Crop Insurance Hazards Shown in Lost Pheasants in Grasslands
The hunters tramp through neck-high prairie grass with a pair of golden retrievers named Moe and Buck, flushing out birds in a freezing autumn drizzle.
When one flutters from the South Dakota grassland, Dick Schmith, 58, calls “rooster!” Guns rise and a long-tailed pheasant drops. Moe bounds through the meadow to pick it up.
Such successes, key to the state’s $172 million pheasant season, are getting harder to come by. Bird numbers are down almost two-thirds from last year.
A number of reasons are cited for the decline, ranging from harsh weather to a boom in commodity prices that has encouraged farmers to plow grassland and plant crops, reducing habitat for pheasants and other wildlife.
Some see a man-made element: taxpayer-supported crop insurance, a program that critics say has contributed to a decline in acres set aside for conservation. A House-Senate conference panel that begins meeting today will consider trimming government subsidies for the insurance and adding conservation incentives as lawmakers reconcile multiyear farm bills approved by each chamber.
See the entire Bloomberg series: Doomed Crops, Record Profits
“By making it less risky for farmers to plant lucrative cash crops in these areas, we’re seeing expansion onto lands that probably wouldn’t be planted without the benefit of the crop insurance program to encourage it,” said Claire O’Connor, a Santa Monica, California-based policy analyst with the Natural Resources Defense Council.
Crop insurance, intended to protect growers from price and weather risk, has become the most expensive U.S. farm-aid program, costing taxpayers $14 billion in subsidies for farmers and payments to companies, including ACE Ltd. (ACE) and a unit of Wells Fargo & Co. (WFC), after last year’s drought pushed payouts to a record, according to U.S. Department of Agriculture data.
Besides a loss of habitat, expanded planting can worsen erosion and chemical runoff and damage ecologically sensitive land, said conservation groups such as the NRDC and Environmental Working Group.
Insurers counter by saying their industry is being unfairly singled out when the crop insurance program’s impact on the loss of grassland is “at most 1 or 2 percent,” said David Graves, manager for the American Association of Crop Insurers, a trade group in Washington.
“Farmers don’t go out and adjust land-use patterns only to be able to take advantage of a crop insurance program,” he said. “The banker wouldn’t let them.”
Land considered high-risk due to poor soil quality, or a location prone to erosion, floods or other disasters, also comes with higher premiums. Acres converted from grassland also carry lower benefits, which blunts cultivation of marginal acres, according to National Crop Insurance Services Inc. of Overland Park, Kansas, an industry group.
Under the insurance program, the government subsidizes the majority of premiums paid by farmers, covers much of the administrative costs tallied by insurers to run the program, and guarantees that all losses are met. A series of stories by Bloomberg in September examined the debate over the program’s structure and costs.
- Cash for Doomed Crops Means U.S. Farmers Avoid Disaster Cost
- Taxpayers Turn U.S. Farmers Into Fat Cats With Subsidies
- Crop Insurance: How the Taxpayer Loses (graphic)
- Critics Make Push to Curb U.S. Crop Insurance Subsidies
More than a half-decade into a price boom expected to push farm profits to a record $120.6 billion this year, land in Midwest and Plains states has shifted toward crops, according to the USDA. This year’s corn acreage of 97.4 million acres was the highest since 1936. About 86 percent of U.S. acreage was covered by taxpayer-backed crop insurance last year, the agency said.
At the same time, about 400,000 acres of grasses and newly broken ground went into production last year alone, according to USDA data analyzed by the Center for Rural Affairs, a farm-advocacy group in Lyons, Nebraska.
“This is about more than a few hunters running around chasing birds,” said Dave Nomsen, vice-president for governmental affairs at Pheasants Forever, a St. Paul, Minnesota-based advocate for hunting and habitat. “This is about having solid wildlife, water and conservation policies that benefit everyone” by providing cleaner air and soil while reducing chemical runoff into water, he said.
As cropland has gone up, nationwide enrollment in the government’s Conservation Reserve Program, which pays farmers to idle land to improve water, soil and habitat, has dropped 20 percent from its 2007 peak, to 29.5 million acres in 2012. In South Dakota, where crop revenues have risen 44 percent to $7.7 billion from a half-decade earlier, the drop was 29 percent, with set-aside acreage last year at its lowest since 1988.
About 4.4 percent of South Dakota’s land moved from grass to other uses from 2007 to 2012, with corn-planting accounting for about a third of the loss, according to a study sponsored by seven state farm bureaus released last July. The study found little relationship between crop-insurance subsidies and changes in land use.
A 2012 study led by Iowa State University found that up to 3 percent of land covered by the program in the Dakotas may have remained grassland were it not for insurance subsidies. A 2011 USDA study focusing on the same region in the years before the commodity-price boom found that crop insurance may have increased cultivated land by about 1 percent.
Higher prices are the main motivating factor behind increased production, and adding cropland isn’t something producers take lightly, said Keith Alverson, 33, who raises 2,500 acres of corn and soybeans with his family near Chester, South Dakota, about 40 miles from Sioux Falls, the state’s largest city.
“Farmers will respond to the market, but you’re not going to tear up grass unless you feel like it will make sense in the long term, because it’s expensive to do,” he said. “We certainly need to strike a balance.”
Less grassland means fewer birds, said Tom Kirschenmann, wildlife chief for South Dakota’s Department of Game, Fish & Parks.
“We’re seeing native grassland being converted. We’re seeing tree shelter belts being removed, and in some areas we’re seeing wetland loss,” he said. “We’ve also had problems with weather, but we can’t control the weather. We can talk about conservation programs.”
Environmentalists and farm subsidy critics are trying to drive that conversation as farm-bill talks intensify on Capitol Hill.
- Farmers and Insurers Reap Crop Insurance Bucks (video)
- $100M Scam to Defraud Federal Crop Insurance System (video)
While overall increases in cropland attributable to the program may be small, local effects can be much greater, said Craig Cox, a vice president based in Ames, Iowa, for the Environmental Working Group, which seeks broader reform of crop insurance, including reduced premium subsidies and a halt to proposed program expansions.
In Congress, lawmakers are debating “conservation compliance,” which would require farmers to create conservation plans for their property before qualifying for crop insurance while discouraging the draining of wetlands or farming highly erodible land.
Backers note that such plans have long been required for participation in other farm-subsidy programs.
Conservation compliance is important regardless of how much new land comes into cultivation because it covers all farmland, no matter how it’s used. “Compliance simply tries to improve the way sensitive acres are managed,” said Cox in an e-mail.
The New York-based Natural Resources Defense Council is advocating for the equivalent of “good driver” discounts on crop insurance, which would offer premium reductions to farmers who improve land-use practices.
Compliance opponents say adding such requirements to crop insurance may keep some farmers from signing up for coverage, thus raising premiums and taxpayer costs while providing few additional environmental benefits.
In May, 31 commodity, crop insurance and conservation organizations ranging from the National Cotton Council to the Environmental Defense Fund agreed to support a compliance provision that phases in over time. That proposal, included in the Senate farm bill approved in June and supported by the White House, balances the interests of conservationists and the industry, said Graves, whose insurance organization supports the compromise.
The House of Representatives bill doesn’t have the provision. Lawmakers including House Agriculture Committee Chairman Frank Lucas, an Oklahoma Republican, don’t support the approach, saying it would be hard to enforce and impose unnecessary rules on farmers.
Conservation compliance is “a redundant regulatory burden on people who are already the best caretakers of our natural resources and who already have conservation practices in place,” Lucas said in his statement prepared for today’s meeting.
His Senate counterpart, Senate Agriculture Chairwoman Debbie Stabenow, a Michigan Democrat, said the new provisions will encourage farmers and ranchers to continue healthy land and water management. “By reconnecting conservation compliance to our now-strengthened crop insurance program, we protect the future of agriculture,” she said at the conference committee meeting.
The Senate’s bill also included a measure to reduce crop-insurance costs. It would trim the government’s portion of farmers’ insurance policy premiums to 47 percent from 62 percent for growers with adjusted gross incomes over $750,000 a year.
The measure, affecting about 20,000 producers nationwide, would save about $100 million a year. The House didn’t include those cuts in its version of the bill, but did pass the non-binding resolution urging its conference committee members to adopt them.
The two chambers also differ on so-called sodsaver provisions, which would lower federal insurance-premium subsidies on newly broken land. While the Senate would implement the policy nationwide, the House would limit it to five states in the so-called prairie pothole region where conversion has been most dramatic, including South Dakota, North Dakota, Montana, Iowa and Minnesota.
“I don’t want to incentivize bad land practices and over-production,” said Representative Kristi Noem, a South Dakota Republican and House farm-bill conferee who backs a nationwide sodsaver provision and doesn’t support conservation compliance. “If crop insurance is doing that in some area, it needs to be tweaked.”
A letter from 278 groups dominated by wildlife advocates ranging from the state Audubon organizations to the National Parks Conservation Association urged farm-bill conferees meeting today to adopt nationwide sodsaver and conservation compliance.
“Grasslands across the country are disappearing at an alarming rate,” the groups wrote. “This new farm bill creates a loophole in the longstanding requirements that those who receive subsidies take minimal steps to protect the public good.”
At Leader Sporting Goods, a hunting-gear store in Mitchell where the late U.S. Senator and Democratic presidential candidate George McGovern would go to get his gun repaired, sales are flat. Owners Ken and Jeanne Blaalid said the bird numbers have kept out-of-state hunters away.
“People we’ve known for years will call us and say the birds aren’t there, that’s why they’re not coming,” said Jeanne Blaalid, adding that half her store’s sales come during the three pheasant-hunting months. “You have to have habitat.”
Hunters say they see the effect of less land on bird populations as they enter pheasant country.
“When you sit on a farm in the morning, you will hear pheasants cackling,” said Thomas “Red” Pederson, a member of the group that has driven six hours from Minneapolis to hunt the birds near Highmore, about 40 miles east of Pierre, the state capital. “This year we haven’t heard so much.”
“A couple years ago, I was coming across South Dakota and I was wondering what was going on, it was fire after fire. It was sloughs being burned so they could be prepared for corn fields next spring,” said Pederson, who was nicknamed “Red” back in the day when he had a full head of hair.
The 8,000-acre ranch where they were hunting is owned by Jim Faulstich and mixes crops including grain, wheat and oats with range and grasslands he keeps as pheasant habitat to attract hunters.
With prices driving crop decisions, the market may ease the habitat crunch even if the government doesn’t, Faulstich said.
Corn, which peaked last year at $8.49 a bushel in Chicago, is down almost 50 percent. Crop-price booms tend to be followed by busts -- and then the grassland returns as farmers idle property, he said.
Still, relying on market fluctuations is no way to balance land and wildlife, Faulstich said.
“I’ve made a lot of money off of corn, but I try to keep several things going on at once. There’s no question I could have made more money on corn than on pheasants the past two years, but we’ll see what that looks like two years from now,” he said, loading Buck and Moe, the retrievers, into his 1986 Ford F-150.
“This is something we can manage better.”
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