INFORMATIONAL MEMORANDUM: R&D-98-020

TO:           All Reinsured Companies
         All Risk Management Agency Field Offices              Other Interested Parties

FROM:    Tim B. Witt           /s/ Tim B. Witt     6/1/98 
         Deputy Administrator

SUBJECT: Christmas Tree Pilot Program Participation

BACKGROUND:
 
The Risk Management Agency (RMA) is researching the feasibility of a pilot insurance program
for Christmas trees.  The following is a summary of where the crops are grown and the relative
economic impact of the industry.

Christmas trees are produced in all 50 States, but the bulk of production is located in the northern
half of the country. The Department of Agriculture's National Agricultural Statistics Service
does not collect data on Christmas trees.  However, information collected by the Economic
Research Service (ERS) indicated that the top producing States include Oregon, Michigan, North
Carolina, Washington, Wisconsin, California, and Pennsylvania.  The most recent ERS data
show an average annual value of Christmas trees for 1992 to 1996 of $423,171,000.  Industry
estimates suggest that as many as 1 million acres may be planted to trees and that 100,000 people
are employed either full- or part-time in producing Christmas trees.  Many Christmas tree
producers grow trees on a part-time basis as a supplement to other types of farm-related
enterprises or non-farm income.  

For several reasons, many of the individuals contacted by ERS in a Christmas tree feasibility
study implied that crop insurance would be mostly an issue for mature Christmas trees. Some
reasons are that costs during the early stages of production are minimal, compared with the costs
of producing the adult tree.  Also, younger trees sometimes can outgrow damage, such as needle
or branch loss, by the time the tree is ready to be marketed. 

A Christmas tree is considered mature and ready for harvest when it reaches 6 to 7 feet, the most
popular height.  It usually takes 5 to 12 years from planting until trees reach this height.  The
actual number of years depends on geographic location, species, size at harvest, age of seedlings
when planted in the field, soil fertility, cultural practices, and other variables.


The major production perils affecting Christmas trees include drought, excessive rain, excessive
wind, hail, and fire. Although sometimes damage will result in the death of the tree, more often it
will result in the appearance of the tree being altered to the extent it is no longer saleable as a
Christmas tree. 

There may be a substantial amount of interest in purchasing insurance, particularly among the
larger producers in the Pacific Northwest and Northern States.

The Christmas tree feasibility study may be obtained by contacting the Research and Evaluation
Division at (816) 926-6343.  Billings, Jackson, Raleigh, St. Paul, Spokane, Springfield, and
Valdosta Regional Service Offices (RSO) have indicated an interest in developing a Christmas
Tree Pilot Insurance Program for their respective areas.  Each insurance provider interested in
participating in the development of a Christmas tree program is invited to designate a
representative or representatives from their organization to work with RMA on this product.

ACTION:

Samuel Coburn of the Raleigh RSO is the project manager for the Christmas Tree Pilot Insurance
Program.  Jay Garner, of the Research and Evaluation Division, is the Kansas City liaison for the
development team.  Insurance providers wanting to participate in the development of the
Christmas Tree Insurance Pilot Program should provide their name, address, and phone number
to Jay Garner, by June 25, 1998.  Jay may be reached at the following address:

                    Jay Garner
                    USDA/RMA
                    Research and Evaluation Division
                    P. O. Box 419293
                    Kansas City, Missouri 64141
                    Phone: (816) 926-1899
                    Fax: (816) 926-7343