Creating Incentives for Improved Soil Health through the Federal Crop Insurance Program.

Healthy soil is essential to sustained agricultural production, but there are many incentives for farmers to ignore long-term soil health for the lure of short-term profits.  The United States Federal Crop Insurance Program (FCIP) encourages risky production methods that are detrimental to soil health; instead, we propose a pilot program within the FCIP that will create incentives for farmers to adopt risk-mitigating practices that will build the soil’s resiliency.

American farmers are increasingly relying on the subsidized FCIP to manage weather-related risks.  From 2001-2010, crop insurance indemnities averaged just $4.1 billion.  Then, in 2011, the FCIP paid a record-breaking $10.8 billion in crop insurance indemnities to farmers.  That record lasted less than a year.  Indemnities for the 2012 crop year peaked at $14 billion, following an extreme drought.  Total indemnities in FY2013 were $12 billion and $8.7 billion and counting for FY2014 - well above the average of the previous decade.

By ignoring how on-farm management of soil health affects farmers’ ability to withstand weather events like the recent droughts and floods, the FCIP has become a crutch on which farmers will increasingly be forced to lean while taxpayers pick up the ever-growing bill.  But what if the FCIP rewarded good stewardship practices, like cover crops, that could result in lower payout of indemnities and also improve carbon sequestration, water quality, and biodiversity?  NRDC proposes the development of a pilot crop insurance program offered through the FCIP in select areas of the Mississippi River Basin.  The 508(h) pilot program would offer actuarially sound crop insurance discounts to producers whose appropriate use of soil health management practices puts them at a lower risk for crop loss.