As California grapples with what is shaping up to be one of the worst droughts in decades, winegrape growers and other agriculture businesses are racing to strengthen or establish crop insurance policies as a hedge against potential weather-related damage that could translate to big financial losses.
All ag businesses have until Jan. 31 of this year to renew, strengthen or open new federally subsidized policies, and the vast majority of vineyards across the North Coast are taking full advantage, according to Chris Maloney, who's crop insurance agency was acquired by Santa Rosa-based American AgCredit late last year.
"We are experiencing a lot of concern with our policyholders and with new people to the program regarding the potential lack of rain," Ms. Maloney said. While she couldn't yet estimate by how much business has increased so far compared to last year, she nevertheless said her office has been swamped with inquiries from a wide range of vineyards.
During a typical year, a vineyard policy might cover between 50 percent and 60 percent of the crop. But with the looming possibility of a sustained drought, many vineyards are upping their premiums to cover up to 80 percent of their crops.
"We're seeing a lot of people move out of the 50 to 60 percent range and into the 75 to 80 percent range, so they are worried," Ms. Maloney said.
Douglas McIlroy, director of winegrowing for Rodney Strong Wine Estates near Healdsburg and who also manages his own vineyard, is doing exactly that.
"We pretty much get crop insurance every year that would cover our operating costs," he said of his personal ranch. "This year, we decided to go from 65 percent to 75 percent. When I was talking to my broker and asked if he'd been busy, he said lots of people were asking the question of how much can I buy up and how much is will it cost."
Mr. McIlroy said grapegrowers and other ag businesses haven't faced water levels this low since 1976 and 1977, although 1990 and 1991 saw a statewide drought. Ms. Maloney similarly said her office hasn't yielded so many inquiries from vineyards in some time.
"It's just very different," she said. "In 2008, there was a huge drought issue in the county. In 2010, there were very high temperatures and there was a lot of heat damage. In 2011, there was rain damage. But those things happened suddenly without a lot of warning. This is more anticipatory."
As polices are increased, premiums naturally increase. But policies and premiums differ for each vineyard and each farm, depending on a number of factors ranging from how water is sourced to overall annual yield to what type of crops are grown, including different varieties of grapes, according to Ms. Maloney. Premiums also depend on how much coverage is purchased because the amount of the federal subsidy, from the U.S. Department of Agriculture, also changes.
A key piece of the insurance puzzle -- and faring better during the dry spell -- is how the water is sourced. Specifically, vineyards that rely heavily on reservoirs not adjacent to a stream could be in for a long season if rainfall remains perilously low, Mr. McIlroy of Rodney Strong said.
"There's vineyards that rely 100 percent on reservoirs. A lot of those are dry right now, and if we don't get some rain, those are the most susceptible," he said. "Not only do they need water to get the crop through, but also for frost protections."