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How Crop Insurance Makes the Drought Worse

Any drought is evaluated based on several categories of dryness: D0 abnormally dry, D1 moderate drought, D2 severe drought. Now you would think that those three levels of drought would sufficient. But no, there are two more levels: D3 extreme drought, D4 exceptional drought. Where is the U.S. now? Since June/July of 2012, a vast area in the Midwest and South (especially Texas) has been within the range from severe, to extreme, to exceptional. And this drought has continued now for 10 months.

NOAA is predicting that the current severe drought in the U.S. will worsen in 2013. Worsen. The drought is already two steps beyond severe, one step beyond extreme, and it will worsen in 2013.

“Drought Outlook
“Fifty-one percent of the continental U.S.–primarily in the central and western regions–is in moderate to exceptional drought. Drought conditions are expected to persist, with new drought development, in California, the Southwest, the southern Rockies, Texas, and Florida. The outlook favors some improvement in the Midwest, the northern and central Great Plains, Georgia, the Carolinas, and northern Alaska.” (NOAA.gov)

The “some improvement” in the Midwest will not be sufficient to end the drought there, because that area is under extreme to exceptional drought. So improvement from exceptional to extreme, or extreme to severe is not enough help for farmers.

Crop Insurance

The U.S. crop insurance program is exceedingly generous. The system pays out more money than it takes in. And it permits farmers to make a decision to plow their crop under, and take the insurance money — merely because the insurance would offer a larger profit than harvesting the crop. The crop insurance program even pays if the commodity price for the crop falls drought-corn2while the crop is in the field. The program goes to great lengths to ensure that farmers remain profitable.

The problem with that program and the current drought is that farmers do not need to change their practices to account for the drought. For example, maize (corn) is a particularly thirsty crop, using more water than many other commodity crops. In times of drought, we might reasonably expect many farmers to grow a different crop, one that is more drought tolerant. But they will not, because the U.S. crop insurance program so thoroughly protects them from loss that they don’t need to make that adjustment. They can take their chances, and not lose money.

If the drought continues or even worsens, the result of not switching to a drought-tolerant crop could be devastating. On a small scale, each farmer will still be paid. But it will continue to cost taxpayers billions of dollars per year. And food prices will rise sharply. The food economy cannot, in my view, withstand another round of maize and soy crop failure. In addition, the winter wheat crop is doing poorly in many areas, due to the drought.

The continuation of the U.S. drought, as predicted by NOAA, and its spread to California and the southwest, will be devastating to the food economy of the U.S. And if changes are not made to the crop insurance program ASAP, the decisions made by farmers as to which crops to grow will not take account of that drought. The result could be much more severe than anyone is currently anticipating.

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