Bloomberg: In Kansas, a long drought has ruined crops and damaged the soil, but Gail Fuller’s farm stands out. His sheep, cows, and chickens roam freely, feeding on the crops and plants in a lush and lively environment.
However, if a tornado, flood, or severe drought hits Fuller’s farm, he would have to cover all the costs himself. This is because his farming methods aren’t covered by federal crop insurance, which is an old safety net that hasn’t kept up with climate change.
Fuller is one of many farmers who don’t have enough insurance because the industry doesn’t support moving from traditional farming to regenerative farming. Regenerative farming can help capture enough carbon to cut agricultural emissions in half by 2030.
This change is important to slow down climate change and protect farmers from its effects, but the insurance industry is not keeping up.
In the US, agriculture causes about 11% of all greenhouse gas emissions. Much of this comes from tilling soil, which releases carbon dioxide, and using too much fertilizer, which emits nitrous oxide.
Nitrous oxide is a greenhouse gas that is over 270 times more powerful than CO2. Regenerative farming helps reduce these emissions by absorbing carbon dioxide through photosynthesis, storing carbon in the soil, and capturing nitrogen that would otherwise run off into nearby streams.
Extreme weather is happening more often now and it threatens crops and supply chains. According to the US Drought Monitor, twenty-four states, including Kansas, are facing severe to exceptional droughts. This is a problem, just like heavy rain that can flood crops and is falling more heavily.
Researchers at Stanford University found that nearly 20% of the $140 billion in crop insurance payouts from 1991 to 2017 were because of rising temperatures. They think this percentage will keep going up as extreme weather becomes more common due to climate change.
Despite these risks, and the benefits regenerative agriculture offers for fighting climate change, stronger incentives have kept the current system in place, says Anne Schechinger, Midwest director at the nonprofit Environmental Working Group (EWG).
Crop insurance policies mostly cover common crops like corn, soybeans, cotton, and wheat. Farmers growing these crops usually get multi-peril insurance, which protects them against bad harvests caused by things like disease, floods, droughts, and other severe weather.
Just like health, car, or property insurance, the assessment of losses or damages in crop insurance depends on standards called Good Farming Practices. These standards make sure that low yields are not due to poor management.
However, these rules cannot include practices that might reduce a crop’s yield, so they usually follow traditional industrial, monoculture methods. For example, a farmer who grows different crops between rows or ends their cover crops too late might have their insurance claims denied.
Regenerative agriculture often means growing different crops together in the same field and using lower-yielding perennial plants, which can create problems for insurers. But according to University of Iowa professor Silvia Secchi, crop insurance payouts mostly don’t depend on whether a farmer’s practices increase or reduce climate risks.
Fuller, a farmer from a family with three generations of farming, began trying out regenerative farming methods in the mid-1990s. He believed these methods would give better yields and stronger crops over time.
He planted cover crops in the off-season, which is a common regenerative practice. These are non-market crops that improve soil health. During this time, Fuller still had crop insurance and followed its rules, killing his cover crops with herbicide before planting his market crops.
In August 2012, there was a severe drought, and Fuller’s insurance company inspected his land. They decided the remaining cover crops were weeds and denied all his claims. Because of this, his lending institution took away his operating line of credit.
Fuller took his insurance company to court and won. But two years later, when he needed them to cover losses for two soybean fields, they denied his claims again. This financial trouble forced him to reduce his farm size from 1800 acres to 400 acres, and he finally decided to stop using crop insurance.
“Once you go broke as a farmer, it’s pretty hard to claw your way back,” Fuller said. “I did not want to be a part of that system. We’ve got to find a better way to farm.”
Over the past decade, the US Department of Agriculture has made changes to the crop insurance program to address climate risks. These changes include adding coverage for new crops and offering a $5-per-acre incentive to plant cover crops during the off-season.
The Risk Management Agency, which oversees federal crop insurance, has increased its coverage for certain climate-smart practices, like reducing water use, cover cropping, and injecting nitrogen into the soil instead of spreading it on top.
However, farmers need to follow specific rules, such as ending their cover crops early, which some scientists believe limits the ability of these practices to lower emissions.
The crop insurance system is already facing challenges from climate change. It needs to adapt to encourage practices suitable for different regions and cover various risks, a USDA spokesperson said. The program must also remain financially stable, meaning it needs to charge premiums that are high enough to cover expected losses.
“Even on a small scale, a bad storm can harm one type of crop while providing much-needed rain for another,” the USDA spokesperson told Bloomberg Green.
“Crop insurance is voluntary,” said RJ Layher, the director of government affairs at the American Farm Bureau Federation. Farmers using regenerative techniques not included in the Good Farming Practices can seek other options, he added, like showing the Risk Management Agency that their practices are financially sound.
It’s hard for any one farmer to collect enough data to show that climate-friendly practices like crop diversification won’t affect yield.
In 2014, the USDA started the Whole-Farm Revenue Protection Program. This program insures a farm’s entire revenue instead of just individual crops. It offers a safety net for farmers who plant companion crops or raise animals in their fields.
However, not many farmers are part of the Whole-Farm Revenue Protection Program. According to EWG’s Schechinger, only about 1,800 policies were sold in 2023. This is less than 1% of crop insurance. The program has a lot of paperwork and a revenue cap that doesn’t always cover the whole farm’s revenue, which makes it hard for insurance agents to sell and farmers to buy, according to Layher.
Layher also said that the Farm Bureau supports making the Whole-Farm Revenue Protection Program easier for farmers to use and for insurance agents to sell. These improvements are suggested in the Farm Bill, which is delayed in the House until at least September.
The regenerative farming movement is still small but has grown in recent years with federal support and interest from agribusinesses. Companies like CoverCress Inc., mostly owned by Bayer AG, encourage farmers to plant cover crops for sustainable aviation fuel. General Mills Inc. has pilot programs to help 24 wheat farmers in Wichita, Kansas, start their regenerative practices.
Right now, the push for changing insurance rules mainly depends on farmers like Fuller and Rick Clark. Clark is a third-generation farmer from west central Indiana who has been uninsured for six years because he does regenerative farming.
When Clark isn’t working on his farm, which uses cover crops on all 7,000 acres, he teaches other farmers how to stop using chemical fertilizers and use cover crops instead.
“We need to make sure the path to change is easy,” Clark said. One of the biggest problems for uninsured farmers is that their lenders often require them to have insurance to keep getting loans.
Clark spoke to Congress in late 2022 for Regenerate America, a group that pushes for agricultural reform. He asked for the changes that Schechinger said are needed. The day after Clark spoke, Congress passed the Inflation Reduction Act, President Joe Biden’s big climate law that includes $19.5 billion for USDA conservation programs. Clark felt he had a small part in that.
“Sometimes when you’re speaking, you wonder if anyone is listening,” Clark said. But then, “you feel like maybe your words don’t fall on deaf ears and maybe some people are really paying attention.”
Source: Bloomberg Businessweek (Bloomberg L.P.)
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