The downside of crop insurance: Part one in a series

The downside of crop insurance: Part one in a series

Crop insurance system insulates poor agronomic choices and encourages monoculture, say critics.

When corn prices were $7 per bushel, Dan DeSutter raised 100% corn for three years. With crop insurance, the economics proved he couldn’t afford to not plant corn.

“If we just put seed out there, we were guaranteed three times the net profit of any other crop we seed,” the Indiana farmer says.

But DeSutter says crop insurance has insulated poor agronomic choices, and soils are going to pay for it with lower future productivity, just as the U.S. farmer ramps up to help feed 10 billion people by 2050 — and do it with fewer resources.

Some crop insurance restrictions limit adoption of certain conservation practices, says Indiana no-tiller Dan DeSutter.

DeSutter, who farms 4,500 acres with his wife and three sons, uses no-till, cover crops and manure to improve soil quality while maintaining high levels of crop production.

Those conservation practices have helped him boost soil organic matter from 2% to over 4%. He’s begun to understand the practices it takes to put carbon back into the soil by limiting tillage and managing soils in a way that can increase infiltration rates.

“I didn’t arrive at this point because I’m a tree hugger, but because of the realization it makes good business sense,” he says. “We make more money when we follow this track. When we increase organic matter and diversity of crops, we increase yields and decrease input spending, which has a tremendous impact on our bottom line.”

Like so many others, DeSutter suffered through the historic drought of 2012. “To go through the worst drought and have some better farms not suffer at levels to collect insurance, that’s what can happen when you manage for soil health and quit managing for government programs.”

With the budget bull’s-eye focused on farm programs, crop insurance and its benefits to farmers and taxpayers will continue to be scrutinized.

DeSutter believes subsidies stifle innovation. Some crop insurance restrictions limit adoption of certain conservation practices. Cover crop intercropping is something he is exploring — practices like planting clover in between rows to act as living mulch. He hopes the benefits to soil will outweigh the potential help of crop insurance. 

Risk to insurance

Under the Risk Management Agency, some cover crop practices may mean loss of crop insurance. At the Natural Resources Conservation Service, cover crops receive a “poor” rank for Environmental Quality Incentives Program funds in some localities, resulting in low eligibility for cost-share incentives. In July, RMA, NRCS and the Farm Service Agency came together to streamline changes to cover crop guidelines.

Some farmers would like to see crop insurance cheaper if cover crops are used, or at least provide some sort of incentive.

Any resulting increase in expected yield is already being captured by the Average Production History yield — which in turn reduces premium rates, says Keith Coble, ag economics professor at Mississippi State University. The difficult part is demonstrating that certain practices reduce yield variability.

Tenant farmers receive no farm program incentives to make long-term conservation commitments on rented land that often is farmed under leases of three years or less. Some practices require the landowner to sign on to make improvements. These problems need to be addressed in future crop insurance policy discussions.

DeSutter notes that renters can afford to make poor agronomic choices and stay in business, because rates are based on county averages and the volatility of those returns on a countywide basis. “It mutes the message of the marketplace back to the farmer,” DeSutter says.

But the intersection between crop insurance and conservation incentives can be tricky, says Coble. He says it will be worth asking if there are some conservation practices worth incentivizing even if they increase risk.

In part two: Making crop insurance more ‘conservation-friendly.

TAGS: USDA
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