AN ECONOMIC ASSESSMENT OF STRAWBERRIES Executive Summary The U.S. is the world's leading producer and consumer of strawberries. While strawberries are grown in nearly all states, California dominates commercial production. Florida and Oregon rank a distant second and third in the amount of strawberries they produce. U.S. production reached a record-high in 1993 and another large crop is anticipated in 1994, continuing the upward trend that has about tripled output since 1970. Strawberry prices follow a very distinct seasonal pattern, declining from December through May as the volume of berries increases, first from Florida and then from California. Prices rise gradually from June through September as the volume from California declines, and then rise sharply during October and November as the California season winds down. The relatively flat prices apparent from May through September reflect the value of California strawberries for processing. The 1987 Census reported 9,398 farms with sales of strawberries. The largest number of strawberry farms was reported in Pennsylvania and California. These two states accounted for 18 percent of all farms with strawberries in that year. Florida, the second-largest strawberry producing state, accounted for only 2 percent of total farms in 1987, and Oregon, which ranked third in production, accounted for 5 percent. Many minor producing states, such as Pennsylvania, account for a fairly large share of farms with strawberry sales, but a small share of total output. For most states, the number of farms reporting strawberry sales declined between 1987 and 1992. About 80 percent of the U.S. strawberry acreage reported in the 1987 Census was irrigated. All of California's acreage was irrigated, and nearly all of Florida's acreage. The extent of irrigation use was much more variable across the minor producing states. Cultural practices for strawberries vary widely from one part of the country to another. Strawberries are usually grown as an annual crop in areas with mild winter temperatures, such as California and Florida. They are generally grown as a perennial crop in other areas, although there appears to be considerable experimentation with cultivation of strawberries as an annual crop in a number of southern, eastern, and midwestern states. The cultural practices are quite different for the two cropping systems. With the annual production system, strawberries are transplanted into the field during the summer or fall, and are harvested during the following winter, spring, or summer. The plants are destroyed after the first harvest season and a new planting is established for subsequent crops. When strawberries are grown as a perennial, "mother" plants are transplanted during the spring. Their first year in the field is primarily a period of multiplication during which the mother plants produce "runners" from which "daughter" plants grow. The plants then go through winter dormancy, and the first harvest occurs during the spring a year after planting. Plantings can be renovated after harvest and produce again the following spring. Usually, a planting is maintained for two or more harvest seasons. The most serious perils in strawberry production include excessive heat and moisture during the harvesting period. Excessive heat during harvest results in soft berries and lowers fruit quality. When accompanied by moist conditions, excessive heat fosters the development of gray rot and other diseases on the fruit. Gray rot is the most serious rot in strawberries. Other causes of yield losses include late spring frost, excessive cold during the winter, drought, hail, and numerous insects and diseases. The importance of these various perils depends on the variety, climate, and time of the growing season. Insurance issues addressed in this report include: annual crop vs. perennial crop issues; the potential for moral hazard and adverse selection; the setting of reference prices; the availability of individual yield data; and potential methods for estimating appraised production. Our assessment is that strawberries are not a particularly good candidate for multiple-peril crop insurance in the major producing areas. The reason is that growers in California, Florida, and the Pacific Northwest (Oregon and Washington), who together produce 95 percent of reported U.S. output, are not likely to be very interested in such insurance. Growers in California, for example, face fewer serious production perils than growers in other parts of the country. Further, the perils that California growers do face (mainly early spring frost and early fall rains) usually disrupt harvesting for only part of the picking season and are not likely to cause yield losses as large as 25 percent of average yield. Although excessive cold is a production peril in Florida, the bulk of Florida strawberries are protected from serious yield losses because of the widespread use of overhead irrigation and row covers. The small amount of ad hoc disaster assistance paid to growers in California and Florida provides further evidence that there may not be very much demand for crop insurance. There were no payments made to growers in California for yield losses to strawberries between 1988 and 1993 and only $320,522 (0.1 percent of the value of strawberry sales) to growers in Florida. The greatest interest in strawberry insurance is likely to be among growers in southern, eastern, and midwestern states such as Illinois, Indiana, Michigan, Minnesota, New York, Pennsylvania, Tennessee, and Wisconsin. Most of the strawberries in these states are grown as a perennial crop using the matted-row system. Frequently, growers have inadequate protection against late spring frosts, extreme drought, and excessive rainfall. In addition, conditions of extreme heat and excessive moisture, which can result in losses exceeding 25 percent of average yields, are more likely to occur during the critical harvest period in these states than in California and Florida. Notwithstanding potential grower interest, sales of strawberry insurance in the South, East, and Midwest would be severely limited by the small amount of production in these areas. Growers in these states generally have small strawberry acreages. Frequently, strawberries are grown near population centers, and rely on direct-market sales.