For years many poeple have argued that FCIC should offer
insurance products that do not penalize farmers in terms of the type of
farming system they choose to employ; stated differently, insurance
products should be equally accessible across production systems, they
should fairly reflect actual levels of risk in premiums, and should
provide about the same level of risk-sharing for a dollar spent (subject
to the constraint that the policy is actuarially sound).
In the 1970s and 1980s government policy encouraged/subsidized
thousands of farmers to make two decisions with adverse consequences for
risk profiles -- expanding intensive crop production onto marginal lands,
into marginal (weather) areas where the risks were too high to sustain
agriculture without the gov't bearing most of the down-side risk (which
it did); and second, adopting chemical-intensive, high yield systems.
The problem with the later is clear now and has been incredibly costly to
the gov't, yet few realize what happened or why.
Commodity program payments are based on established yields, as are
crop insurance payments (i.e. the expected yield level you insure against;
the higher the yield the better the deal for farmers, generally). But
when farmers first break new land, first install irrigation systems, first
go to double-crop systems, or high-yield intensive fruit/veg systems, they
tend to do very well for a short period of time, 3 to 5 years, while they
use up organic matter, increase compaction, trash soil microbial
diversity, narrow above-ground biodiversity, setting the stage for
secondary pest problems, and otherwise undermining the biological and
ecological foundation for high yields. But in this 3 to 5 years, they
make lots of money, establish a high "established yield" if in the
commodity programs, a high yield for crop insurance purposes, and then
have the gov't standing behind them as the inevitable trouble starts.
Yield levels can remain high in some years, but many studies show clearly
that the expected variation in yield over time goes up in such systems.
My experience is that it goes up roughly linearly with time, degree of
reliance on chemicals, and can reach very high levels until the underlying
biological problems in the production system are fixed.
When farming systems crash the gov't has been there to lend a
helping hand. The fiscal situation today is such that gov't can no longer
afford to do this, so FCIC is looking for ways to get out of the business
of providing insurance for "designed (unknowingly) to fail" systems. Your
interest in sus ag is appropriate, since such systems clearly are less
prone to radical collapses and loses; tend to be far more resilient in
years of extreme stress, and tend to recover faster when things return to
normal. Translation -- lower actuarial risk, FCIC ability to offer
attractive policies at lower prices, and do some real good. But in order
to get from here to there, you need to --
* build expected yield variability as a function of farming
systems into your premium scale; any farmer following a three-crop
rotation should receive, for starters, a 20% discount in premiums; a 2
crop rotation, 10%. These discounts should properly be adjusted by
state/region as a function of agronomic factors. Farmers doing a good
job minimizing their risks and managing their farms should not be
expected to subsidize (by paying higher premiums) farmers who push
land/weather/biological systems where they can not be expected to go and
last (for the same reason non-smokers pay lower health ins. costs, BTY).
* farmers following rotations should be given credit for rotation
effect through higher insurable yield goals at no higher premium, same
percentage adjustments as above might make sense as a default assumption.
* as you note, biggest loss factor is weather, and weather is
biggest cause of break-down in bio-intensive IPM systems, so FCIC could
(and should) extend climate-induced losses to losses caused by the blow
up of pest populations that are normally controlled by bio-intensive IPM
systems. Care will need to be taken here to not get FCIC into the
business of extending the period of collapse for chemical-intenisve IPM,
by providing coverage for losses caused by emergence of resistance,
secondary pests, Bt-resistant strains of insects (thanks to Monsanto and
its new generation of "built for resistance" plant varieties), etc.
I suggest FCIC offer a new product, "Whole Farm Insurance", which
is based on expected income across all crops/livestock/forestry products;
is based on expected annual income over at least two crop rotation
cycles; which requires that the farmer have and adhere to integrated farm
plans with erosion control, water, fertility, and pest management
components (all designed to increase efficiency and lower risks). I
think the federal gov't should be willing to underwrite such an insurance
product, although I do not think it would be necessary, since I think
FCIC could offer a high degree of protection under such a plan for a very
affordable price. Plus, you would start to get the FCIC out of the
business of subsidizing excessively risky and resource depleting cropping
systems.
Good luck. I would appreciate hearing more about your plans as
they take shape. I live/work in D.C. on the Hill; and can be reached at
546-5089. chuck benbrook