As Climate Changes, Taxpayers Will Shoulder Larger U.S. Payouts To Farmers

Jul 24, 2019
Originally published on July 24, 2019 11:16 am

Robert Henry is driving along the top of a Mississippi River levee, giving me a tour of land where he'd love to be planting soybeans right now. We're just east of New Madrid, Mo.

"Smells kind of raunchy, doesn't it?" he says.

From the window of Henry's truck, I see what looks like a swamp, with trees standing in water. Then we make a turn, and suddenly, as far as I can see, there's water. It covers a wide flood plain between the main river channel and the levee. This is where Henry normally grows his crops.

"Thousands and thousands of acres," Henry says. "Some of the best land in the world."

Henry won't grow anything here this year. He even has a tractor and harvesting equipment stranded on an island out in the middle of the river.

But here's the good news: He'll get a check anyway — a payout from his crop insurance. It won't be as much money as he'd have gotten from a soybean crop, but it'll help him get by, "which is better than going under, you know?" he says.

Most farmers who grow big commodity crops like corn, soybeans and wheat buy crop insurance. It's a good deal for them; the federal government actually covers about 60 percent of the cost of the premiums.

In fact, the federal government spends, on average, about $8 billion a year subsidizing crop insurance for farmers.

That number could be a lot bigger this year. Officials with the U.S. Department of Agriculture are expecting up to $1 billion in "prevented planting" payments to farmers in Henry's situation. At the end of the season, more claims will arrive from farmers who planted seeds but ended up with poor harvests.

Some people fear that this year's flooding is a taste of the future. Henry is hoping that it's not. "It could be global warming, but I don't think so," he says. "I think we're in a cycle of wet, and we'll cycle out of it and we'll be dry again."

There are billions of dollars riding on this. Scientists, of course, say climate change is happening, although the precise effects — for example, on rainfall in the Midwest — are harder to predict.

A team of researchers at the USDA just released a study of how the changing climate could affect those crop insurance payouts.

"We used five different climate models, some of which are more optimistic and some more pessimistic in terms of warming and precipitation," says economist Andrew Crane-Droesch, who led the research.

Generally, the models show a future, 40 to 80 years from now, in which farmers across the U.S. will bring in smaller harvests of the country's biggest crops — corn and soybeans. The drop in crop yields is projected to be particularly large in non-irrigated land across the South.

This sounds bad, and it probably is for anyone who needs corn or soybeans. But for farmers, it may not be. Smaller harvests mean higher prices. "To the degree that climate change lowers production, it will increase the value [of the harvest], because of basic supply and demand," says Crane-Droesch.

This is the first reason that the government could be paying bigger subsidies for crop insurance premiums in the future; it would be insuring harvests that would become more valuable.

In addition, the models show more volatility in the weather. The good years are better; the bad years worse. This means more farmer claims and government payouts for bad harvests.

Crane-Droesch is quick to point out that these are not firm predictions. His economic models disregard all sorts of complicating but important factors. They don't consider the effects of international trade, for instance.

"There's just a lot of stuff that we can't capture. That's why this work is only the beginning," he says. "There's a lot more to do on top of this."

His study is attracting attention though, partly because there's a risk that this type of work may not continue — at least not right away, or not within the USDA.

The USDA's Economic Research Service, where Crane-Droesch and his colleagues work, is getting relocated from Washington, D.C., to the Kansas City region. Agriculture Secretary Sonny Perdue says it'll save money and bring "important USDA resources closer to many stakeholders."

Critics call it an attack on independent research. The move, they say, has been carried out in such a rush that it's forcing employees to quit rather than uproot their lives.

Most authors of the new report either have left the agency already or are planning to do so.

Copyright 2019 NPR. To see more, visit https://www.npr.org.

NOEL KING, HOST:

When a disaster hits U.S. farmers, like the floods this spring in the Midwest, taxpayers end up paying part of the bill because of government-subsidized insurance. The U.S. Department of Agriculture now says as a result of climate change, the cost to taxpayers is likely to increase in the future.

NPR's Dan Charles has the story.

DAN CHARLES, BYLINE: Robert Henry is giving me a tour of the land where he'd love to be planting soybeans right now, near New Madrid, Mo.

ROBERT HENRY: Smells kind of raunchy, don't it?

CHARLES: It's a swamp.

HENRY: Yeah.

CHARLES: Oh, my goodness. Look at this.

It's water as far as I can see, covering this flood plain between the Mississippi River and the levees - land where Henry normally grows crops.

HENRY: Thousands and thousands of acres, and some of the best land in the world.

CHARLES: But he won't grow anything here this year. He even has a tractor and harvesting equipment still stranded on an island out in the middle of all that water. But here's the good news - he'll get a check from his crop insurance - not as much money as he'd have gotten from a soybean crop, but enough to help him get by.

HENRY: Which is better than going under, you know?

CHARLES: Most grain farmers buy crop insurance. It's a good deal for them. The federal government pays most of the cost of the premiums. In fact, the federal government spends, on average, about $8 billion a year on crop insurance for farmers.

It could be a lot more this year. USDA officials expect to pay up to a billion dollars to farmers like Henry who couldn't plant their crops. Farmers who planted crops but get poor harvests will send their claims in later. Robert Henry is hoping that this year's flooding won't turn out to be a taste of the future.

HENRY: It may be global warming, but I don't think so. I think we're in a cycle of wet. And we'll cycle out of it, and we'll be dry again.

CHARLES: There are billions of dollars riding on whether he's right. The scientists, of course, say the climate is changing. And a team of researchers at the U.S. Department of Agriculture just tried to figure out how it might affect these crop insurance payments.

Economist Andrew Crane-Droesch led the project.

ANDREW CRANE-DROESCH: We used five climate models, some of which are more optimistic and some of which are more pessimistic in terms of warming and precipitation change.

CHARLES: In general, these models show a future, 40 or 80 years from now, in which farmers harvest smaller amounts of the country's biggest crops - corn and soybeans.

CRANE-DROESCH: Reductions in yield almost across the entire country.

CHARLES: That sounds bad, and it probably is for anybody who needs corn and soybeans. But for farmers, the picture is different because that smaller harvest sells for a higher price.

CRANE-DROESCH: To the degree that climate change lowers production, it will increase the value because of basic supply and demand.

CHARLES: And the government has to pay bigger subsidies for crop insurance premiums. It's insuring something that's more valuable. Also, the models show more volatility, more booms and busts - so more farmer claims, more government payouts for bad harvests.

Now, Crane-Droesch is quick to point out this is not really a prediction. The models don't include all kinds of other things, like how much of the corn and soybean crop gets exported.

CRANE-DROESCH: So there's just a lot of stuff that we can't capture. And that's why this work is only the beginning. There's a lot more to do on top of this.

CHARLES: His study is attracting attention, though, partly because the work may not continue - at least not right away or within the USDA. The USDA's Economic Research Service, which carried out this study, is getting relocated from Washington, D.C., to Kansas City. Secretary of Agriculture Sonny Perdue says it'll save money and bring USDA operations closer to farmers.

Critics say it's an attack on independent research, carried out in such a rush that it's forcing employees to quit rather than uproot their lives. Most of the authors of this report on climate change and crop insurance either have left the agency already or are planning to.

Dan Charles, NPR News.

(SOUNDBITE OF DIRTWIRE'S "VIBEZ") Transcript provided by NPR, Copyright NPR.