Comment box Scope: information/summary Tone: neutral Opinion: none Sarcasm/humor: none Archive link. Not sure which category this belongs in, but I thought it was a good topic to discuss. Recently...
Comment box
Scope: information/summary
Tone: neutral
Opinion: none
Sarcasm/humor: none
Archive link. Not sure which category this belongs in, but I thought it was a good topic to discuss.
Farmers who grow fresh fruits and vegetables are often finding crop insurance prohibitively expensive — or even unavailable — as climate change escalates the likelihood of drought and floods capable of decimating harvests.
Recently on Tildes we were talking about insurance costs rising for people who choose to live in places likely to face environmental destruction due to climate change (but who are not specifically connected to the land they live on in an economic sense). My opinion on that is, "well, shucks, but it's for the best that we don't live in dangerous and unstable places."
I think that agricultural insurance is a somewhat different case because the land that crops grow on is simultaneously 1) often the best/only place in a region to grow a particular food, and 2) sometimes really susceptible to flooding, drought, etc. due to human-induced climate change... possibly because it is extra suitable for a particular food. It seems hard to reconcile that as a society, because we like our year-round fruits, but it is even harder for the farmers who live on that land. They have a productive use for it but also rely on it financially for their entire life.
The threat to farms from climate change is not hypothetical. A 2021 study from researchers at Stanford University found that rising temperatures were responsible for 19 percent of the $27 billion in crop insurance payouts from 1991 to 2017 and concluded that additional warming substantially increases the likelihood of future crop losses.
About 85 percent of the nation’s commodity crops — which include row crops like corn, soybeans and wheat — are insured, according to the National Sustainable Agriculture Coalition, a nonprofit promoting environmentally friendly food production.
In contrast, barely half the land devoted to specialty crops — supermarket staples like strawberries, apples, asparagus and peaches — was insured in 2022, federal statistics show.
Even in an ordinary year, his expenses of $2,000 an acre yield returns ranging from a 20 percent profit to just breaking even. Mr. Smiarowski said the least expensive [insurance] plans quoted to him — around $170 an acre annually — would be a significant outlay but would cover only 60 percent of the potatoes’ wholesale price.
And most insurance plans cover a single crop, meaning specialty farmers growing a variety of fruits and vegetables need to buy multiple policies.
TBH, I was surprised that only 85% of staple crops like corn are insured. Somehow I thought that those were like car insurance where it was legally required. But I guess not! Regardless, the lack of insurance for those slightly more luxurious foodstuffs (like apples) is concerning.
I mean, I can hunker down and eat nothing but corn, beans, and rice for the rest of my life if that's really what it comes down to. But I would rather not, because I kinda like peaches, and I think most people feel the same way. (Well, maybe not about peaches specifically, but at least some insurance-threatened crop.)
I think it's useful to put our current lives in context: we do live quite luxuriously, eating pretty much whatever we like with very few restrictions. Seasonality is basically a non-issue except when companies withhold certain products for marketing reasons; but this is not an agricultural problem. Prices rise here and there for some foods, but they are still remarkably inexpensive, even in relatively expensive places. Recognizing this reality is useful because it helps us understand the amount of logistical and financial work that goes into designing reliable production chains for a variety of foods around the world. If we understand these chains then we can better protect them from disasters, especially disasters that we cause.
I think we have a long way to go before we stop having access to fruit and vegetables, because a lot of that food is imported. That’s why it’s available year-round. What’s more likely is that some...
I think we have a long way to go before we stop having access to fruit and vegetables, because a lot of that food is imported. That’s why it’s available year-round. What’s more likely is that some fresh produce isn’t available or gets very expensive at certain times. (And even if it were insured, that helps the farmer, but it’s still not available for sale.)
There is also canned and frozen food.
I wonder how much access farmers have to insurance globally?
Comment box Scope: information Tone: neutral Opinion: none Sarcasm/humor: none That is a good question. A 2021 study from Ghana states: Most of these farmers are probably growing staple crops, not...
The results show that smallholder farmers’ access and acceptability of agricultural insurance is low (14%) and scarce but ironically considered useful by many (90%) as an effective tool to deal with agricultural risks. Inadequate knowledge about agricultural insurance products constituted the most stated reason (64%) for the scarce adoption rate, followed (23%) by the unavailability of insurance products in areas needed but absent. A few (5%) reported insurance to be expensive. Acceptability and accessibility of agricultural insurance are further influenced by gender, educational level, low knowledge, information asymmetry and wrong perception concerning agricultural insurance products. Sense of security and reduced impact of climate variabilities constituted important benefits guaranteed by agricultural insurance.
Most of these farmers are probably growing staple crops, not specialized ones, so I don't know how the numbers stack of there.
Affordability appears to depend quite a lot on government support for insurance. A 2015 report implies that many farmers are unlikely to get insurance if they have to bear the entire costs of the premiums themselves.
In India, insurance use among farmers was pretty low last decade, though things may have changed more recently as the country has rapidly industrialized:
Much of the scaling in these schemes can be attributed to requiring insurance as a prerequisite for agricultural credit, and high premium subsidy of up to 75% (Singh 2010). This allowed insurance to reach approximately 24% of farm households nationwide. This corresponds with a 2006 survey which found a 27% insurance take-up rate among a sample of farmers in Andhra Pradesh and a 23% rate by another sample in Gujarat, India (Cole et al. 2013). There is now a growing body of information on the types of farmer that have bought this insurance, although the size of India and the wide variation in wealth and infrastructure mean that the impact will almost certainly vary from region to region.
That same 2015 study provides some stats for Ethiopia and Mongolia:
The insurance component is notable for reaching a relatively large 29% of the population on average, and up to 38% in some villages (Madajewicz et al. 2013). It is also notable for the fact that a large proportion of the scaling happened in 2011 after a relatively wet year with very few payouts.
A similar result was also found in western Mongolia in 2013; below 200 livestock: 14% of herders bought [insurance], between 200-350 livestock: 15% of herders bought [insurance], above 350 livestock: 32% of herders bought [insurance] (Bertram-Hümmer and Krähnert 2015).
It seems like a complicated and economy-dependent issue. Education/farmers being informed about their options is one barrier, but it also appears to be necessary for government to provide significant subsidies to farmers for them to bother with insurance; otherwise the costs are too high.
There are apparently also some criticisms of "index-based agricultural insurance" (IBAI) and various other forms of government-assisted insurance, including claims that it tends to concentrate wealth among larger farmers at the expense of poorer ones. Some insurance mechanisms are apparently not as effective as claimed and alternative solutions are needed.
I’ve read that historically, subsistence farmers have often had tiny plots of land in many places within walking distance of a village, which seems inefficient, but serves as a way to reduce the...
I’ve read that historically, subsistence farmers have often had tiny plots of land in many places within walking distance of a village, which seems inefficient, but serves as a way to reduce the risk of crop failure. Insurance can be seen as a way to allow farmers to make larger, unhedged bets, since it’s an alternate way of hedging.
So I can see how insurance would encourage large, single-crop farms. It might also encourage more investment in perennials?
And it seems like that should be true more generally - the more hedging and insurance there is available, the more people and companies can specialize and invest in one risky thing. In this way, insurance can be seen as encouraging risky bets.
There’s good and bad in that. After all, risky bets can pay off.
It is worth pointing out that berries and peaches have a unique problem compared to grains and beans: they’re a full order of magnitude less fungible. In other words, there’s a far bigger range of...
It is worth pointing out that berries and peaches have a unique problem compared to grains and beans: they’re a full order of magnitude less fungible.
In other words, there’s a far bigger range of possible quality and desirability for berries and peaches due to their sensitivity to pests, soil quality and pH, frost time, sun exposure, etc. The line between “salvageable” and “failed harvest” is accordingly much blurrier, and the risks from moral hazard are greater. I can definitely see why many insurers wouldn’t be as interested in that market.
Granted: we should be doing much more to support small farmers, but I don’t think insurance availability for “premium” crops should be a high-priority policy lever for achieving that.
Who, Mexicans? Just kidding. Kind of I would argue needing a car to work in the first place (and the often obscenely expensive insurance rates) is what causes the problem in the first place...
I would argue needing a car to work in the first place (and the often obscenely expensive insurance rates) is what causes the problem in the first place though. And the lack of a legal process to immigration generally leading to undocumented people living under the radar in terms of official matters both in registration and receiving benefits.
Comment box Scope: comment response, personal take Tone: neutral Opinion: a bit Sarcasm/humor: none Automotive insurance wasn't really within the scope of this article, but I agree that the costs...
Comment box
Scope: comment response, personal take
Tone: neutral
Opinion: a bit
Sarcasm/humor: none
Automotive insurance wasn't really within the scope of this article, but I agree that the costs of car ownership are a significant burden.
A society which requires agricultural workers to own automobiles does make it difficult for those workers to afford to live; by extension, in markets where their labor is in demand, it raises costs for distributors and end-consumers. (In markets where their labor is not in demand, it means they are quite and often inescapably poor.) I just published a thread on all the ways car dependency is wrecking us which is related to this issue.
Insurance is not exclusively a concern for immigrant workers. The article mentions farms in Connecticut and other places where there are very few illegal migrants from Mexico. The owners of such farmers are often American citizens and still face significant barriers toward insuring their crops.
Comment box
Archive link. Not sure which category this belongs in, but I thought it was a good topic to discuss.
Recently on Tildes we were talking about insurance costs rising for people who choose to live in places likely to face environmental destruction due to climate change (but who are not specifically connected to the land they live on in an economic sense). My opinion on that is, "well, shucks, but it's for the best that we don't live in dangerous and unstable places."
I think that agricultural insurance is a somewhat different case because the land that crops grow on is simultaneously 1) often the best/only place in a region to grow a particular food, and 2) sometimes really susceptible to flooding, drought, etc. due to human-induced climate change... possibly because it is extra suitable for a particular food. It seems hard to reconcile that as a society, because we like our year-round fruits, but it is even harder for the farmers who live on that land. They have a productive use for it but also rely on it financially for their entire life.
TBH, I was surprised that only 85% of staple crops like corn are insured. Somehow I thought that those were like car insurance where it was legally required. But I guess not! Regardless, the lack of insurance for those slightly more luxurious foodstuffs (like apples) is concerning.
I mean, I can hunker down and eat nothing but corn, beans, and rice for the rest of my life if that's really what it comes down to. But I would rather not, because I kinda like peaches, and I think most people feel the same way. (Well, maybe not about peaches specifically, but at least some insurance-threatened crop.)
I think it's useful to put our current lives in context: we do live quite luxuriously, eating pretty much whatever we like with very few restrictions. Seasonality is basically a non-issue except when companies withhold certain products for marketing reasons; but this is not an agricultural problem. Prices rise here and there for some foods, but they are still remarkably inexpensive, even in relatively expensive places. Recognizing this reality is useful because it helps us understand the amount of logistical and financial work that goes into designing reliable production chains for a variety of foods around the world. If we understand these chains then we can better protect them from disasters, especially disasters that we cause.
I think we have a long way to go before we stop having access to fruit and vegetables, because a lot of that food is imported. That’s why it’s available year-round. What’s more likely is that some fresh produce isn’t available or gets very expensive at certain times. (And even if it were insured, that helps the farmer, but it’s still not available for sale.)
There is also canned and frozen food.
I wonder how much access farmers have to insurance globally?
Comment box
That is a good question. A 2021 study from Ghana states:
Most of these farmers are probably growing staple crops, not specialized ones, so I don't know how the numbers stack of there.
Affordability appears to depend quite a lot on government support for insurance. A 2015 report implies that many farmers are unlikely to get insurance if they have to bear the entire costs of the premiums themselves.
In India, insurance use among farmers was pretty low last decade, though things may have changed more recently as the country has rapidly industrialized:
That same 2015 study provides some stats for Ethiopia and Mongolia:
It seems like a complicated and economy-dependent issue. Education/farmers being informed about their options is one barrier, but it also appears to be necessary for government to provide significant subsidies to farmers for them to bother with insurance; otherwise the costs are too high.
There are apparently also some criticisms of "index-based agricultural insurance" (IBAI) and various other forms of government-assisted insurance, including claims that it tends to concentrate wealth among larger farmers at the expense of poorer ones. Some insurance mechanisms are apparently not as effective as claimed and alternative solutions are needed.
I’ve read that historically, subsistence farmers have often had tiny plots of land in many places within walking distance of a village, which seems inefficient, but serves as a way to reduce the risk of crop failure. Insurance can be seen as a way to allow farmers to make larger, unhedged bets, since it’s an alternate way of hedging.
So I can see how insurance would encourage large, single-crop farms. It might also encourage more investment in perennials?
And it seems like that should be true more generally - the more hedging and insurance there is available, the more people and companies can specialize and invest in one risky thing. In this way, insurance can be seen as encouraging risky bets.
There’s good and bad in that. After all, risky bets can pay off.
It is worth pointing out that berries and peaches have a unique problem compared to grains and beans: they’re a full order of magnitude less fungible.
In other words, there’s a far bigger range of possible quality and desirability for berries and peaches due to their sensitivity to pests, soil quality and pH, frost time, sun exposure, etc. The line between “salvageable” and “failed harvest” is accordingly much blurrier, and the risks from moral hazard are greater. I can definitely see why many insurers wouldn’t be as interested in that market.
Granted: we should be doing much more to support small farmers, but I don’t think insurance availability for “premium” crops should be a high-priority policy lever for achieving that.
Who, Mexicans?
Just kidding. Kind of
I would argue needing a car to work in the first place (and the often obscenely expensive insurance rates) is what causes the problem in the first place though. And the lack of a legal process to immigration generally leading to undocumented people living under the radar in terms of official matters both in registration and receiving benefits.
Comment box
Automotive insurance wasn't really within the scope of this article, but I agree that the costs of car ownership are a significant burden.
A society which requires agricultural workers to own automobiles does make it difficult for those workers to afford to live; by extension, in markets where their labor is in demand, it raises costs for distributors and end-consumers. (In markets where their labor is not in demand, it means they are quite and often inescapably poor.) I just published a thread on all the ways car dependency is wrecking us which is related to this issue.
Insurance is not exclusively a concern for immigrant workers. The article mentions farms in Connecticut and other places where there are very few illegal migrants from Mexico. The owners of such farmers are often American citizens and still face significant barriers toward insuring their crops.
(archive link)