Crop Insurance May Be Increasing High-Risk Planting

Subsidies for crop insurance may be increasing the cost of weather loss, according to an environmental advocacy group.

Analysis of U.S. Department of Agriculture data by the Environmental Working Group shows the total crop insurance indemnities doubled between 2001 and 2022, and totaled over $118 billion dollars. Their examination of the data shows the cost of those payouts is increasing faster than the rate of inflation. 

Work done by the non-profit environmental research group revealed the largest category of insurance claims were due to drought. Claims grew 690 percent during the 22 year period studied with the federal government paying $7.6 billion dollars last year alone. Flooding was seen as the second largest cause of loss with $2.2 billion dollars paid in 2022.

The insurance loss category with the largest percentage increase came in losses due to heat, which grew over 1000 percent over the two decades reviewed, Farmers were paid on $1.6 billion in claims for the final year examined. 

Based on their analysis, the ERG suggests the Federal subsidy farmers receive for buying crop insurance, which generally covers two-thirds of the purchase price, distorts the perceived risk farmers face due to climate change. The group also argues that those subsidies encourage farmers to plant crops in areas that are at a high risk of loss due to heat, drought or excess moisture.

County level data from the USDA also suggests the rate and cost of insurance claims will probably continue to increase in the future. The result could be an increase both in the subsidized cost of insurance to farmers and the cost of those subsidies to taxpayers. 

For Market to Market, I’m Peter Tubbs.