1. Crop Insurance

Crop insurance is the largest component of the farm safety net.¹³⁹ Almost half of the estimated $20 billion in subsidies flowing to farms each year through farm bill programs now goes to crop insurance.¹⁴⁰ This is a relatively new development: between 1989 and 2014 the number of crop insurance policies doubled, the number of insured acres almost tripled, and federal spending on premium subsidies increased more than fifteenfold.¹⁴¹ This expansion was engineered by the agricultural industry, which created a new crop insurance system that is highly profitable for large-scale operations, politically more palatable to the general public than traditional subsidies,¹⁴² and compliant with international trade agreements.

Proponents of the current crop insurance system often portray it as a safety net for farmers in the case of natural disaster,¹⁴³ but it operates more as an income subsidy. While some crop insurance policies only protect farmers from crop losses—routine or not—most provide revenue guarantees ensuring that covered crops remain lucrative. About 70% of federally subsidized crop insurance policies in 2019 were revenue-based; the remainder were mostly yield-based.¹⁴⁴ Despite large increases in funding in recent years, crop insurance continues to primarily serve large-scale producers of commodity crops. According to the Congressional Research Service, more than 70% of the acres covered by crop insurance are devoted to one of four crops—corn, cotton, soybeans, and wheat.¹⁴⁵ The 2014 Farm Bill opened crop insurance up to a wider range of products, and the USDA agency in charge of crop insurance programs, the Risk Management Agency (RMA), has taken important

138

steps to open up crop insurance to diversified and organic farms.¹⁴⁶ Nonetheless, many farms, particularly small- and medium-scale operations, continue to find it impractical or unavailable.¹⁴⁷ In addition to bolstering large-scale operations, crop insurance has also motivated farmers to bring more land under cultivation, particularly wetlands and other marginal lands, leading to increased emissions.¹⁴⁸

There are four steps USDA should take to make its crop insurance programs more climate friendly.

139

In 2015, the RMA began allowing organic farmers to use opinions from organic agriculture experts outside of their immediate geographic area.¹⁵² In part due to this change, the amount of organic acreage enrolled in crop insurance, while still small, increased by 34% during the first year of the new policy.¹⁵³ The RMA made this change as a result of the Agriculture Risk Protection Act of 2000, which provides that good farming practices include “scientifically sound sustainable and organic farming practices.”¹⁵⁴ The RMA should likewise create a new standard for carbon farming—a scientifically sound sustainable farming system—that would allow farmers to use carbonfarming experts outside of their immediate area, while encouraging agricultural experts to take climate change into account when assessing “good farming practices.” Ideally, basic conservation practices would be required to meet the “good farming practices” threshold on the basis that, over the long run, they will improve the financial soundness of the insurance system.

Current RMA guidelines also hinder beneficiaries from using cover crops and other conservation practices.¹⁵⁷ As a result, some farmers using cover cropping are unable to benefit from crop insurance, while others forgo cover cropping in order to receive crop insurance. While the agency has made it easier to adopt practices promoted by NRCS,¹⁵⁸ including cover cropping,¹⁵⁹

140

it needs to further revise its guidelines to not only eliminate remaining barriers to conservation practices but actually to encourage them as risk-mitigating techniques.¹⁶⁰ The RMA should also conduct outreach encouraging conservation practices in order to dispel the widespread fear that they interfere with crop insurance coverage.

RMA’s production history requirements further disadvantage many climate-friendly practices, particularly those used in diverse cropping systems. While the federal crop insurance program currently seeks a 10-year actual production history for each insured crop to provide coverage and set premium rates, this history requirement impedes adoption of diverse cropping systems because it could take decades to collect the necessary data. The RMA should therefore consider alternative methods to examine yield trends so as not to discourage these sustainable practices.

The second of the four broad measures USDA can take to make crop insurance more climate-friendly is to ensure that publicly funded crop insurance policies treat greenhouse gas-intensive practices as risk-enhancing and reduce or eliminate their premium subsidies accordingly.¹⁶¹ In fact, the Federal Crop Insurance Corporation (FCIC) may be compelled to consider the climate impact of practices when establishing policies and premiums.

141

policy goals when reviewing them.¹⁶⁵ If the plan or premium under review is not consistent with USDA’s policy goals, then the FCIC may reject it.¹⁶⁶ Climate change mitigation is an express policy goal of USDA and the FCIC should ensure crop insurance programs are furthering that goal.¹⁶⁷

While operations using risk-enhancing practices should not receive government subsidies, risk-mitigating practices should be encouraged through premium discounts as an intermediary step. The Senate version of the 2018 Farm Bill included a provision that would have allowed the FCIC to provide performance-based crop insurance discounts for risk-reducing conservation practices, including “precision irrigation or fertilization, crop rotations, cover crops, and any other practices determined appropriate.”¹⁶⁸ This provision was omitted from the final Farm Bill, but Congress should pass a strengthened version mandating that the RMA provide performance-based discounts to farmers using conservation practices that reduce risk to crops while mitigating climate change, including those practices listed in the Senate bill.

Third, USDA should collect and report data on the impact of various practices on risk. Without robust data on how conservation practices impact yield, soil health, water quality, and resilience, the RMA will not be able to accurately evaluate how practices affect risk. These data will also help farmers and ranchers better understand the degree to which different practices can make their operations more resilient. Also, as discussed above, Congress should eliminate data secrecy and agricultural data collection limitations.

Fourth, as discussed below in Chapter V.B.6, current conservation compliance requirements should be expanded to require key conservation practices for all operations receiving crop insurance.