Farmers who wish to remain eligible for some USDA program benefits must obtain catastrophic insurance or higher levels of coverage. Given the relatively few government programs available for specialty crop growers, this ranking may be associated with the specialty crop growers who have diversified into field crops. However, it is worth mentioning that not even one-quarter of potential respondents provided the rank for the reason for purchasing crop insurance except for “crop loss,” which was chosen by more than three-quarters of the insurance buyers. This indicated that many felt that any reason other than crop loss was remotely related.Reasons for not purchasing crop insurance and their mean ranking are presented in Figure F2. “Never lost enough production” and “premium is too high” ranked highest among the choices offered except “other.” This reflected the relatively low degree of yield variability in many specialty crops grown in California. “Lack of availability for my crop” was next. Particularly among vegetable growers, lack of availability was ranked as the primary reason for not purchasing crop insurance, with a mean rank of 1.6 . Further, “major source of risk is not an insured cause of loss” and “do not understand the program” were not trivial. Finally, for almost all crop categories, “other” ranked as the primary reason for not insuring. This may imply that there is substantial “catch up” to be done for both growers and insurance providers—that more efforts are needed to inform growers about crop insurance and for authorities to learn the unique reasons why growers of particular crops do not purchase insurance. Table F3 provides the average ranking of suggestions to improve crop insurance. Suggestions listed were mostly related to compensation schemes.

For fruit/nut and vegetable farmers, “raising the yield guarantee,” “compensating for revenue or profit,” and “guaranteeing cash production costs” ranked high, grow bag for tomato while for ornamental growers, “compensating for revenue or profit” and “guaranteeing placement costs of an inventory” ranked high. For fruit/nut farmers, guaranteeing the cost of establishing an orchard was not as preferred as compensation of cash production costs, and a compensation scheme for ornamentals needs to be devised to accommodate their production systems because traditional yield-based production is not relevant to them. Overall, it was clear that specialty crop growers were more concerned with revenue and profit variability than they were with yield variability. This attitude is common among farmers in California’s irrigated agricultural industry. Recent research on crop insurance has consistently identified some level of demand, but that demand has been influenced by numerous factors . A decade ago, research focused primarily on yield risk as the key determinant of demand for crop insurance. Studies of that period focusing on specialty crops found that growers’ reluctance to insure was based on the fact that price variance was often more significant than yield variance . This prompted the first assessments of revenue insurance as an alternative . In recent years, revenue insurance has received wide attention. However, the few studies of specialty crop producers’ demand for revenue insurance have shown a need for more detailed, crop specific analyses of market and grower factors .The final section of analysis focuses on four financial variables: off-farm income share, gross agricultural sales, assets, and debts . Previous research has shown that these factors have a significant influence on farmers’ risk attitudes and, thus, on their risk management practices. For example, off-farm income supports most farms in the United States . The cushion from off-farm income makes many of those farms less sensitive to income risk , thus decreasing the demand for risk management tools .

In other words, off-farm income substitutes for other risk management tools to some extent. Figure G1 presents the distribution and mean of off farm income shares by crop category. The “share” refers to the percentage of total household income that comes from off-farm sources. The mean share for the entire survey was 63 percent . In general, there seemed to be a common pattern in the distribution for each crop category. Each distribution showed relatively heavy densities at the 1 to 10 percent range and then in the mid-range at 41 to 50 percent. The density started to increase at the 71 to 80 percent range. Note that the 91 to 100 percent range showed the highest density among all ranges for both fruits/nuts and ornamentals . However, the distribution of farms in the vegetable category deviated from the other two categories. The distribution of vegetable farmers showed greater density in the ranges with relatively low off-farm income shares, indicating that vegetable growers tend to spend less time on off-farm activities and get more of their income from farming than do fruit/nut or ornamental growers. Table G1 provides average values of gross agricultural sales, assets, and debts. Along with mean dollar figures, the table also reports the standard deviations in parentheses. There were substantial differences across crop categories. Consistent with the earlier findings on mean acreage, vegetable growers’ mean gross sales were much higher than those of other categories—nearly three times that of fruits/nuts and one and a half times that of ornamentals. The standard deviations of the mean gross sales were relatively large, indicating substantial variation in sales figures across farms. Nevertheless, judging from the values of the coefficients of variation, it was possible to infer that the variation in gross sales was less severe for vegetable farms. Vegetable operations also had the highest mean values for assets and debts. 

The reported mean values of assets and debts gave debt/asset ratios of 0.42 for fruits/ nuts and 0.50 for vegetables. More importantly, when viewing assets and debts as financial inputs necessary to generate revenue, the ratio of gross sales revenue to the sum of assets and debts was highest for vegetables and lowest for fruits/nuts. This implies that one unit of financial inputs is associated with a higher level of revenue for vegetables than for fruits/ nuts, or equivalently, one unit of revenue is associated with a lower level of financial inputs for vegetables than for fruits/nuts. This cursory observation may be linked to the relatively high intensiveness of financial inputs required, or the relatively low performance of financial inputs in fruit/nut production. The mean gross sales by region varied substantially. Gross sales data by crop category and by region indicated that the lowest gross sales were in the Far North region for both the fruit/nut and the vegetable categories, as expected because of those region’s lack of suitability for such crops . The highest mean sales for the fruit/nut category were the Central Coast – North’s $0.6 million ; for the vegetable category, the highest mean sales were the Sacramento Valley’s $1.8 million. Figure G2 provides the distribution of gross agricultural sales by crop category. The median and mean gross sales diverged considerably; the median was only about one-tenth of the mean value due to inclusion of some extremely high sales values for a few very large scale operations combined with the large number of small-scale farms. In the vegetable category, there were relatively higher proportions of farmers in higher sales ranges. The proportions of farmers with more than $1 million in sales were 6 percent for fruits/nuts, 29 percent for vegetables, and 13 percent for ornamentals. Figures G3 and G4 provide the mean gross sales by off-farm income share and by acreage class, respectively. Mean gross agricultural sales were negatively correlated Figure G2. Distribution of Gross Agricultural Sales Fruits and Nuts 5,001 and greater 35% 15% 10% 5% 0% 0–10 11–50 51–100 101–500 501–1,000 1,001– 2,000 2,001– 5,000 14% 17% 5% 26% 3% 2% 1% 25% 30% 20% 33% with off-farm income share and positively correlated with acreage, grow bag for blueberry plants confirming our expectation that higher agricultural revenues were generated by farms with larger acreage and farmers with less off-farm work. However, when sales revenue was computed as per-acre revenue, Figure G4 suggests that revenue per acre decreases as acreage increases. This is not counter-intuitive, given that specialty crops vary widely in unit value and the survey results indicated that smaller sized farms were, in general, associated with higher crop values.The main purpose of this report was to provide detailed and unique survey-based information on the fruit/nut, vegetable, and ornamental crop industries of California. The main findings from these survey data are as follows. California has fewer vegetable farms but, measured by gross sales and other dimensions, they are larger operations than fruit/nut farms are. Diversification increases with farm size, measured by acres. Fruit/nut farms are, on average, less diversified than vegetable farms, and when fruit/nut farmers diversify, they tend to use similar crops. About 6 percent of fruit/nut and vegetable farms have some organic land. These organic farmers represent 6 percent of fruit/nut farms, 14 percent of vegetable farms, and 4 percent of ornamental crop farms. Many of these farms also engage in conventional farming, and they devote, on average, about one-third of their primary crop land to organic farming. California farms tend to grow produce for either processing or fresh use but not for both. About 71 percent of the sampled fruit/nut farms produced mainly for processing use. About 67 percent of sampled vegetable farms produced mainly for fresh use. Contracts play a major role in marketing for specialty/ horticultural crops. They are particularly important in markets for crops designated for processing. Nearly 60 percent of fruit/nut farmers and 90 percent of vegetable farmers marketed their processing commodities through contract arrangements. The majority of these contracts provided for a predetermined price.

About 13 percent of vegetable farms but only 3 percent of orchard farms are grower/shippers. These farms tend to be larger than average and supply to mass merchandisers. Among the various channels, “directly to consumers” was used by the largest share of farms , but the farms tended to be smaller than average. Yield variability is an important risk factor for growers. Orchard and vineyard crop yields tend to fluctuate more than vegetable yields. Orchard and vineyard crop yields deviated an average of 15 percent for the five-year moving-average yield, compared to an average of 8 percent for vegetable crop yields. Despite considerable yield variation from year to year for these California crops, price variability is listed by growers as the most important risk source. Growers list price declines due to industry-wide overproduction as the number one concern. Growers use diversification and some marketing channels to manage risk. Crop insurance is less available for vegetable crops than it is for fruit, vine, and nut crops. Vegetable producers view crop insurance as a “less preferred” risk management tool. When asked about crop insurance programs, many farmers suggested that a “higher yield guarantee” would improve crop insurance. Further, most farmers strongly suggested the need for crop insurance that compensates in value terms, but they expressed no strong preference among compensations based on gross sales, profit, or production costs.The information provided in this study and the data set that underlies it will prove useful to agricultural business firms, including individual farms, as well as to government policy advisors and program designers. The study results provide a benchmark to industries that allows them to compare operations to the averages and medians for specific crops or locations. It also allows agricultural marketing and other service and supply firms to better understand their own potential supply and customer base for planning and product development. Such detailed data have not been available previously. The data are being used in risk management education efforts for growers and in summary form to provide objective data about grower operations and attitudes.The data and results also have implications for public policy and implementation of public policy, especially relative to risk management. Some examples are provided here. We find that many growers use crop diversification to smooth their revenue streams, but some growers find diversification more difficult or costly. Even if more diversified farms tend to have less variability in farm income, the degree and form of diversification affects the probability and magnitude of losses. The importance of diversification and its variation across specific industries points to the conditions under which yield insurance may be of interest and where it is less important to a farm’s annual revenue and thus less appealing as a risk management tool. The covariance between price and individual farm yield is another crucial piece of information in assessing farm revenue risk related to either price or yield variability. USDA’s Risk Management Agency has been developing whole-farm revenue insurance products.