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Does crop insurance provide farmers a major inducement to plant on land that they otherwise would not?

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No. The primary driver behind planting decisions is crop prices—which have increased dramatically since 2006—not crop insurance policies that farmers purchase to manage risk. It appears that both commodity prices and world demand for food and biofuel will remain high in coming years, which will send continued market signals to farmers to expand production to meet demand. Even so, the 327 million acres planted in 2014 was about the same as the 328 million acres averaged over 1981 to 2014. There is no analytical or science-based foundation to support the statement that crop insurance is a significant driver of planting decisions. For a brief overview of the literature on land use and crop insurance, click here.

 

Cognizant of the concern over expanding onto environmentally sensitive lands, crop insurance regulations include provisions to deter expansion onto new and sensitive lands. Crop insurance strengthened its “new breaking” provision in 2013, which caps the insurable yield for land that has not been planted in at least one of the past three years or where the only crop was cover, hay or forage. There are also provisions that raise premium rates for high-risk land. In addition, the 2014 Farm Bill requires farmers to adhere to conservation compliance requirements to conserve highly erodible land and wetlands in order to be eligible for premium support and a provision to protect native sod in states in the upper Midwest.

 

Farmers are taking actions to improve the conservation and environmental benefits of the lands they farm. Area enrolled in the USDA’s Natural Resource Conservation Service (NRCS) programs increased from 17 million acres in 2007 to about 40 million acres in 2010. In addition, soil erosion on cropland decreased 41 percent between 1982 and 2010.

 

For information on these conservation benefits click here.