Better use of data equals better risk management
By Bruce Knight
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Lately I've been hearing from both the conservation community and the crop insurance folks about the intersection between the two. But it seems both groups are talking past each other, not always listening or engaging in an effort to understand and work together. A few folks in the conservation community blame the crop insurance program for poor land management decisions by some individuals. That's unfortunate.
Risk management is the real concern. Conservation supporters are often saying those who utilize such practices as no-till and cover crops deserve a crop insurance discount because their risk of crop failure is lower. The crop insurance people aren't at all sure that is the case and make a persuasive argument that any lower risk from those practices is reflected in the producer's Actual Production History (APH) yield.
What would make the case is better data. And a commitment to work together to find common sense points of agreement on the part of farmers and ranchers and others in the Ag community on the issues we approach from divergent viewpoints. That's one reason I've been encouraged by the work that AGree is doing to build consensus between crop insurance and conservation policy so we can move forward together. But even that process needs to be more holistic and collaborative, involving more crop insurance companies.
I think eventually we will be able to make the case, based on data, that conservation practices reduce the risk of crop losses. And we may find that data would support more rapid changes to the APH adjustments. But what's more important is that we may already have data that would enable us to do a better job of predicting and rating risk today. What we have yet to do is take the data we have from separate databases and merge it to come up with a closer estimation of risk. Doing so would represent a triple win-for farmers, crop insurers and taxpayers.
While I was at NRCS, we digitized soil data. So, today we have field-by-field information on soil types on all the cropland in the U.S. It's well documented and well known, and most of it is pretty good. I wouldn't think of purchasing or renting land without first reviewing the soil data. Perhaps we shouldn't issue crop insurance policy for a field without carefully considering the soil type as well.
We also have increasingly accurate data on flooding and rainfall patterns. Layer that information over the soil type and the APH yields that are available, and there's a much clearer picture of what has happened and what is likely to happen on that field, that parcel of crop or grassland in the future.
What about land classified as highly erodible? What about land classified as a wetland and farmed under natural conditions? Shouldn't such a classification influence the premium rate for that parcel of land?
For forage and rangeland, consider using a forage condition index. That gives a measure of the quality of the rangeland as a baseline from which to estimate risk. In the near future we may have a soil health test or index that could predict risk reduction associated with good conservation management. However, we can't get to a new place without hard work, collaboration and research involving lots of data.
I believe the first step toward improving risk management for crop insurance should be to use the data we have right now. Of course, we shouldn't stop with that data, but encourage the research needed to continue to further fine tune risk estimation. Instead of simplistically asking for a premium discount for folks using cover crops, the conservation community should collaborate with the crop insurance sector to use the data we have and expand the data available.
Do no-till and cover crops reduce risk? I think so, but I can't prove it beyond my personal experience on my farm. But if we work together to move toward a more data-based approach to managing risk using readily available data, we can make the case for gathering the data needed to give us evidence that conservation practices make a sufficient difference to better complement crop insurance products.
About the author: Bruce I. Knight, Principal, Strategic Conservation Solutions, was the Under Secretary for Marketing and Regulatory Programs at the U.S. Department of Agriculture (USDA) from 2006 to 2009. From 2002 to 2006, Knight served as Chief of Natural Resources Conservation Service. The South Dakota native worked on Capitol Hill for Senate Majority Leader Bob Dole, Rep. Fred Grandy, Iowa, and Sen. James Abdnor, South Dakota. In addition, Knight served as vice president for public policy for the National Corn Growers Association and also worked for the National Association of Wheat Growers. A third-generation rancher and farmer and lifelong conservationist, Knight operates a diversified grain and cattle operation using no-till and rest rotation grazing systems
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