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MIAMI—Florida growers have yet to determine how much damage their crops suffered from the cold snap that gripped most of the country the first week of January, but insurance experts say much of the expected losses will be covered.
Freezing temperatures descended on South Florida and much of the Southeast for more than a week, causing anxiety for farmers, particularly orange growers. Some agricultural insurance experts said growers may have avoided large freeze losses, while growers' groups still were assessing how much of this year's orange crop will be lost.
“The quick answer is that we don't know the extent of the damage yet,” said Ray Royce, executive director of the Sebring, Fla.-based Highlands County Citrus Growers Assn. Inc. Jan. 10 “was the coldest day of the seven or eight days of freezing weather we experienced. To what degree that freeze had an effect on the crop, we won't know for a matter of weeks.”
As of Jan. 14, the Southeast had 13 consecutive days with temperatures 32 degrees or colder, according to the National Weather Service.
Florida has a $9.3 billion citrus industry, which produces more than three-quarters of the U.S. orange crop and accounts for about 40% of the world's orange juice supply, according to Florida Citrus Mutual Inc. Citrus crops can be damaged if temperatures fall to 28 degrees for four hours or longer.
At the time of the freeze, Florida Citrus Mutual, the largest growers group in Florida with 8,000 members, said 25% of its harvest was complete, with some damage to fruit, branches and leaves of trees.
“It may be days or weeks until we figure out whether there is long-term tree damage,” Michael W. Sparks, executive vp and CEO of the Lakeland, Fla.-based Florida Citrus Mutual, said in a statement. “All of the information is anecdotal at this point and varies literally from grove to grove, so we won't be able to come out with a definitive answer until the U.S. Department of Agriculture accounts for the cold snap in the monthly crop forecast, probably in February.”
Mr. Royce said the 185 growers in his group, which account for 55,000 acres of Florida's citrus crop, might experience crop losses between 10% and 20%.
The citrus growers are covered by multiple-peril crop insurance overseen by the USDA's Risk Management Agency. The government-subsidized insurance provides comprehensive protection against weather-related causes of loss and certain unavoidable perils, such as pollination failure.
The RMA contracts with 15 insurance companies or managing general agents to sell the crop insurance to farmers. Growers can purchase policies providing coverage levels ranging from 50% to 85%.
In 2008, the multiple-peril crop insurance program insured approximately 552,000 acres of citrus crops in Florida, said Richard Shanks, Kansas City, Mo.-based national managing director of Aon Corp.'s food system, agribusiness and beverage group. He said the protection limits for that citrus acreage in Florida were approximately $408.1 million with gross premiums of about $14 million. Growers paid about $5.1 million of the premium, Mr. Shanks said.
Only $226,000 worth of all crops in Florida were insured outside the government-subsidized program, Mr. Shanks said.
Fred Simons III, a sales agent with Winter Haven, Fla.-based Carden & Associates Inc., said some groves experienced colder temperatures for longer stretches than others. Carden procures coverage for about 150,000 acres of citrus in Florida, with a majority of growers electing policies at a 65% attachment, which means they have to lose at least 35% of their crop before MPCI applies, he said.
At the time of the freeze, growers were harvesting Hamlin oranges, which are an early season crop used for eating and juicing. Hamlin oranges typically are harvested between November and late February, while late-season Valencia oranges typically are harvested between mid- to late February and late June, Mr. Simons said.
“Hamlins have been picked for the most part as growers are trying to get as much early fruit harvested as possible,” Mr. Simons said. “With Valencias, it's going to be wait-and-see. It could be months before we see what kind of damage the freeze did.”
David Cash, Pembroke, Bermuda-based chief underwriting officer with Endurance Specialty Insurance Ltd., said growers will be covered under MPCI, adding that it provides broad coverage for loss of crop yield, as well as coverage for lost profit due to price declines.
Endurance underwrote about $700 million in premiums in 2009 for MPCI with about $3.5 million of that from citrus crops, Mr. Cash said.
“Even as it is clear this freeze event is potentially very damaging, it is surprising how resilient southern citrus crops are to the freeze peril,” Mr. Cash said, adding that MPCI coverage requires farmers and growers to demonstrate sound farming practices, such as watering the citrus to coat it with an ice shell to protect the fruit.
Mr. Cash said the ice slows the rate of cooling and often can be sufficient to save the crop if the freeze is of short duration.
“By historic standards, this year's freeze is a very unusual event for these crops,” Mr. Cash said. “It will likely turn out that this event ends up being the largest citrus freeze that the MPCI program has had to cover in the last 10 years.”