Growers have several options for addressing risks through the purchase

of crop insurance and establishing overall business management plans,

including succession plans for the future. Both can help considerably to reduce

risks and to assure you are successful into the future. This chapter gives an

overview of insurance options as well as a few key business planning aspects

that may help vineyard owners/managers prevent or reduce risk while ensuring

sustainability over time.

A. Insurance Options*

Insurance policies provide several options to growers who are seeking protection

against risks. Some of the main options for insurance include the following

(RMA, USDA, 2008, and Vinewise, Washington Associaton of Winegrape

Growers, 2008, http://www.vinewise.org/files/documents/Crop_Insurance.

pdf):

AGR – Adjusted Gross Revenue insurance policy – insures revenue of the

entire farm rather than an individual crop by guaranteeing a percentage of

average gross farm revenue, including a small amount of livestock revenue.

This product is a pilot program and only available in the following California

counties: Fresno, Kern, Riverside, San Diego, San Joaquin, San Luis

Obispo, and Tulare.

MPCI – Multi-peril Crop Insurance Policy provides comprehensive protection

against weather-related causes of loss and certain unavoidable perils.

Coverage is available on over 76 crops through the U.S. at 50% to 75% of

the Actual Production History for the farm. MCPI coverage provides protection

against low yields and poor quality.

CAT – Catastrophic Coverage – pays 55% of the established price of the

commodity on crop losses in excess of 50%. The premium on CAT cover-



age is paid by the Federal Government; however, producers must pay a

$300 administrative fee for each crop insured in each county. Limited-resource

farmers may have this fee waived. CAT coverage is not available on

all types of policies; contact a crop insurance agent for more information.

See http://www3.rma.usda.gov/tools/agents/companies/.

The choice of an insurance policy depends on the objectives of the grower.

Possible Objectives of Purchasing Insurance:

What do I want my crop insurance to do in a bad year? For example:

Cover production costs

Give security to make marketing decisions even with low/no crop to

harvest

Provide peace of mind

What do I want my crop insurance to do in a good year? For example:

Guarantee loan collateral

Provide security to make marketing decisions

Add confidence to my farming decisions

Increase my opportunity for profit

A grower should develop his/her own scenarios of situations that might happen

in the future, as noted in the Box 9.1, and apply the proposed insurance

package to the scenarios, to see if the outcome is adequate to meet needs.

The Supplemental Revenue Assistance Payments (SURE) Program was created

in the 2008 Farm Bill. In order to qualify for any disaster payments,

should such funds be authorized by Congress, producers need to have all crops

insured under one of the crop insurance options available through RMA or

have coverage under Farm Service Agency’s Non-insured Assistance Program

(NAP). (See: http://www.fsa.usda.gov/FSA/newsReleases?area=newsroom&

subject=landing&topic=pfs&newstype=prfactsheet&type=detail&item=pf_

20080716_distr_en_buyin.html.)

For more information regarding crop insurance, or to find a crop insurance

agent in your area, please visit the RMA website: www.rma.usda.gov.

B. Business Planning: Helping to Reduce Risk and Ensure Sustainability

Business planning is an important part of owning and/or managing a vineyard

operation. It is an on-going problem-solving process that can be used to

identify challenges and opportunities. New and experienced business owners

and managers, regardless of their history or current status, can benefit from

business planning. Producers generally prepare business plans to: a) evaluate

production alternatives; b) identify new market opportunities; and c) communicate

their ideas to lenders, business partners, employees and family (SARE/

MISA, 2003). Business planning can also help ensure that potential risks are

understood and practices are in place to reduce risks.

As agricultural entrepreneurs become more involved in “sustainable” farming,

business planning is more important than ever. Producers considering innovative

management practices use business plans to map-out strategies for taking

advantage of new opportunities in the market, and to manage financial risk

(SAN/MISA, 2003).

“Business planning is a critical component of any operation. Even though a

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‘seat-of-the-pants’ approach to farming might work, it takes too long to figure

out if a decision is a poor one; you can waste years doing the wrong thing

when you could have been doing the right thing,” as stated by Greg Reynolds,

Riverbend Farm Owner/operator (quoted in SAN/MISA, 2003).

Before starting to develop a business plan, it is helpful to determine what you

want to accomplish from your planning process, and also who will be involved.

Generally, business planning is done by a team of key people involved in any

operation. A team approach can enrich the effort, and garner support for

the plan. People involved in developing business plans often include family

members, partners, employees (especially managers or directors), customers,

board members, lenders, and/or other experts who may be viewed collectively

as stakeholders.

The planning process for an agricultural operation can be categorized in five

major tasks which are summarized below (SAN/MISA, 2003). All of these

business planning tasks are also important for managing risk and ensuring

sustainability in vineyard operations:

1. Identify values – What is important to you?

What does it mean for you to be successful?

What community, financial, and environmental values are important

to you?

2. Review history and assess your current situation – What do you have?

Market situation (your products, customers, unique features, pricing,

promotion, etc.); cycles and fluctuations in the wine and winegrape

market which affect pricing and sales opportunities. (See Figure 9.1)

Operations situation (physical resources, production systems, management

and information systems, etc.)

Natural resources (your land/soil, water, air, energy sources, habitat,

etc.)

Human resources situation (current work force, skills, expected

changes)

Financial situation (financial needs, performance, and risks)

Identify current Strengths, Weaknesses, Opportunities, and Threats

(SWOT



3. Identify your vision, and mission, and goals – Where do you want to go?

Develop a future vision, mission statement, and goals

Set and prioritize goals

4. Develop and communicate your strategic business plan – what routes will

you take to reach your goals?

Develop a marketing strategy: identify markets, products, competition,

pricing, and promotion

Develop an operations strategy for production, management, regulations,

natural resource management, resource needs, etc.

Develop a human resources strategy (see Chapter 6)

Develop a financial strategy, including financial risk management,

organizational structure, means of achieving financial requirements,

long term financial plans, contingency plans, etc.

Communicate the plan and strategies to others in your operation and

to others who work closely with you (such as lenders)

5. Ensure effective implementation of the strategic plan and evaluation

Develop steps for implementing the plan

Establish monitoring methods and record keeping

Review your plan annually and evaluate progress, strengths,

weaknesses, risks, and opportunities, and adjust practices and plans as

needed

This list of tasks provides only a general overview of business planning for a

farming operation. Yet, carrying out these basic steps in business planning can

contribute to a successful and sustainable business, and can also help manage

and reduce risks in business. More detail and specific templates for business

planning can be obtained from the resources listed at the end of the chapter.