Market Trends / Ingredients

$17.3 billion in crop losses is a record-breaker

Farm fields

Extreme weather forced the Federal Crop Insurance Program (FCIP) to pay out a record-breaking $17.3 billion in crop losses last year, much of which could have been prevented using water-smart strategies, according to the Natural Resources Defense Council (NDRC). Payments made to farmers during the 2012 growing season to cover losses from drought, heat and hot wind alone accounted for 80% of all farm losses, with many Upper Midwest and Great Plains states hit hardest.

With extreme weather conditions expected to become more common, record-breaking insurance payouts will likely continue to increase. However, widespread adoption of crop-loss prevention methods that build soil health and improve water management on farms can limit these losses. From 2001 to 2010, crop losses averaged just $4.1 billion a year, making the 2012 record-breaking FCIP payouts even more staggering.

“The Federal Crop Insurance Program has failed farmers and taxpayers by ignoring water challenges,” says Claire O’Connor, NRDC agricultural water policy analyst. “The program was designed to be a safety net, not a subsidy for increasingly risky practices and less sustainable food production. We need to empower farmers to invest in low-risk, water-smart practices that are proven to reduce crop losses.”

NRDC’s study, “Soil Matters: How the Federal Crop Insurance Program Should Be Reformed,” includes a new interactive crop loss and weather map at detailing crop losses county-by-county in all 50 states in 2012, when more than 80% of agricultural lands nationwide suffered drought.

The report finds that American farms, particularly in the Upper Midwest and Great Plains, were primarily impacted by three major forms of extreme weather in 2012: drought, heat and hot wind, all of which are expected to increase in the future. The top ten states with the largest overall crop insurance payouts due to drought, heat and hot wind were:

  • Illinois: 98% of all crop losses were caused by drought, heat and hot wind, costing $3,011,443,799
  • Iowa: 97% of losses, costing $1,924,444,160
  • Indiana: 97% of losses, costing $1,130,302,660
  • Kentucky: 96% of losses, costing $454,380,256
  • Missouri: 95% of losses, costing $1,098,310,111
  • Wisconsin: 94% of losses, costing $372,479,370
  • South Dakota: 93% of losses, costing $1,029,780,352
  • Kansas: 93% of losses, costing $1,273,662,944
  • Nebraska: 92% of losses, costing $1,427,738,976
  • Texas: 75% of losses, costing $974,548,606

Soil Matters’ analysis reveals the key causes of the staggering crop insurance payouts by the U.S. Department of Agriculture’s Risk Management Agency (RMA) and examines the systemic flaws in RMA’s program, which fails to account for risky farming practices that create extreme weather vulnerabilities and ignores the risk-reducing value of healthy soil. The report outlines solutions for a crop insurance reform pilot plan that would build soil health to help climate-proof American farms, and would reduce government and taxpayer costs by encouraging farmers to become more resistant to weather-related risks. The pilot, which would not require legislation, 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.

“Farmers can apply their own skills to build healthy soil, reduce the worst effects of climate change and rein in the skyrocketing costs of this program,” reports Gabe Brown, a Great Plains farmer and soil champion. “Healthy soil is one of the most effective and time-tested insurance policies we have.”

These best management practices include cover cropping, conservation tillage and improved irrigation scheduling:

  • Cover crops: Crops grown with the specific purpose of building soil health and increasing biodiversity on farms focused on growing major commodity crops. Farmers who used cover crops in 2012 averaged higher yields than farmers who did not, according to one recent USDA survey. The yield benefit from cover crops was most pronounced in the areas hardest hit by the drought, demonstrating the importance of cover crops to drought-proofing fields.
  • No-till farming: A soil moisture management method when farmers plant directly into the stubble from the previous year’s crops, rather than plowing up this residue. The protective stubble serves as mulch that retains soil moisture, suppresses weeds and increases a field’s capacity to grow high-yield crops. In 2010, corn farmers who used no-till were 30% less likely to file a crop insurance claim than conventional tilling corn farmers.
  • Improved irrigation scheduling: A simple altering of often fixed irrigation times, whereby farmers apply adaptive irrigating schedules based on frequent examinations of soil health. This improved efficiency could help farmers avoid some supply constraints that cause losses during dry years. In 2012, irrigation supply failures accounted for more than $14.7 million in indemnity payments.

More than 282 million acres of cropland—making up at least 70% of the nation’s total cropland—are insured under the FCIP, a public-private partnership between the RMA and 18 private insurance companies. The FCIP is the most expensive farm subsidy program and serves as the primary risk-management tool for farmers to prepare for potential crop loss, including from weather-related risks.

For more information about 2012’s record-breaking crop insurance payouts and how the FCIP should be reformed to encourage sensible, low-risk farming, see:

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