Study says crop insurance costs – subsidized by taxpayers – are rising because of climate change
Taxpayers spent nearly $40 billion on crop insurance premiums between 2001 and 2020 across a 13-state region that includes Iowa, Illinois, Missouri and South Dakota, according to a new report from the Environmental Working Group.
When water from the Missouri River and its tributaries flooded Jeff Jorgenson’s farmland near Sidney, Iowa, in July 2011, crop insurance helped him get back on his feet.
“If it wasn't for crop insurance, it would have been a huge loss,” Jorgenson said. “It would have been really difficult to be farming the next year without crop insurance.”
Crop insurance provides a safety net for farmers, helping protect them against crop losses that can come from natural disasters. The federally-subsidized crop insurance program pays farmers when they lose crops because of a flood, drought or tornado.
But a new analysis from the Environmental Working Group finds taxpayers fronted nearly $40 billion in crop insurance premium subsidies between 2001-2020 across 13 states, most of which are in the Mississippi River Basin. EWG expects the cost of the crop insurance premium subsidies to increase as climate change worsens.
According to the report, farmers pay for 40% of a crop insurance policy’s total premium. Taxpayers pay for the rest, the premium subsidy.
EWG Midwest Director Anne Schechinger authored the report. She said the big takeaway is climate change is increasing crop insurance program costs, which are likely to grow as climate change intensifies. At the same time, she said, the program “discourages” farmers from adapting to climate change because, she said, “farmers are less likely to spend money [on new farming practices] when a lot of their losses are covered.”
“We really need to be reforming the crop insurance program to increase adaptation to climate change,” Schechinger said. “We want to be encouraging farmers to adapt instead of discouraging them.”
EWG looked at U.S. Department of Agriculture data between 2001 and 2020 in the USDA’s Mississippi River Critical Conservation Area, which covers 13 states, including Iowa, Illinois and Missouri. According to the report, Iowa, Illinois, Minnesota and South Dakota got nearly $23 billion in premium subsidies over that period of time, more than half of the premium subsidies in the 13-state region.
EWG says the subsidies “may encourage farmers to take more risks, such as farming in areas that because of the climate crisis are no longer suitable.”
Schechinger suggests some reforms to the crop insurance program that would help farmers adapt to climate change and “very likely” save some taxpayer money. She said premium subsidies could be reduced on high risk land, like farmland that floods easily.
“Since total premiums are higher in these high risk areas, that actually means that higher risk policies get higher amounts of premium subsidies,” she said. “Reducing premium subsidies in these high risk areas could really help encourage farmers to adapt to climate change and it would also decrease taxpayer costs.”
The USDA did not make anyone available to comment on the study.
Scott VanderWal, a farmer from Volga, South Dakota and the president of the South Dakota Farm Bureau, said he disagreed with the report’s claim that premium subsidies may encourage farmers to take more risks and farm in areas they shouldn’t be farming.
“Farmers want to do the best job they can, using our natural resources in farming,” VanderWal said. “If you’re raising a crop that’s not suitable for a certain area, you’re not going to make any money at it.”
Yet Aaron Lehman, who uses both conventional and organic farming practices in Alleman, Iowa, said he would like to see changes with crop insurance. He pointed out that many farmers are embracing practices that improve sustainability and help counter climate change, such as using no-till farming and cover crops.
He said crop insurance should encourage such resilient practices.
“We are definitely experiencing climate changes, we definitely need to address them,” Lehman said. “And our crop insurance system should take a more proactive approach to encourage farmers to use those climate smart farming practices.”
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This story was produced in partnership with Harvest Public Media, a collaboration of public media newsrooms in the Midwest. It reports on food systems, agriculture and rural issues. Follow Harvest on Twitter: @HarvestPM
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