The environmental advocacy group Natural Resources Defense Council Tuesday said an improved emphasis on soil health in crop insurance programs could have minimized crop insurance losses from the 2012 drought.
The idea is based on a recently unveiled study prepared by NRDC that found 80% of crop insurance payments made to farmers during the 2012 growing season were the result of heat, drought or hot wind.
The group suggested also that such weather events will become more common in the future, estimating that soil management practices such as no-till and cover crops could help limit the effects of extreme weather events.
NRDC policy analyst Claire O'Connor, author of the study, said weather challenges could be avoided by improving soil health; more resilient soil can hold and filter more water, meaning the difference between profit and loss, she added.
But the Federal Crop Insurance Program, O'Connor argued, doesn't take soil health and subsequent water efficiency into account.
"The Federal Crop Insurance program charges farmers using a fixed formula that ignores the importance of how farmers are managing their fields," O'Connor said in a conference call Tuesday. In contrast, the NRDC said it is preparing plans for a pilot program that would take roll soil preservation practices into account.
Crop insurance-soil improvement pilot program
The plan, O'Connor said, would offer reduced premium rates to farmers who adopt "proven soil-building management practices" that sustain productive crop yields and result in greater water infiltration, less farm runoff and reduced flooding. It would not require legislation, but would be voluntary, NRDC noted.
The plan would also work in concert with proposed conservation compliance measures currently surfacing in farm bill negotiations.
"This is not a substitution for conservation compliance," O'Connor explained. While NRDC stands by farm bill policies that support conservation compliance, O'Connor said the pilot program would improve upon already proposed framework by expanding its benefits.
"The advantage of the program is that it provides incentive for farmers to go above and beyond that baseline," she said, referring to standard requirements of conservation compliance. "It can happen regardless of existing law."
O'Connor noted also that a provision in crop insurance policies allow companies to deviate from charging standard rates if it is actuarially sound and in the best interest of producers, making the plan legally possible.
"Rewarding farmers for regenerating their soils and improving soil health would meet both of these conditions," O'Connor said. "Farmers who invest in their soil and regenerate their soil are less likely to have crop insurance indemnities so they cost less to insure." And, O'Connor believes soil improvement practices would improve resiliency.
The group said it expects to approach crop insurance companies and the Risk Management Agency – the FCIP's managing agency – to determine the potential reception of such a pilot program.
"I think farmers should welcome this opportunity to build resilience and increase their yields, decrease their inputs," O'Connor said.
The group suggests that the new "above and beyond" provisions – which would ultimately, they say, decrease producers' cost for insurance – could be fulfilled by implementing no-till practices, improved irrigation scheduling and the use of cover crops.
Though O'Connor explained that further study would be necessary to determine the effectiveness and adoption trends of the proposed program, Gabe Brown, North Dakota farmer and advocate for the program said it could serve as a hedge against changing trends in Washington.
"The U.S. economy is not very good now to say the least. And as the budget constraints hit Washington, one of the things they are going to look at cutting is crop insurance – at least scaling it back some. If that's the case, programs like this that would offer reduced discounts to producers who use these practices, then famers are going to accept it on a wide basis because it affects their bottom line directly," Brown said.
Read more about last year's crop insurance losses and the soil conservation program in the NRDC study Soil Matters: How the Federal Crop Insurance Program should be reformed.