For African swine fever, the primary control and eradication strategy is stamping-out. Since there is no effective vaccine, clinically affected swine, as well as swine that are suspected of being exposed to the virus, must be culled. If ASF should break on a farm in the United States, the question then becomes who will pay for that depopulation and how much will they pay?
According to Donna Karlsons, public affairs specialist for the USDA Animal and Plant Health Inspection Service, the Animal Health Protection Act provides broad authority to the Secretary of Agriculture to prevent, detect, control and eradicate diseases and pests of animals. It also provides authority to pay claims for animals, articles or means of conveyance that are destroyed. Generally, the AHPA authorizes APHIS to pay 50% of fair market value for animals taken in a disease response.
For diseases such as Newcastle disease and highly pathogenic avian influenza, APHIS may pay up to 100%. Additionally, there are provisions that allow the USDA to pay up to 100%.
Tim Craig, co-founder and CEO of James Allen Insurance, learned of this wide range for USDA payouts while working on a loss insurance bill that recently passed in Indiana. The bill allows the Indiana Board of Animal Health to purchase insurance to cover the loss and damages to the state of Indiana related to a prevalent animal disease incident.
“The whole conversation is how are we going to pay these producers because the states aren’t set up to do so. In the past, the Board of Animal Health was not allowed to protect itself or protect the states with insurance policies,” Craig says. “Our bill actually took that language out, allowing them to buy insurance coverage. In the event of a foreign animal disease outbreak it would provide for that and benefit back to the state.”
The next question becomes how will the USDA figure out the price for that culled animal?
According to Karlsons, fair market value is calculated based on a variety of factors, including the type of animal, age and other variables.
“It’s unclear what the market value will be then, is that the market value prior to an outbreak or is it the market value during the outbreak?” Craig says. “If it’s during that, then the price is going to go down even further.”
James Allen Insurance’s mortality policy can be purchased as a stand-alone or can be wrapped into an overall farm mortality policy. However, the producer gets to decide the value they want per animal, rather than just current market value.
“The way we’ve designed it was you pay an agreed value, which means the actual producer can set the value of that animal as low or as high as they want,” Craig says. “The difference is the policy that we’ve created would make the farmer more than whole, it could include some profit for them if they build that into what they want. It’s very broad, so it’s not only just covering this, we actually have the ability to cover their normal standard insurance perils that they currently would have just a regular mortality policy on too.”
The mortality policy will pay out if that farm breaks with ASF or foot-and-mouth disease, if the farm is in an area the government deems as a mandatory slaughter zone, and if the producer needs to transport pigs across regional or state lines and there’s a stop movement in place.
“If ASF or FMD would enter the United States, it would be a complete disaster. Indiana alone exports, I believe around $3 billion worth of pork; it’s the fifth largest state,” Craig says. “Take some state like Iowa, it would cripple that state’s economy, and really it would trickle the entire pork economy.”
While James Allen Insurance also offers an expense reimbursement policy, Craig says the mortality policy has been more popular among smaller to mid-range producers, while the larger producers are purchasing both.
Regardless of the policy, Craig cautions producers to not wait until ASF gets closer to the U.S. border before purchasing.
“With these policies there is a waiting period. So, if they choose to wait six months, they’re really waiting seven months because we have a 30-day wait,” Craig says. “Also, just because of the extreme high risk to us and our supporting security behind the coverage, it’s limited capacity. For instance, in Iowa, there are certain counties we’re completely full in and Minnesota is starting to get heavily populated, as is Illinois. It could be a producer comes to us and we wouldn’t be able to help them at that time. Also, it is truly a ‘first come-first serve’ type of coverage, just because of the risk and the appetite of reinsurance on the back end, how much they’re really willing to tolerate if a loss has happened.”