What is in this article?:
- Study shows crop insurance can change production decisions
- Environmental consequences
• Crop insurance isn’t just about finances; it can influence a multitude of decisions farmers make.
• Crop insurance has the potential to affect two types of farm decisions: how much acreage is devoted to a single crop and the amount of inputs used depending upon the crop choice.
In his peer-reviewed paper, he pointed out that there are inevitable environmental consequences when the relationship between risk, farm production decisions and environment changes.
“Farming, is, after all, a kind of environmental activity — inescapably bound to soil, water and air quality and, of course, changing ecosystems,” he reported.
According to Walters, crop insurance has the potential to affect two types of farm decisions: how much acreage is devoted to a single crop and the amount of inputs used depending upon the crop choice.
“Is crop insurance impacting acreage decisions, and if it is, are environmental impacts positive or negative?” he said.
Of the four regions analyzed, Walters found that the purchase of crop insurance in North Dakota did have a “meaningful environmental impact,” in all four environmental indicators he examined: total nitrogen loss, change in total organic carbon, wind erosion-caused sediment loss and soil erosion due to other causes.
But only for total nitrogen loss was the effect negative. In eastern Washington, the effect was adverse on wind erosion. However, in this area, the decision to purchase crop insurance did not greatly affect the crop allocation in that region.
In Iowa, there was no meaningful environmental impact from the decision to buy crop insurance. In eastern Colorado, the decision adversely impacted wind erosion and soil organic carbon.
In his results, Walters noted that he found “a small, but not universal, tendency of increased crop insurance participation to create ‘noticeable’ environmental effects. Our evidence shows both positive and negative environmental effects as cropping patterns change, but more importantly, results are specific to local conditions and particular environmental indicators.”
Walters’ study also backed up earlier research by Jun Ji Wu and Richard M. Adams of Oregon State University showing that the type of crop insurance and the coverage level influenced the decision to change crop allocations. Revenue insurance altered cropping patterns more than the yield protection.
In Kentucky, revenue protection is the dominant type of coverage chosen, mostly because it receives the most subsidy dollars per acre. Revenue protection coverage for wheat, soybeans and corn ranged from 54 percent to 69 percent of total insurable acreage per crop in 2011.