Climate change increases the cost of crop insurance

Hot, dry conditions caused by climate change have added billions of dollars to the cost of the federal crop insurance program.

Long-term warming has contributed $ 27 billion losses covered by the we crop insurance program from 1991 to 2017, representing more than 19% of the 140 billion dollars total, according to researchers at Stanford University. Rising temperatures have contributed to about half of the $ 18.6 billion losses in 2012 alone, when record heat and severe drought engulfed much of the Corn Belt.

“We know that global warming causes extreme thresholds to be crossed more frequently, and new research shows that it costs billions of dollars in the agricultural sector alone,” Noah Diffenbaugh, lead author of the study and professor in from Stanford School of Earth, Energy and Environmental Sciences, said in an academic press release.

The we The crop insurance program – created in the wake of the Dust Bowl of the 1930s and expanded in 1980 – now covers more than 80% of America’s cropland. It costs the government on average about $ 9 billion per year. The program allows farmers to purchase insurance when crop yields or market prices fall below expectations.

“In a year of bad weather, farmers can have a terrible year in terms of yields, but in fact they do quite well in terms of income thanks to the crop insurance program,” said Marshal Burke, co-author of the study, associate professor of Earth system science and principal investigator at Stanford Institute for Economic Policy Research. “That’s what the program is supposed to do. So in a sense it works – but it’s very expensive.”

The grants cover more than half the cost of purchasing crop insurance and support private companies that sell and manage policies. As warmer and drier conditions become more common, insurance payments to farmers – called indemnities – are likely to increase.

“Because the payments are so heavily subsidized by the we taxpayer, it is a matter of public policy to what extent these should be maintained, ”said Burke.

The researchers designed their analysis to isolate the influence of weather extremes from the many other factors that may contribute to larger payments into the crop insurance program. These factors include inflation, changes in the composition and value of crops planted, or the insurance take-up rate by farmers.

“Farmers may buy more insurance over time, but we are using a method that allows us to remove these changes when estimating the relationship between temperature and cost of claims,” said Francoise Davenport, co-author of the study and doctoral student in Earth system science at Stanford.

The authors compared the allowances in each we county to itself in different weather conditions. County by county and year by year they looked at US Department of Agriculture records of losses claimed by farmers and paid by federal crop insurance. They also calculated the average temperature and precipitation observed in each county during the growing season from April to October.

After taking into account the time differences and allowances shared between several counties, they calculated whether the payments in each county were higher or lower in a year in which the temperature or precipitation deviated from the average. County.

“Looking at the variations from year to year, we found that the payouts are larger in very hot years or very dry years,” Davenport said. “One of the things we constantly see with climate change is that it makes the most extreme events worse. Warmer years, like 2012, are when the additional costs of climate change are greatest. . “

Some regional trends emerged from the county level data. The Midwestern states, which contain much of the heavily cultivated counties, most closely resemble the national trend. Counties California Central valley saw the strongest growth in harvest allowances during the study period, increasing on average by more than $ 2 million per year.

The new study is the latest in a growing field of climate science known as “extreme event attribution,” which combines statistical analyzes of climate observations with computer models to quantify how global warming is changing. the likelihood and severity of individual weather events. It is an area of ​​study that may provide answers to some of the causal questions raised in climate-related litigation. But few studies to date have extended the analysis to quantify the financial impact of individual extreme events.

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