearing acreage, yields, and allocations to processed products will continue to follow their respective trends.

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