EWG analysis: As the climate emergency heats up the Southwest, crop insurance payouts for heat surge

WASHINGTON – Hotter weather linked to climate change drove up crop insurance costs for heat-related crop damage and losses in the Southwest, according to a new Environmental Working Group analysis of federal data from 2001 to 2021.

Average annual temperatures increased in almost all counties in the Southwestern states of Arizona, California, Colorado, Nevada, New Mexico and Utah over the 21-year period. Over half of the counties in the region – 121 out of 216 – saw both higher temperatures and any heat-related crop insurance payouts during that time. Even more telling, over three-fourths of these counties had rising crop insurance indemnity payments for heat.

“As the weather in the Southwest keeps getting hotter, farming will continue getting harder,” said Anne Schechinger, EWG Midwest director, agricultural economist and the report’s author. “Our analysis provides a definitive look into some of the ways the climate crisis is already hurting both farmers and taxpayers.”

Analyzing weather data from the National Oceanic and Atmospheric Administration and the Department of Agriculture, EWG found that farmers in the Southwest received over $1.33 billion in crop insurance indemnity payments for reduced crop yields due to heat. 

Indemnities are paid through the federal Crop Insurance Program to farmers for losses to crop yield or revenue, and taxpayers provide a portion of these funds. The program is managed by the USDA.

EWG researchers found an especially strong link in California between rising average temperatures and growing crop insurance costs for heat. Both rising temperatures and crop insurance costs for heat were more prevalent in the state than the Southwest region overall. In fact, in California heat was the number one cause of loss, with $1.1 billion in indemnities – about 80 percent of all total heat-related payments in the region.

In all six states, heat generated the fourth highest total amount of indemnity payments out of all causes of loss in the period EWG studied. Nationally, heat was the sixth largest category of such payments during this period.

Heat also spurred rising crop insurance costs beyond just indemnities across the Southwest, EWG’s report shows.

The rapidly intensifying climate crisis has already increased the cost of the Crop Insurance Program in at least one other part of the country, as EWG highlighted in a 2022 analysis. Costs are likely to continue to rise without interventions that encourage farmers to adapt to climate change and the extreme weather associated with it.

As currently designed, the program discourages climate adaptation by shielding farmers from the true cost of policies and minimizing the risk to farmers of planting on marginal lands – among numerous other climate-unfriendly features in dire need of reform.

The many changes that should be made to the federal Crop Insurance Program include reducing premium subsidies for the highest-risk farmers and factoring recent weather events and projected weather, climate and crop yield data into the insurance premium rating process. 

Conservation practices like cover crops can help farmers in the Southwest and beyond both adapt to the extreme weather caused and worsened by climate change and reduce their greenhouse gas emissions – while potentially reducing the costs of the Crop Insurance Program. 

“The 2023 Farm Bill is a historic opportunity to reform federal farm programs to encourage farmers to reduce their greenhouse gas emissions and adapt to climate change,” Schechinger said. “It also provides a chance to reform our farm safety net to more effectively encourage farmers to switch to crops that require less water and can better withstand heat and drought.” 

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The Environmental Working Group is a nonprofit, non-partisan organization that empowers people to live healthier lives in a healthier environment. For 30 years, we’ve harnessed our signature research, advocacy and unique educational tools to drive consumer choice and inspire civic action. Visit www.ewg.org for more information about our work — and our 30th anniversary.

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