2017 set the record for disaster losses with over $5 billion in agricultural losses alone. Many U.S. farmers have still not recovered and some will never recover.
Federal payments are crucial for disaster recovery. Major natural disasters are one of the times when individual states and communities rely on the assistance of the rest of the country. Ideally, the whole country comes together to help a smaller part of the country to recover when a disaster is beyond the resources of that community to recover on their own. But in designing Federal programs, it is also crucial that we prevent the damage from happening in the first place.
Right now, Congress has the chance to make changes to crop insurance that will incentivize reduction of the severity of disaster damage, reducing both upheaval for the farmer and costs to the taxpayer, by recognizing and encouraging the risk mitigation benefits of conservation practices.
We have long known from field research that increased soil organic matter and improved soil quality from a range of conservation practices significantly reduce crop losses from either too much or too little water. This is settled science, backed up by farmer experience. But we have never had the computing power and integrated data sets to do the actuarial analysis that would allow those practices to be rewarded in the structure of crop insurance policies. This gap between data and experience means increased costs to the taxpayer and an economic disadvantage for those who care for their soil and prevent losses rather than relying on government programs to address losses after the fact.
Increasing the recognition of the risk reduction benefits of conservation practices in crop insurance reduces disruptions to the agricultural economy caused by natural disasters, rewards farmers who take responsibility for caring for their land and reducing risk within their farm, reduces costs to taxpayers, and increases the actuarial soundness of the program.
Three provisions in the Senate version of the farm bill would address this issue:
First, the Senate version addresses the need for better data integration and actuarial analysis with provisions from the “Agricultural Data Act of 2018,” integrating production and management data between USDA Farm Services Agency, Risk Management Agency and the Natural Resources Conservation Service. This initiative protects producer privacy but allows for the types of big data analysis necessary for developing actuarially sound recognition of the benefits of conservation.
While an important step, this integration of data and the analysis it will allow will take many years to come to fruition. The Senate bill also takes several prudent, proactive steps to make improvements based on what we know now.
Second, the Senate bill builds on the extensive science behind conservation practices encouraged by the Natural Resources Conservation Service by simply establishing that they should be considered “good agricultural practices” under crop insurance. A farmer shouldn’t lose their crop insurance for doing something that NRCS says is good for them to do.
Third, the Senate bill establishes a pilot program to test the ability of crop insurance premium incentives to encourage practices that field research shows reduce production risk. This program will test premium discounts for farmers who implement production practices known to reduce risk and the extent to which those discounts will encourage further risk reduction. As Congress and USDA consider future reforms to reduce dependence on crop insurance and encourage conservation practices that reduce risk, this pilot will provide critical information on how premium reductions could be designed and how effective they could be at achieving program goals.
These steps combine solid science with fiscal responsibility to improve the quality of USDA programs, improve farmers’ ability to weather natural disasters with less need for federal programs, and increase the fiscal responsibility of crop insurance. We urge that they be retained in the final legislation and are ready to work with legislators on their passage.
Take Action! For information on how you can contact your legislators and ask them to support these three provisions in the Senate version of the farm bill, click here.
Learn more: RAFI is part of the AGree Conservation and Crop Insurance Task Force, which has a series of papers about these issues available here. This Task Force is bipartisan and represents a range of agricultural stakeholders.
Catch up on all things Farm Bill here.