Crop Insurance: Good Enough for Monsanto-Good Enough for Sustainable Ag

From the fact-is-stranger-than-fiction department: In 2007, Monsanto talked the USDA’s Risk Management Agency into giving farmers a discount on crop insurance premiums if they planted the company’s triple-stacked GMO corn. Reportedly, some reviewers of the proposal raised concerns that the premium subsidy would unfairly benefit a single private company.

But in the end, the USDA overcame such “cynical” fears and approved the so-called Biotech Yield Endorsement—BYE for short. As a result, farmers who planted the GMO seed received a discount of around 13 percent to 20 percent on their insurance premiums. According to a report released by Datu Research earlier this month, in the end the discount ended up being applied to DuPont Pioneer, Syngenta and Dow stacked hybrids. The BYE was discontinued in 2011 because triple-stacked GMO hybrids were so widespread by then that there was no longer any basis for offering a special discount to adopters, according to interviews conducted by Datu. In other words, the GMO industry had fully saturated the seed market, thanks in part to the tax-funded crop insurance program.

So much for the myth that the GMO business has thrived as a result of a free market unfettered by government intervention.

Perhaps we shouldn’t be surprised that the government would allow a publicly funded program like crop insurance to benefit private industry. After all, as the Land Stewardship Project’s “Crop Insurance—How a Safety Net Became a Farm Policy Disaster” white papers show, a huge beneficiary of this USDA program is private industry—in this case some of the largest insurance corporations in the nation. And despite its billing as a safety net for all farmers, no matter their size or enterprise mix, crop insurance has become mostly a gravy train for the largest commodity crop producers in the country. This has produced some decidedly negative results for the public at large when it comes to economic viability of rural communities, support of beginning farmers and stewardship of the land.

But the BYE example opens the door to perhaps making crop insurance a true risk management strategy—one based on sustainable, resilient production systems. Ironically, Monsanto’s rationalization for a premium discount was that GMO products like triple-stacked hybrids provide farmers a more consistent, and thus less risky, way to raise corn. Of course, it’s hard to argue these days that GMO products are less risky in light of their connection to super-pest outbreaks in farm country, and evidence they threaten our soil’s ability to function biologically.

True risk management policy needs to be based on resiliency, not a corporation’s desire to make money on its own patented technology. That’s an important point to keep in mind as the benefits of cover cropping and other soil-friendly techniques become increasingly clear. A nationwide survey of farmers released in November by the USDA’s Sustainable Agriculture Research and Education (SARE) program and the Conservation Technology Information Center (CTIC) provides the latest evidence. According to the survey, cover cropping farmers reported an average corn yield increase in 2013 of five bushels per acre; the soybean yield boost was two bushels. That’s a significant statistic, given that cover crops have long been slammed for actually reducing commodity crop yields.

Cover crops really shine when extreme weather sweeps into town. When SARE-CTIC conducted a similar survey last year, they found that during the 2012 drought corn planted after cover crops produced a yield boost of 11 bushels. Cover cropping’s ability to preserve moisture and build soil’s resiliency on a field-by-field basis is impossible to ignore any longer.

And it’s looking like cover cropping can help our planet manage risk on a big picture level as well. A few weeks ago the University of Illinois released numbers from a 12-year study showing cover cropped plots sequestered a significant amount of organic carbon. In fact, when compared to non-cover cropped plots, no-till fields protected with hairy vetch and rye sequestered 30 percent more carbon. Even when the plot was moldboard plowed, the carbon gains with cover crops were 18 percent. That’s good news in the battle to keep greenhouse gases out of the atmosphere, where they can cause the kind of climate change that produces crop-disrupting extreme weather events in the first place.

Cover cropping can also play a key role in sustaining our environment closer to home. Protecting the land with these crops during the otherwise “brown season” can dramatically reduce the kind of erosive runoff that ruins fields and transforms our rivers into ribbons of mud.

What does all of this have to do with crop insurance? As LSP’s white papers show, over the years, this program has morphed from a basic safety net into the biggest government farm program in the country. As a result, it has perhaps more influence than any other program on what crops are planted where—even what techniques and systems are used.

In the real world, a company that sells insurance should be interested in reducing its risk of making a high claim payment, called an indemnity. That’s why car insurance companies provide “safe driver discounts” and homeowners who install alarm systems can qualify for lower premiums. But crop insurance exists in a parallel universe where risky behavior is rewarded, no matter how much the negative results of that behavior come home to roost. The high premium subsidies provided these days—around 62 percent—encourages some farmers to till acres they normally wouldn’t touch—at least if good yields, rather than insurance payments, were the basis of their business plan. That’s why land that would normally be too steep, wet or otherwise marginal to produce a decent crop has been going under the plow at rates not seen since the 1920s and 1930s.

And all of this risk-taking is becoming increasingly expensive. From 2001 to 2010 crop insurance indemnities averaged just $4.1 billion a year. In 2011, a new record was set when $10.8 billion in payouts were made; a year later that record was shattered with $17.3 billion in indemnities going out the door.

In October, the U.S. Government Accounting Office (GAO) blamed federal crop insurance and the National Flood Insurance Program for inflating the cost of recovering from disasters by increasing risky behavior. “…while federal law prohibits crop insurance from covering losses due to a farmers’ failure to follow good farming practices, such as various irrigation methods, some of these practices maintain short-term production but may inadvertently increase the vulnerability of agriculture to climate change through increased erosion and inefficient water use,” concluded the GAO.

An executive order has directed federal agencies to reform policies that may increase the vulnerability of “economic sectors” or “communities” to climate change. Federally subsidized crop insurance should be a poster child for such reform.

Unfortunately, because of the convoluted nature of a program that allows insurance companies to dump economic risk onto the public while raking in administration payments that are neither transparent or accountable, the industry has little incentive to reward farmers for “good farming practices.” Or, as the Natural Resource Defense Council’s Claire O’Connor puts it, “…there are very few market signals that private insurance companies can send to farmers to make risk-reducing choices.”

O’Connor provides a glimpse at just how much risk reduction could be achieved with cover cropping. For example, during 2012 farmers in states most severely impacted by the drought—Illinois, Iowa, Nebraska and Kansas—received around $4 billion in indemnities because of the dry weather. Using the SARE-CTIC survey figures, O’Connor shows that there’s a good chance many of the farmers who used cover crops wouldn’t have even qualified for a weather disaster insurance payment because their use of continuous living cover provided a good enough yield boost. Now that’s good risk management. While visiting North Dakota, I’ve seen firsthand the drought-proofing benefits of cover cropping and other practices that build soil health.

“On our farm we’ve built enough soil resiliency that we don’t need crop insurance,” says North Dakota farmer Gabe Brown, who experienced many a crop failure before he started using a system that combined cover crop cocktails, no-till and mob grazing of cattle.

The program’s apparent inability to recognize and reward innovative farming systems is one more reason crop insurance is in need of a major overhaul, as LSP argues in its “Principles of Reform” paper. But short of that, there are also steps that can be taken to make crop insurance a true risk management program and a supporter of resiliency. Insurance companies may lack the incentive to reward farmers for utilizing innovative systems that involve cover cropping, conservation tillage and other techniques, but the Risk Management Agency is a different matter. As a public, tax-funded agency, it supposedly has every incentive in the world to promote practices that are in the public good—and soil-friendly farming systems definitely fit in that category.

We have a long ways to go before a technique like cover cropping has a major impact on the landscape. The latest U.S. Census of Agriculture estimates there were 10 million acres of cover crops in the country as of 2012, which is only about 2.5 percent of total crop acres. But as the benefits become clearer on the farm level, interest is catching on—the latest SARE-CTIC survey estimated cover cropping adoption increased by 30 percent a year from 2010 to 2013.

Both Datu Research and the Natural Resources Defense Council recently highlight conservation farming practices such as cover cropping and no-till as good risk management techniques that should be encouraged through crop insurance incentives. Just last week, economists from the International Food Policy Research Institute added their voices to the call for tying proven conservation farming practices to subsidized crop insurance. Sixty percent of the farmers who answered a SARE-CTIC survey question about crop insurance said that reducing premiums for growers of cover crops would increase soil-friendly plantings. With cover crop establishment costs —including the cost of seed and planting—averaging around the $40 per-acre mark, a little economic incentive could go a long ways toward establishing farming systems that have wide-ranging benefits.

The BYE example shows there is a process, and a precedent, for adding techniques and systems to the crop insurance “good farming practices” list. Hopefully, it also shows us the importance of utilizing public programs for the benefit of the public good, not a corporation’s bottom line.