July 19, 2011

Gillibrand Fights To Reform Crop Insurance For New York’s Grape Producers

Nation’s Third Largest Grape Producer, NYS Produces 180,000 Tons, $50 Million for Rural Economy Annually

Washington, D.C. – With unfair and outdated insurance regulations putting a strain on New York State’s grape producers, U.S. Senator Kirsten Gillibrand, a member of the Senate Agriculture Committee, is urging the USDA to remove unnecessary burdens that hold grape producers back from their full economic potential. New York State produces 180,000 tons of grapes each year, making New York the third largest grape producer in the nation, and contributing $50 million to the state’s rural economy annually.

“New York is home to the nation’s finest grapes and the hardest working producers,” Senator Gillibrand said. “But outdated regulations are devaluing their crops, holding back their growth, and the strength of our rural economy. We need to bring our crop insurance practices for grape producers into the 21st century with fairer guidelines so our grape producers are free to reach their full economic potential.”

In a letter to William Murphy, Administrator of the Risk Management Agency at the USDA, Senator Gillibrand is urging the USDA to treat grape harvesting the same as grain harvesting by ending the arbitrary cost-of-harvest deduction since grapes are usually machine harvested the same as grains.

Senator Gillibrand is also requesting switching from the current two-ton per acre minimum yield requirement to allowing grape growers to use their full county average yield per acre as the basis for insuring their crop, and timing crop measurements to be congruent with the natural cycle of production, enabling producers to get a fairer, more accurate value for their crops.   

Senator Gillibrand’s full letter to Administrator Murphy:

Dear Administrator Murphy,

After meeting with grape growers in New York State, I have learned of problems they’re experiencing with the current grape crop insurance program. I hope that we can work together to resolve these for New York’s hard working grape producers. The problems include the arbitrary cost-of-harvest deduction, the two-ton acre minimum yield requirement, the average yields measured on a five-year cycle, and the current price calculation for juice grapes being computed on a ten-year average.

Grape growers do not believe that deducting an arbitrary cost of harvest before calculating the announced price election for crop insurance is equitable. According to Cornell experts, 80% of the grapes harvested are done so by growers who own their own harvesting equipment, therefore the arbitrary deduction does not accurately reflect upon their harvest costs. Every acre of a vineyard is covered with the same crew and equipment, regardless of the tonnage to be harvested. We understand that commodities, such as grains, that use the Chicago Board of Trade future prices or have crops that have contracted prices with a processor do not have harvest costs subtracted from the announced price, and we’re wondering why grapes can’t be treated in the same way. There was a time when grapes were hand harvested and harvest costs would have been greatly reduced if a grower didn’t harvest much of a crop, but now the vast majority of grapes are mechanically harvested, as are grains. So, like grains, harvest costs are much the same per acre regardless of yields. Treating grapes the same way would give grape growers equality. As an interim step, the partial reduction in the harvest deduction this year from $50 to $30 would be helpful to growers.

The growers have also requested an exemption to the previous yield requirement in order to insure their first, lucrative crop on new vines. Vines aren’t productive enough to harvest until the fourth year, but aren’t insurable under the current policy since none of the previous three years meet the two-ton per acre minimum yield requirement. It is a hardship for growers not to be able to insure this first harvest since vineyards reach their maximum yields in years five through ten, meaning year four is at near maximum yield and is a very valuable crop to lose. I recommend that growers be allowed to use 100% of their county average yield per acre as the basis for insuring their crop in new vineyards in year four.

They would also like the average yield measurement to be congruous with the natural cycle of production. Since grapes produce on a somewhat alternate bearing cycle, meaning one year there is high yield followed by a year of lower yield and so on, the growers would like the average yield to be calculated on a six-year average, instead of on a five-year average. Similarly, the growers would like the price to be determined on a six-year average, since the current decade-long average doesn’t reflect current pricing. They understand that shortening the number of years may at times work against them, but believe that this would also correlate the average price calculation with the proposed six-year average yield calculation mitigating year-to-year price fluctuations resulting from supply and demand.

New York is our country’s third largest grape-producing state. The industry and dependent agribusinesses are important to the state’s economy. I look forward to working to resolve these grape crop insurance issues with you.