By Meetpal Kukal and Suat Irmak et.al
What does insurance loss data tell us about climate risks to agricultural production?
A wide variety of risks affect agricultural productivity, decision-making, profitability, and overall sustainability. These risks can arise from price declines, natural calamities that can be weather and climate-related, insect, disease, and wildlife-caused crop loss. Oftentimes, farmers manage and reduce this risk using federal crop insurance through the Federal Crop Insurance Corporation (FCIC), which is administered by The US Department of Agriculture (USDA) Risk Management Agency (RMA) and provides a financial safety net against these risks. When affected, farmers receive a payment based on their coverage and liability and each payment is recorded along with the reason for crop loss. These data are published by the RMA for all U.S. counties and are a valuable asset to study patterns of agricultural risk in any given area. This article seeks to inform Pennsylvania agricultural stakeholders about impacts of weather and climate-related risks during the last 3 decades.
Reasons for crop loss in Pennsylvania
Overall, 91% of the total payments received by Pennsylvania farmers during 1989-2021 were weather and climate-related, on average. This number varied from as low as 72% to as high as 99% in individual years. Weather and climate-related causes are classified into 10 categories for reporting and verification: drought, heat, hail, excess moisture/precipitation/rain, frost, freeze, cold wet weather, flood, wind/excess wind and hot wind. The top cause of loss has been drought, responsible for 41% of total payments, followed by excess moisture/precipitation at 26%. The top 5 causes comprise more than 95% of the total weather-related payments received and 85% of the total payments received due to all causes. See Figure 1 for share of each cause to total weather and climate-related payments. The payments received vary greatly year-to-year. The largest payments received for crop loss due to drought, excess moisture/precipitation/rain, frost and freeze were in 2002, 2018, 2010, and 2020, respectively.
Figure 1. Weather-related cause of crop loss in Pennsylvania (1989-2021)
Percentage of total payments received during 1989-2021 for all weather-related causes of loss in Pennsylvania.
What crops have been affected the most?
Pennsylvania farmers have received payments for more than 25 commodities in total. However, the top 10 crops make up for more than 98% of the payments received. These crops are shown in Fig. 2 using boxes relative to their proportion of total payments. Roughly half (46%) of the payments were received for loss of corn crop, followed by 24% for apples, and 12% for soybean. Specialty crops, such as grapes and peaches, also account for a small proportion.
Corn (74%) and soybean (14%) account for 88% of total payments received for drought. 80% of payments received for excess moisture/precip/rain have been for corn (42%), soybeans (21%), and apples (17%). Apples and grapes account for the most payments received for damage from freeze and frost. Apples also account for half the payments received for cold wet weather, followed by corn (19%) and soybeans (8%).
Figure 2. Top 10 commodities for which payments were received due to weather-related loss in Pennsylvania during 1989-2021.
Regional differences in weather-related crop loss
Regions within Pennsylvania have encountered variable causes of loss relative to others in individual years. This geographical distribution is likely a result of a combination of general weather characteristics as well as crop distribution patterns within the state. Figure 3 shows the percentage of payments received corresponding to each primary causes of loss for all counties in the state during 1989-2021. Counties with darker red color means greater percentage of payments were received in that county due to a certain cause of loss than the ones with lighter shade. Each cause of loss has a unique distribution within the state, which highlights the vulnerability of local agricultural enterprise to weather and climate-related crop loss. These maps can be relied on for assessing regional risk exposure to economic risk.
Figure 3. Maps showing spatial distribution for payments received for each cause of crop loss in Pennsylvania during 1989-2021. The quantity represented in each map is the percentage of total payments received for a given cause relative to all weather-related causes.
Insurance loss data for Pennsylvania and beyond are made available by USDA Climate Hubs.
Source : psu.edu