Crop Insurance and Conservation: A Risk Management Partnership?

Mahantango Creek Watershed (USDA ARS)

Risk management interests loom large as this Farm Bill cycle speeds up, particularly with recent price trends, droughts, fires, floods, and related challenges to production and bottom lines. In House and Senate Farm Bill field hearings over the past year, witness after witness spoke eloquently about how Farm Bill “safety net” programs made local and often personal differences that kept their farm in the family and agriculture on the landscape. The Farm Bill is all about managing and mitigating risk, from production to natural resources to food security. And isn’t that the intent? Farm bills are written for the bad times, not the good times.

Most can easily see how farm support payments, crop insurance, or livestock disaster programs directly address risk, but there’s much more to risk management than immediate threats. So, we have to ask: why do we struggle to fit conservation into the farm safety net picture? It’s all about planning, immediate impact, and an unfortunate data vacuum. If conservation mitigates long-term risk to natural resources and agricultural productivity, then shouldn’t it be considered part of the safety net? One might argue USDA’s May 2017 reorganization that aligned NRCS with sister agencies FSA and RMA signals a growing awareness of just that.

One particular relationship of interest is the one between conservation and crop insurance. They are complementary and, between these two programs, producers can insure to mitigate risk to yield or revenue to sustain annual operations, and insure to mitigate risk to (or improve) natural resources to sustain long-term land productivity and operations. The foundation for a productive agriculture, be it crop or livestock, is the soil upon which it rests.

Over the last decade, there have been numerous and varied efforts to link conservation and crop insurance. While there are some moves in this direction, such as Iowa’s 2018 premium reduction incentive for using cover crops, the major program-wide change was the 2014 Farm Bill’s recoupling of crop insurance to conservation compliance. Going forward, linking these two important programs based on data will be a valuable step toward a much larger partnership. Documenting conservation’s risk mitigation value could allow producers a crop insurance benefit and minimize risk for insurers.

But it’s not that easy. Crop insurance, while administered nationally, is delivered through  independent insurance companies. Products offered by these companies have to be actuarially sound; after all it’s a business. Consequently, the data needs are not trivial. Generally 10 years of data are required to develop viable products and pricing. USDA discussions along this path are important, but not sufficient because this conversation requires a really big tent. Some organizations like AGree are already working to build bridges for wider discussion of conservation and crop insurance.

How can the Farm Bill help? As the interest groups supporting the different sides of this question continue their Hill rounds to press their objectives, a good starting place would be the data gap. Change will follow the data. Today there’s incredible opportunity to start addressing this gap through the growing precision agriculture movement—never before have such essential data at such a granular level been harvested and poised for use. The Farm Bill could set the stage to gather the primary interests together—farmers, USDA, insurance companies, agricultural and environmental groups, lenders, and consumers—to explore what conservation does for long-term risk management from a business perspective, gather the natural resource and economic data, and establish how these two risk management tools can work together in a Risk Management Partnership.

Let’s start with the data rather than opinions.