The Use of High Tunnels and Crop Insurance to Manage Risk in Specialty Crop Production 1 Department of Agricultural Economics and Economics, Montana State University 2 Department of Horticulture and Landscape Architecture, Washington State University 3 Department of Plant Sciences, University of Tennessee – Knoxville 4 Department of Plant Pathology, Washington State University Eric Belasco 1, Carol Miles 2, Annette Wszelaki 3 & Debra Inglis 4 Women in Agriculture Educators National Conference, Memphis, TN, March 2012

Biodegradable Mulches for Specialty Crops Produced Under Protective Covers Debra Inglis and Carol Miles (Project Directors) 1 ; Andrew Corbin, Jessica Goldberger, Karen Leonas, Tom Marsh and Tom Walters 1 ; Doug Hayes, Jaehoon Lee, Larry Wadsworth and Annette Wszelaki 2 ; Jennifer Moore-Kucera 3 ; Russ Wallace 4 ; Marion Brodhagen 5 ; and Eric Belasco SCRI Grant Award No

Purpose and Objectives  How to incorporate risk management strategies into fruit and vegetable production  Demonstrate how high tunnels can be used as a risk mitigation structure  Avoidance of impacts from extreme weather events  Hail  Heavy Rain  Flooding  Wind  Complementary to or substitute for crop insurance? Women in Agriculture Educators National Conference, Memphis, TN 3 March 2012

Outline 1) What are high tunnels? 2) Fruit and vegetable risk management strategies 1) High tunnels 2) Crop insurance 3) Both? 3) Experimental results 1) Response to weather events 2) Early-to-market premiums as a “buffer” to risk 4) Conclusion and discussion 4 Women in Agriculture Educators National Conference, Memphis, TNMarch 2012

Some Basics about High Tunnels  An arched frame covered with clear plastic  High enough to stand in or drive tractor through  Solar heated, no heating costs  Crops grown in ground with drip irrigation  Range in price from $1.50-$3.00 per square foot  Cost-share programs:  NRCS-EQIP Seasonal High Tunnel Initiative has funded about 2,400 high tunnels in 43 states  TAEP provides cost-share for long-term investments; others? 5 Women in Agriculture Educators National Conference, Memphis, TNMarch 2012

Some Basics about High Tunnels  Notable advantages to high tunnel usage:  Longer and earlier growing season (Blomgrem and Frisch, 2007)  Higher yields  Higher quality  Lower water usage  Ease transition from conventional to organic production  Intermediate protection from extreme weather 6 Women in Agriculture Educators National Conference, Memphis, TNMarch 2012

High Tunnel Research Project  Experimental design:  Split plot, randomized complete block design with sub-plots  Four high tunnel (HT) and open field plots at each site: ∙ TN and TX tunnels 29 ft x 96 ft ∙ WA tunnels 27 ft x 120 ft  Crops: lettuce, tomato & strawberries  HTs assumed to be used for 5 years (for cost accounting purposes) 7 Women in Agriculture Educators National Conference, Memphis, TNMarch 2012

High Tunnel Profitability  Profits = P*Q – FC – VC  Prices (P) and Yields (Q) assumed to be random  Fixed Costs (FC):  High tunnel materials and installation  Machinery and irrigation installation  Land cost  Variable Costs (VC):  Labor and maintenance  Fertilizer, herbicide, seeds, etc.  High Tunnel results in  Increased yields, extra season, price premiums  Increased fixed costs 8 Women in Agriculture Educators National Conference, Memphis, TNMarch 2012

High Tunnels to Mitigate Risk  Increased fixed costs associated with high tunnels can be thought of as an insurance premium  High tunnels are designed to mitigate the impact of extreme weather events  Dampen impact of strong winds  Reduce the potency of hail storm  Mitigate the impact of prolonged drought through increased water retention  Guard against prolonged and extreme heat/sunlight 9 Women in Agriculture Educators National Conference, Memphis, TN2012

Crop Insurance to Mitigate Risk  Traditional federal insurance plans include:  AGR – Lite  Yield products (APH, DOL)  Revenue products (RP, YP)  Given current farm bill debates, the subsidies associated with crop insurance programs may diminish  Past experience has shown that federal insurance products are unpopular without major subsidies 10 Women in Agriculture Educators National Conference, Memphis, TNMarch 2012

APH Example  Assume an apple grower has an average yield of 500 boxes per acre  A 50% coverage level is selected  Price election is determined to be $10.75  Actual yields are 200 for growing year  Here is how the indemnity is determined Boxes per acre (avg. yield) X0.50 Coverage level 250Yield guarantee -200 Actual yield 50Yield shortfall X $ Price election $ Indemnity per acre Women in Agriculture Educators National Conference, Memphis, TNMarch 2012

Other RMA products  Catastrophic (CAT)  Inexpensive product to protect against very bad years  Dollar  Producer specifies value per acre  Provides revenue protection  Actual Revenue History  Similar to DOL with a few exceptions  AGR-L  Based on tax returns  Less that $2M in gross income 12 March 2012Women in Agriculture Educators National Conference, Memphis, TN

RMA Products for Specialty Crops  Yield Products  Average Production History (APH)  Yield Protection (YP)  Revenue Products  Fixed Dollar (DOL)  Revenue Protection (RP)  Average Revenue Production (ARP)  Pecan Revenue (PRV) 13 Women in Agriculture Educators National Conference, Memphis, TN2012 CropPoliciesCropPolicies AlmondsAPHMustardAPH ApplesAPHNavel OrangesAPH, ARH ApricotsAPHNectarines (Fresh)APH AvocadosAPHOatsAPH BananaAPHOnionsAPH BarleyRP, YPPapayaAPH Beans(DryandProcessing)APHPeachesAPH BlueberriesAPHPeanutsAPH BuckwheatAPHPearsAPH CabbageAPHPeas (Dry and Green)APH CanolaRP, YPPecansPRV CherriesRP, YPPeppersDOL ChilePeppersDOLPlumsAPH CitrusDOLPopcornAPH CoffeeAPHPotatoesAPH CranberriesAPHPrunesAPH FigsAPHPumpkinsAPH FlaxAPHRainsinsDOL GrapefruitAPHRyeAPH GrapesAPHSafflowerAPH LemonsAPHSugarBeetsAPH MacadamiaNutsAPHTomatoesAPH MandarinsAPHTomatoes (Fresh Market)APH, DOL MilletAPHWalnutsAPH MintAPH

Crop Insurance + HT to Mitigate Risk  Both work to protect downside yield risk  Overlap may limit simultaneous use  Additional price risk may provide incentive for additional insurance (in addition to high tunnel)  Revenue-based plans insure both yield and price 14 Women in Agriculture Educators National Conference, Memphis, TNMarch 2012

Extreme Events 15 Women in Agriculture Educators National Conference, Memphis, TNMarch 2012 Wind and blowing dust causes weathering on TX tunnels

Extreme Events 16 Women in Agriculture Educators National Conference, Memphis, TNMarch 2012 Wind damage to WA tunnels in 2010

Extreme Events 17 Women in Agriculture Educators National Conference, Memphis, TNMarch 2012 Flooding in Texas in 2010

Extreme Events 18 Women in Agriculture Educators National Conference, Memphis, TNMarch 2012 Hail Damage in Tennessee in 2011

Response to high tunnels 19 Women in Agriculture Educators National Conference, Memphis, TNMarch 2012 TOMATOTotal Yield (kg/plot)Marketable Yield (kg/plot) Knoxville High Tunnel48.7 a50.0 a11.7 a25.6 a Open Field25.5 b29.4 b 1.0 b13.4 b Significance0.0004< Lubbock High Tunnel56.3 a29.9 a18.1 a17.0 a Open Field13.4 b 0.0 b 2.9 b 0.0 b Significance< Mount Vernon High Tunnel26.5 a35.6 a4.2 a21.0 a Open Field 5.9 b 7.3 b0.5 b 3.3 b Significance <0.0001

Response to high tunnels 20 Women in Agriculture Educators National Conference, Memphis, TNMarch 2012 TOMATOTotal Yield (kg/plot)Marketable Yield (kg/plot) High TunnelsOpen FieldHigh TunnelsOpen Field Knoxville Early Girl58.8 a60.9 a23.3 b32.9 a24.8 a37.4 a2.0 a21.8 a Celebrity50.6 a55.5 a31.4 a34.2 a 9.7 b23.6 b0.8 b12.0 b Ch. Purple36.5 b33.5 b21.7 b21.2 b 0.6 c15.8 b0.2 b 6.5 c Significance < Lubbock Early Girl69.7 a b040.0 a a0 Celebrity67.0 a a010.7 b ab0 Ch. Purple32.2 b b0 3.6 b b0 Significance Mount Vernon Early Girl a a32.7 a a Celebrity b a10.5 c b Ch. Purple a b20.0 b b Significance NS

Response to high tunnels 21 Women in Agriculture Educators National Conference, Memphis, TNMarch 2012 LETTUCETotal Yield (kg/plot)Marketable Yield (kg/plot) Knoxville High Tunnel15.4 a b10.5 a Open Field11.9 b a 6.7 b Significance < Lubbock High Tunnel Open Field Significance Mount Vernon High Tunnel Open Field Significance

Tipburn and Bolting

Response to high tunnels 23 Women in Agriculture Educators National Conference, Memphis, TNMarch 2012 Lettuce Total Yield (kg/plot) KnoxvilleLubbockMount Vernon HTOFHTOFHTOF Variety2010 * Coastal Star a16.6 a22.9 b23.0 a21.1 a24.0 b22.2 a a ab Jericho Star a14.6 ab27.9 a23.6 a22.3 a28.7 a22.3 a a b Ermosa b 10.9 c 9.2 cd14.3 b18.8 ab12.4 d12.4 bc a a Adriana b10.4 c10.7 c15.2 b19.4 a11.2 d11.6 c c d New Red Fire c 6.4 d 5.8 e11.6 b10.7 b12.0 d12.8 bc b c Greenstar b12.3 bc 7.9 de14.4 b16.2 ab20.3 c16.5 b c cd Significance0.1026< < < <.0001

Response to high tunnels 24 Women in Agriculture Educators National Conference, Memphis, TNMarch 2012 Lettuce Marketable Yield (kg/plot) KnoxvilleLubbockMount Vernon HTOFHTOFHTOF Variety2010 * Coastal Star a14.7 a 5.0 bc b 21.6 a b b Jericho Star bc10.0 b 2.6 c a20.2 ab a a Ermosa c 7.6 bc 9.0 a d12.2 cd c b Adriana bc 7.4 bc10.0 a d11.4 d c c New Red Fire bc 3.9 c 5.8 b c12.8 cd c bc Greenstar b 7.4 bc 7.9 ab b16.5 bc c c Significance < <

Response to high tunnels 25 Women in Agriculture Educators National Conference, Memphis, TNMarch 2012 STRAWBERRYTotal Yield (kg/plot)Marketable Yield (kg/plot) Knoxville High Tunnel1.1 a8.3 a0.9 a6.2 a Open Field0.1 b2.5 b0.1 b1.6 b Significance< Lubbock High Tunnel010.1 a0 9.3 a Open Field0 1.5 b0 1.1 b SignificanceNA < NA< Mount Vernon High Tunnel Open Field Significance

Hail Damage Women in Agriculture Educators National Conference, Memphis, TNMarch 2012

Response to extreme events 27 Women in Agriculture Educators National Conference, Memphis, TNMarch Total Strawberry Yield (kg/plot) KnoxvilleLubbockMount Vernon VarietyHTOFHTOFHTOF San Andreas (B)0.9 b0.05 b b Albion (B)0.9 b0.09 b a Seascape (B)1.6 a0.22 a a Significance NA Strawberry Total Yield (kg/plot) KnoxvilleLubbockMount Vernon VarietyHTOFHTOFHTOF San Andreas (B) 7.6 ab 1.8 bc12.3 d0.6 c11.6 b13.3 c Albion (P)10.2 a5.0 a19.4 c6.4 a20.5 a21.0 a Albion (B) 5.4 b1.6 c10.8 d0.7 c13.4 b16.3 b Chandler (P) 9.8 a1.5 c 22.2 bc0.6 c 1.4 c 1.1 e Festival (P)11.1 a3.0 b31.4 a3.8 b 3.5 c 2.3 de LCN (P) 5.9 b 1.9 bc 26.2 ab2.9 b 4.4 c 4.1 d Significance <0.0001

Response to extreme events 28 Women in Agriculture Educators National Conference, Memphis, TNMarch Marketable Strawberry Yield (kg/plot) KnoxvilleLubbockMount Vernon VarietyHTOFHTOFHTOF San Andreas (B)0.6 b0.01 b c Albion (B)0.8 b0.04 b b Seascape (B)1.3 a 0.13 a a Significance NA Marketable Strawberry Yield (kg/plot) KnoxvilleLubbockMount Vernon VarietyHTOFHTOFHTOF San Andreas (B) 5.5 bcd 1.4 bc 6.1 d0.4 c 8.4 b 8.7 c Albion (P)7.5 ab3.4 a 9.6 c3.5 a15.1 a14.3 a Albion (B) 4.0 d 1.2 bc 5.3 d0.4 c 9.9 ab10.8 b Chandler (P) 7.0 abc0.9 c 10.8 bc0.4 c 0.6 d 0.5 f Festival (P) 8.6 a1.8 b 15.4 a2.4 a 2.9 c 1.8 e LCN (P)4.5 cd 1.0 bc 13.5 ab1.7 b 3.4 c 2.5 d Significance <0.0001

Marketable Yield Gains (HT over OF) 29  Waterer (1992) reports improved yields for bellpeppers of an avg. of 61.5%  Greatest benefits come from growing warm season crops in cool weather conditions (Wells and Loy, 1985)  Results differ based on variety and location  Our preliminary results show:  Tomato yield increased more than 100%; increased net returns by $26k  HT lettuce yield decreased ~20% for summer due to bolting and tipburn; reduced net returns by $690  shift season to fall and spring  Strawberry ~ 2% overall increase for HT in WA; >300% for TN and >800% for TX in 2011 Women in Agriculture Educators National Conference, Memphis, TNMarch 2012

The Early-to-Market Price Premium 30 Women in Agriculture Educators National Conference, Memphis, TNMarch 2012

Production Times: Greenhouse production Everbearing varieties under open-ended tunnels Everbearing varieties Junebearing varieties Strawberries Women in Agriculture Educators National Conference, Memphis, TNMarch 2012

Early-to-Market Premium (cont.) 32  Experiments found average harvest among sites:  Tomatoes were July (OF) and early June (HT)  This implies a 25% increase in price  Lettuce was early June (OF) and early May (HT)  This implies a 78% increase in price  Increases returns by $2,691 per year  Strawberries were harvested Nov/Dec (HT)  Extra season + early season  Premiums used reflect average prices  Price premiums often rely on market chains Women in Agriculture Educators National Conference, Memphis, TNMarch 2012

Concluding Remarks 33  Producers can use high tunnels to:  Increase profits  Decrease risk exposure  HTs can lead to increased productivity of tomato in summer & strawberry in fall & winter  Wind damage to HTs can be significant – select model based on wind conditions  Price premiums generally greatest in fall, winter and spring  Experimental outcomes have shown HT crops to be less susceptible to downside risk Women in Agriculture Educators National Conference, Memphis, TNMarch 2012