By Jon Clements

Among the five major risk areas fruit growers face—production, marketing, financial, legal (and environmental), and human resource—production risk is arguably the most basic. Without annual production of a fruit crop, the other risk areas (particularly financial) take on new meaning and/or importance. Fortunately, most fruit growers already do a good job of managing production risk, however, they need to be continually vigilant and proactive in managing this risk.

Quite simply, production risk is the risk that production yield will be lower than desired due to weather or some other unpredictable event. Fruit growers deal with the vagaries of weather and its potential impact on their fruit production (both yield and quality) every growing season. If you’ve been growing fruit for long, you probably know and understand your production risks quite well! Examples of production risk include:

· Spring frost reduces fruit set in a block of apples that normally produces 800 bushels/acre—now there are only 200 bushels/acre to pick.

· Birds get into a Pick-Your-Own (PYO) blueberry patch just ahead of what are now unhappy customers—PYO revenue is reduced by 50%.

· Hail hits a fresh fruit apple orchard—now the remaining fruit is suitable for processing only, reducing gross dollar returns substantially.

· Failure to apply a timely insecticide to strawberries results in plant bug injury that is unacceptable for the fresh fruit market.

· Etc., etc.—you get the idea!

Five major sources of production risk include: Adverse Weather; Pest Damage; Input Timeliness/Quality; Machinery Breakdown; and Lack of Production Know How. Briefly, let’s look at specific sources and some risk-reducing responses fruit growers might take for each of these.

Adverse Weather: Sources are obvious: hail, drought, frost, extreme heat or cold, wind, etc. For fruit growers, hail and frost can result in complete loss (production and or quality) of current growing season production. Weather is uncontrollable, however, risk management seeks to avoid or insure against bad weather circumstances resulting in crop loss. For example, planting on good sites to avoid frost ‘pockets’ or installing irrigation to reduce drought effects are ways to avoid weather damage. Purchasing crop insurance is recommended for all fruit growers. Catastrophic (CAT) insurance at a minimum guarantees an income if the insurable crop is completely lost to hail or frost, and ‘buy-up’ options of Multi-Peril Crop Insurance (MPCI) protect against some quality losses. Adjusted Gross Revenue (AGR) insurance is tailored to diversified fruit farms. Diversification is another strategy to reduce losses caused by weather. For example, peach production losses from mid-winter cold bud injury can be compensated by a successful apple crop if both fruits are grown.

Pest Damage: Insects, diseases, mammals, birds, weeds—every fruit grower deals with these pests on an almost daily basis. Pest pressure varies by fruit crop and time of year, however, to avoid loss caused by pests, growers need to use timely inputs, stay educated, and use appropriate technology. For example, the use of weather monitoring equipment and computer models to predict when apple scab is active (or not) can help an apple grower more effectively time fungicide applications and reduce their risk of blemished fruit (quality loss) at harvest.

Input Timeliness/Quality: Site selection, cultivar/rootstock selection, orchard system and tree support, and choice of crop production chemicals and usage are all examples where input timeliness and quality can make the difference between success (profit) and failure (red ink). Fruit growers must retain a level of proficiency and education to reduce risk associated with poor input timeliness and quality. Experienced fruit growers know that timeliness of inputs/operations is critical to produce a profitable crop. Sometimes you get some leeway, but often you do not—there is no sleeping on the job! The perfect example is fruit thinning of apples, where a very narrow window of chemical thinner application(s) at the right times and rates can make the difference between a crop of very small, low-value fruit vs. large, high-value apples.

Machinery Breakdown: Equipment failure is inconvenient at best, but costly and/or a disaster at worse! Planned maintenance of tractors, sprayer, harvest equipment, etc. is the best way to reduce or self-insure against the risk posed by untimely machinery breakdown. A realistic replacement schedule of worn/obsolete equipment is a good idea.

Lack of Production Know-How: Producing a successful fruit crop requires extensive knowledge of site selection, crop protectant rates and timing, current and forecast weather and environmental conditions, and horticultural techniques (i.e, pruning, tree/vine support, nutrition, etc.). Education—i.e. attending Extension meetings, reading publications, joining industry organizations, etc. is critical to avoid and self-insure against loss of yield and quality as a result of poor input decisions. Technology can play an important role to retain and gain production know-how.

Some grower responses to production risk as described above include: Diversification; Technology; Site Selection; Timeliness of Operations; Record Keeping; and Crop Insurance.

Diversification: Has three D’s—Different crops, Different locations, Different markets. The concept is easy to grasp, but pulling it off successfully takes hard work, and growing and marketing savvy. It’s all-too-easy to bite off more than you can chew! Enterprise analysis and good record keeping are important to know if the inputs for growing a new crop are not exceeding the returns. Off-farm employment is a less obvious but very common form of diversification among fruit growers. For example, an apple grower with multiple varieties and/or crops (peaches, cherries, blueberries, etc.) is also a computer consultant in town.

Technology: Irrigation, drainage tile, and wind machines are examples of technology to protect against adverse weather events. Mating disruption, degree-day and ‘expert’ models, computers, weather stations, and site-specific weather data (i.e. ‘SkyBit’ E-Weather) are technology tools that help fruit growers make integrated pest management decisions. Dwarf rootstocks, improved varieties, intensive orcharding, and plant growth regulators are examples of horticultural technology designed to improve and insure quality and yields of fruit crops.

Precision Agriculture: Precision agriculture involves using new technology to get site-specific farming results.  Geographic Information Systems (GIS), Global Positioning Systems (GPS), sensors, and Variable Rate Technology (VRT) are all newly developed tools to help the modern day farmer with precision agriculture. 

· Geographic Information Systems (GIS):  Combines information about specific geographic locations.  Use to query, analyze and map an area to aid in the decision making process.

· Global Positioning Systems (GPS):  A satellite navigation system controlled by the U.S. Department of Defense that provides specially coded satellite signals that can be processed in a GPS receiver, enabling the receiver to compute position, velocity and time.

· Sensors:  Used to identify and monitor hazardous atmospheres and possess the ability to detect several different gases in multiple farm environments.

· Variable Rate Technology (VRT):  Alternative chemical, seeding, and fertilizer application systems focused on reducing input costs. 

Site Selection: Choosing a good site is the one major response to weather-related production risks a fruit grower has some control over it. Needless to say, choosing a site adapted to the fruit being grown and avoiding ‘frost pockets’ or ‘wet feet’ situations is the basis for growing a profitable fruit crop.

Timeliness of Operations: A major source of production risk is a lack of timeliness of operations. Pest management, fruit thinning, fertility and plant nutrition, pruning and training, and harvest timing (among others) are all crop inputs with specific timing requirements. Experienced fruit growers know that timeliness of inputs/operations is critical to produce a profitable crop. Sometimes you get some leeway, but often you do not—it bears repeating, here is no sleeping allowed on this job! Time and labor management are good skills to have or develop.

Record keeping: In a nutshell, you “can’t manage what you can’t measure!” Information is the power to make informed decisions. Record keeping is your source of information. Enterprise analysis—how well are you using your inputs to produce a crop?—requires accurate record keeping. Good record keeping, although it seems like one of the more difficult and time-consuming tasks for some fruit growers, is an essential tool for managing risk!

Crop Insurance: A valuable and basic risk management tool that allows fruit growers to insure against losses due to adverse weather conditions. It shifts unavoidable production risks to an insurance company for a fixed dollar premium per acre. In addition, crop insurance can help you market more profitably, improve access to credit, guarantee a minimum income level, reassure partners and family, and above all, provides some peace of mind! Crop insurance is recommended for all fruit growers, and there are several types available, including: Multi-Peril Crop Insurance (MPCI) which is based on Actual Production History (APH); Non-Insured Crop Disaster Assistance (NAP) for fruit crops not covered by MPCI; and Adjusted Gross Revenue (AGR) which is especially suited for diversified fruit farms. Catastrophic (CAT) insurance provides a basic level of MPCI for a very low premium—it is the minimum level of coverage available. Need more information about crop insurance or want to purchase a policy? Contact a crop insurance agent in your area by using the ‘agent locator’ on the USDA/RMA website, http://www3rma.usda.gov/tools/agents/.

Crop insurance can be utilized as an important part of a total risk management plan to assure a fixed amount of cash-flow protection from adverse weather and other unavoidable named perils that producers are exposed to during the coverage period. 

· Multiple Peril Crop Insurance (MPCI) is a broad-based crop insurance program that covers numerous crops in the mid-atlantic region.  For most crops, MPCI covers unavoidable production losses caused by natural hazards such as flooding and drought.  Losses resulting from poor farming practices or theft are not covered through MPCI.

· A producer can choose to insure a specified acreage of a crop or his/her revenue (whole-farm plan).

· Crops insured by acreage are on an Actual Production History (APH) yield plan.  APH is an estimate of a producer’s average yield on the insured acreage for four to ten consecutive years.  Crops can be insured at 50-85% (in increments of 5%) of a producer’s APH yield.

· Insurable crops vary by county—written agreements may be an option for crops not specifically insurable in your county.

· Price elections are set by the Risk Management Agency for selected crops and are utilized as a maximum price to insure crops.  Crops can be insured at a price between 55-100% of the price election.

· A low cost, minimum level coverage policy called catastrophic coverage or CAT is also available.  This policy insures 50% of an APH yield and 55% of a price election.  CAT coverage is fully subsidized by the government with no premium cost to the producer, except for a $100 administrative fee, regardless of the amount of acreage.

· Indemnity payments are made when your average yield per acre is less than your guaranteed yield.  This payment is calculated by multiplying the number of insured acres by the yield difference times the indemnity price.

· Premium rates of payment for insurance are based on the coverage level chosen, the loss history for your county, and your APH yield.

· Late and prevented planting payments are also available for some crops if due to an insurable cause of loss.  There are replanting provisions for various crops available as well.

· Adjusted Gross Revenue (AGR) and Adjusted Gross Revenue-Lite (AGR-L) are whole-farm programs that provide protection against low revenue due to unavoidable natural disasters and market fluctuations that occur during the insurance year.

· Covered farm revenue for AGR and AGR-Lite include income from animals and animal products, aquaculture, and agricultural commodities.

Crop insurance can play a major role in providing a producer with peace of mind.  Crop insurance policies are tools used to reassure partners and family, guarantee a minimum level of income, improve credit status, and protect against disasters.  Contact an insurance agent for more information.

In conclusion, today’s growing and marketing environment requires fruit growers to be skilled producers and sellers. One of those skills needs to be devoting considerable attention to reducing overall risk—including loss of production and fruit quality—via a comprehensive risk management strategy. Good risk management = happy and profitable fruit grower!