Crop insurance payments set a record in 2012, with drought-swollen payments totaling $17.4 billion and nearly half of that from federal subsidies.
That's two years in a row of record payouts by the program, run by the U.S. Department of Agriculture's Risk Management Agency. Payments in 2011 totaled $10.8 billion, the previous record, largely because of flood damage.
Payments to insured farmers totaled $1.53billion in Nebraska and $1.98 billion in Iowa in 2012. The two states are within a swath across the Midwest and Great Plains that suffered months of drought during the growing season.
In Iowa, 97 percent of the payments were for crop losses caused by drought, heat and hot wind, third among the states. Nebraska's 92 percent ranked 10th, according to an environmental group that analyzed the agency's crop insurance payouts.
Such record payouts may continue, according to the Natural Resources Defense Council, a lobbying group based in New York City, as climate change promises more extreme, damaging weather, such as 2011's flooding and 2012's drought.
Drought caused $13 billion of the 2012 payments last year, the council said Tuesday, compared with an average of $4.1 billion a year between 2001 and 2010.
Claire O'Connor, a Waverly, Neb., native who is an analyst with the council's office in Santa Monica, Calif., recommended in a study of crop insurance that the agency look at charging farmers less for crop insurance if they use certain conservation techniques.
“The program was designed to be a safety net, not a subsidy for increasingly risky practices and less sustainable food production,” she said. “We need to empower farmers to invest in low-risk, water-smart practices that are proven to reduce crop losses.”
Farmers reduce their risk of insured losses if they practice good soil conservation but risk higher losses if they don't, she said, yet they pay the same premiums.
O'Connor said the council would propose a pilot study that would reduce premiums for farmers who practice no-till cultivation, which leaves stalks and plant debris on the soil after harvesting, and those who plant moisture-retaining cover crops and manage their irrigation closely.
Of the cornfields planted in 2010, she said, 5.69 percent of no-till acres had insurance payments, compared with 8.26 percent for land with conventional tillage. That's because plant debris helps hold moisture in the soil.
She said the insurance program ignores “water challenges” that are becoming more frequent and serious.
O'Connor said the council had not submitted the proposal for a pilot program to show whether the federal agency should extend the pricing method throughout the program. “That's the next step.”
In response, the agency issued a statement saying it requires farmers to use good practices, “a fundamental part of the program,” including proper planting, harvesting, fertilizing and crop rotation.
“Equally important, crop insurance provides the stable financial environment that growers need so they can invest in technology or new growing practices that can reduce water dependency and risk,” the agency said.
Crop insurance rules prohibit planting in areas prone to drought or flooding. Figures from the agency showed that its losses in 2012 were the largest dollar amount but not the largest in relation to premiums paid by farmers.
In the 1988 drought, the program paid out $2.39 for each $1 of premium collected from farmers. Last year, when the drought was the worst since the 1930s, the figure was $1.57 for each $1 of premium collected.
Federal payments make up the difference between claims and premiums paid.