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

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  • O'Connor, Claire
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    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.

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    File URL: http://purl.umn.edu/156789
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    Bibliographic Info

    Paper provided by Agricultural and Applied Economics Association in its series 2013 AAEA: Crop Insurance and the Farm Bill Symposium, October 8-9, Louisville, KY with number 156789.

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    Date of creation: 2013
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    Handle: RePEc:ags:aaeaci:156789

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    Keywords: crop insurance; no-till; cover crop; Agricultural and Food Policy; Crop Production/Industries; Environmental Economics and Policy; Farm Management; Risk and Uncertainty;

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    1. Osteen, Craig D. & Vasavada, Utpal, 2012. "Agricultural Resources and Environmental Indicators, 2012 Edition," Economic Information Bulletin 132048, United States Department of Agriculture, Economic Research Service.
    2. Toliver, Dustin K. & Larson, James A. & English, Burton C. & Roberts, Roland K. & Torre Ugarte, Daniel de la & West, Tristram O., 2011. "Effects of No-Tillage Production Practices on Crop Yields as Influenced by Crop and Growing Environment Factors," 2011 Annual Meeting, February 5-8, 2011, Corpus Christi, Texas 98818, Southern Agricultural Economics Association.
    3. Ramirez, Octavio A. & Carpio, Carlos E. & Rejesus, Roderick M., 2009. "Can Crop Insurance Premiums be Reliably Estimated?," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49465, Agricultural and Applied Economics Association.
    4. Ko, Jonghan & Piccinni, Giovanni, 2009. "Corn yield responses under crop evapotranspiration-based irrigation management," Agricultural Water Management, Elsevier, vol. 96(5), pages 799-808, May.
    5. Barry K. Goodwin & Monte L. Vandeveer & John L. Deal, 2004. "An Empirical Analysis of Acreage Effects of Participation in the Federal Crop Insurance Program," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(4), pages 1058-1077.
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