Assessing agricultural risk management using historic crop insurance loss data over the ogallala aquifer

Abstract

Much of the agricultural production in the Ogallala Aquifer region relies on groundwater for irrigation. In addition to declining water levels, weather and climate-driven events affect crop yields and revenues. Crop insurance serves as a risk management tool to mitigate these perils. Here, we seek to understand what long-term crop insurance loss data can tell us about agricultural risk management in the Ogallala. We assess patterns and trends in crop insurance loss data from the U.S. Department of Agriculture Risk Management Agency. Indemnities, or insurance payments, totaled $22 billion from 1989–2017 for the 161 counties that overlie the Ogallala Aquifer. We focused on the top ten weather and climate-driven causes of crop loss for the Ogallala, which comprised at least 92% of total indemnities. Drought, hail, and heat were the leading causes of crop loss for the region, and varied over space and time. For example, drought is a significant cause of loss across all seasons, while hail is more prevalent in the spring and summer. Spatially heterogeneous patterns emerged showing larger hail indemnities in the northern Ogallala versus larger drought indemnities in the southern portion. We performed a Mann-Kendall trend analysis of county-level annual loss cost values (the ratio of indemnities to liabilities). Drought and excess moisture showed significant increasing loss cost trends in the western counties of the Ogallala. In contrast, hail showed significant decreasing trends in the northern and eastern portions. These results suggest the northern counties of the Ogallala may perceive hail as a greater risk, and may be better equipped to handle drought losses as compared with the southern Ogallala. Crop insurance loss data play a role in integrating long-term trends with near-term management practices, and providing relevant risk information in producers’ operational to tactical decision making processes.