Working with New Partners:Working with New Partners:Extension Experiences with USDA’s Extension Experiences with USDA’s

Risk Management AgencyRisk Management Agency

Dr. Terry Hanson and Dr. Keith CobleDr. Terry Hanson and Dr. Keith CobleDepartment of Agricultural EconomicsDepartment of Agricultural Economics

Mississippi State UniversityMississippi State University

ARPA Act of 2000

• PURPOSE– Authorize the FCIC to enter into partnerships to increase the

availability of loss mitigation, financial, and other risk management tools for producers, with a priority given to risk management tools for specialty crops, and underserved underserved agricultural commoditiesagricultural commodities.

• AUTHORITY– The FCIC may enter into partnerships with CSREES, ARS,

NOAA, or other public and private entities with capabilities in developing and implementing risk management and marketing options for producers of specialty crops and underserved agricultural commodities.

Project Overview

- RMA teamed with MSU for this partnership

- Feasibility of developing and implementing risk management programs for U.S. aquaculture producers

- Provide FCIC risk management products, policies, and related materials necessary to implement these programs.

Aquaculture

Science, Extension & Management

A Unique Synergism

MSU National Risk Management Feasibility Program for Aquaculture

Risk Management & Insurance

Objectives• Conduct a feasibility study of four species:

– catfish, salmon, trout, and baitfish

• Conduct listening sessions in the major production areas to determine interest level

• Collect data regarding the risks associated with aquaculture production

• Provide a feasibility report that will provide information to assess the viability of alternative risk management designs

If feasible, develop insurance programs or risk management tools with related materials:– Policies– Underwriting and loss adjustment standards

handbooks– Rating and pricing methodologies

If not feasible– Thoroughly document listening sessions,

unavailability of data, and industry/grower association recommendations not to proceed

Plan of Action

• Collecting existing and preliminary aquaculture species data

• Commissioning needed scientific reports & original research

• Developing potential risk management tools and products

• Will evaluate cost, acceptance, and feasibility of potential products

Plan of Action

• Formed species steering committees– Technical advice in developing a species research

plan

Catfish Committee

• Jimmy Avery• Jerry Crews• Carole Engle• Billy George Janous

• Joey Lowery• Rafe Taylor• Craig Tucker• Hugh Warren

Baitfish Committee

• Neal Anderson• Jeffery Gunderson• Eric Park• Danny Pool• Nathan Stone

Salmon Committee

• Sebastian Belle• Pete Granger• Mike Hastings• Colin Nash• John Thibodeau

Trout Committee

• Paul Adelizi• Richard Bragg• Gary Fornshell• Jeff Hinshaw• Ron Kinnunen

Risk Committee

• Barry Barnett• Roy Black• Barry Goodwin• Alan Ker• Tom Knight

Project Activities

Annual Workshops• Brought together more than 40 specialists in

aquaculture and risk management– Developed a list of priority peril areas

– Determined whether peril met insurability criteria

– Determined if info and data existed to measure

• Magnitude of loss and frequency of occurrence

– Identified the nature of required information and determined how best to obtain this information

– Identified experts in each peril area

– Discussed post-workshop steps for this project

– How advisory committees can best integrate into overall process

What Risks to Insure• Specific coverage for risk events

– Diseases (all)

– Bird Predation (all)

– Floods (all)

– Water Quality (all)• Oxygen Depletion

• Algal toxins

– Electrical Power Outages (catfish and baitfish)

– Off-flavor (catfish)

Species Reports

• Species industry reports for:– Catfish, Salmon, Trout and Baitfish

• Authored by:– Extension personnel– Researchers– Consultants

• Will form the background for the project’s final species reports

Species Report

• Characteristics of each selected species • Descriptions of alternative production systems

and variations in those systems• Characterization of aquaculture risks

– Identification of economic risks associated with production (treatable perils)

– Description of the potential to quantify risks including frequency and severity

Clientele Meetings– Greenville, MS: Catfish Advisory Committee

meeting at the Fish Farming Trade Show– Lonoke, Arkansas: Baitfish Advisory

Committee Meeting– Reno, Nevada: Presentation to U.S. Trout

Farmers Association’s annual meeting– Eastport, Maine: Salmon Advisory Committee

Meeting

Clientele Meetings– Fort Collins, Colorado: Presentation to USDA-

APHIS Livestock Insurance Conference (November 2002)

– Kansas City, Missouri: Project Update presented to RMA (December 2002)

Insurance Designs

• Developing a white paper to describe potential aquaculture insurance designs

• Being sent to members of each species advisory committee for comments

Areas Under Investigation• Enumeration of dead fish in pond aquaculture

environments

• Bird predation

• Production verification studies

• Disease spread modeling for aquaculture

Areas Under Investigation• Development of risk management criteria to use in

assessing producer risk level

• Surveys to obtain estimates of frequency and severity of losses

• Survey of European aquaculture insurance providers

• Develop underwriting language for potential aquaculture insurance products

Areas Under Investigation• Conduct rigorous willingness-to-pay studies

where both the insurance product and a proposed cost are presented to the farmer– Will there be demand?

– Willingness to pay studies• To determine producers willingness to pay for insurance

products that provide various degrees of protection from specified perils

The Balancing Act of Developing Viable Products

Effective Protection Producer Acceptance Actuarial Soundness

CostProduction Distortion

Project Website• Depository for project information, reports, and

recent events

• http://www.agecon.msstate.edu/aquaculture