2018 Farm BillCrop InsuranceMarker Bills

Improving Soil Health Through Crop Insurance

By April 13, 2018 No Comments

One marker bill currently before the House Agriculture Committee, the Crop Insurance Modernization Act, proposes some of the same reforms to crop insurance as FBLE’s report on Productivity and Risk Management. One of its proposals involves strengthening incentives in crop insurance contracts for farmers to integrate better conservation practices into their regular operations.

The bill, also known as H.R. 4865, is sponsored by Rep. Richard Nolan of Minnesota, a Democrat from the 8th District of Minnesota and member of the House Agriculture Committee.

What’s a marker bill?

Before the farm bill takes center stage on Capitol Hill, members and interest groups start framing the debate using a tool called marker bills. Essentially, marker bills function as position statements on some policy that makes up the omnibus legislation known as the farm bill. The National Sustainable Agriculture Coalition explains marker bills nicely.[1]

H.R. 4865 incentivizes farmers to adopt sound conservation practices like cover cropping

Research is increasingly clear that certain farming practices improve long-term productivity by improving soil health and retention and reducing erosion. These practices include cover cropping, no-tillage or conservation tillage, diversified crop rotations, the use of riparian buffers, and agroforestry. In the long run, farms using these practices—from big operations to boutique ones—will have better outcomes, thus reducing crop insurance indemnities (payments from insurers to farmers). Because a lot of the money paid into the crop insurance system is subsidized by the federal government, fewer and lower indemnities will, ultimately, help make the system cheaper for taxpayers.

Even though the virtues of these farming practices are clear from the science, adoption is not as great as it ought to be. One barrier to adoption is crop insurance contracts. Some crop insurers include restrictions on cover cropping in annual rotations as a term of their insurance contracts. The insurers’ rationale is that some conservation practices may interfere with conventional planting and harvesting practices, potentially lowering yields in the short term (and before the fruits of improved soil health and reduced erosion materialize). Insurers’ short-term interests thus stand in the way of long-term conservation and production interests.

As a remedy for this problem, the bill proposes a simple quid pro quo for farmers: if you adopt certain farming practices, then insurer cannot deny you indemnity payments. The bill would implement that quid pro quo by amending § 508(a)(3) of the Federal Crop Insurance Act (codified at 7 U.S.C. 1508). The proposed scheme is fairly simple:

  • If a farmer adopts “good farming practices,”
  • as defined either by the Natural Resources Conservation Service (part of USDA) [2] or a third-party agricultural expert based in the same area as the farmer,
  • then the farmer can’t be denied indemnity payments from his or her insurer.

This proposal addresses an issue identified in FBLE’s recommendations, though FBLE’s proposed solution is slightly different.

FBLE seeks a farm bill built on a more comprehensive understanding of risk and risk management—one that thinks about productivity and conservation over a longer time horizon by, for example, accounting for future yield as well as environmental harms and benefits in pricing crop insurance subsidies and premiums.

Productivity and Risk Management offers two sets of recommendations to fix the problem of insurers’ short-term interests standing in the way of long-term conservation and sustainable production.

For one, FBLE recommends that the farm bill remove limits on supplemental payments for resource-conserving crop rotations .

Currently, the Natural Resources Conservation Service makes supplemental payments to farmers who adopt certain conservation practices. But Congress has set a cap on the amount of those payments that prevents wider adoption. FBLE recommends that Congress raise that cap. See page 22 of the report.

Second, FBLE recommends that the farm bill bolster links between insurance subsidies and soil health.

Specifically, FBLE recommends that Congress require the Risk Management Agency, one of the subdivisions of USDA responsible for administering crop insurance, to conduct pilot programs whose long-term goal is to price the benefits of conservation practices into crop insurance. Long-term, the rates crop insurers charge farmers should be tied to soil health rather than to other data, like yield, only. To make this long-term change, RMA needs to begin new data collection efforts now. See pages 26-29 of the report.

[1] “Marker bill” is an informal, generic name for a piece of legislation that bundles together a variety of related policy asks for the sake of getting ideas on the table in the context of a large reauthorization bill. The intent of the legislators who introduce marker bills is not to have their bill adopted into law directly, but rather to establish an agenda and set of ideas they will then push and hope to get pieces of into the large omnibus bill, in this case the farm bill.
[2] NRCS is an agency housed within USDA that oversees several of the conservation programs set up by by the farm bill.