Soil Matters: How the Federal Crop Insurance Program should be reformed to encourage low-risk farming methods with high-reward environmental outcomes

Abstract

Although significant research has been done on managing farmers’ financial risk through federal programs such as federal crop insurance, to date, little attention has been paid to the ability of on-farm management’s potential to mitigate agricultural risk. Federal crop insurance could empower farmers to use their farm management skills to become more resilient to extreme weather conditions. This paper proposes a federal crop insurance pilot program that reduces premium rates for farmers who lower their risk of crop loss by investing in technically sound management practices that both reduce the risk of loss in the near-term and build soil health and increase productive capacity in the long-term. For example, soil moisture management practices, such as conservation tillage, cover cropping, and improved irrigation scheduling, reduce weather-related risks, such as droughts and floods. In the short-term, encouraging practices that increase soil moisture and water infiltration, as well as combat pest pressures, will help decrease yield fluctuation due to unfavorable weather in a given year. In the long-term, farmers who invest in soil health will increase their fields’ yield potential and be better prepared to face the challenge of a changing climate, in which extreme weather events are predicted to be more frequent and intense. Because these practices reduce the risk of crop loss, federal crop insurance can and should encourage them through an actuarially sound premium reduction pilot program.