From the Field

Quantifying the Risk Reduction Value of Soil Health

Diversifying crop systems can reduce risk of hazards like floods and extreme heat. With grants from USDA and FFAR, Tim Bowles and colleagues are working to quantify that risk reduction and bring the dollar value back to farmers.

August 28, 2023

By Austin Price

The current crop insurance system favors less resilient, simplified crop rotations that end up costing taxpayers more in payouts as climate change increases the severity of weather hazards like floods and droughts. USDA photos by Lance Cheung

The USDA grant is funding $800,000 over three years to understand how diversifying crops reduces risk during stressful weather conditions, and to translate that data into actuarial and economic information that can inform the valued benefits of risk mitigation. To accomplish this, the team will build a dataset spanning a million farm fields across nine states and two decades in the US Corn Belt. This dataset will illustrate the impact of crop rotation and cover cropping on corn and soybean yields in various weather and soil conditions — and provide the foundation for actuarial models to test risk profiles under different diversification practices and weather.

“This research will provide a proof of principle that, one, more diversified cropping systems actually do reduce risk, and that, two, this risk reduction can be quantified,” says Bowles.

FFAR has awarded the team a $715,611 Seeding Solutions grant, with matching funds from the Paul and June Rossetti Foundation, Mighty Arrow Family Foundation, JM Kaplan Fund, Great Island Foundation, and Records-Johnston Family Foundation for a total of $1,449,611. This grant, led by soil health policy nonprofit Land Core, will focus on developing the workable model to enable an insurer or lender to visualize the data. The Eric and Wendy Schmidt Center for Data Science & Environment at UC Berkeley will also be involved in developing the model, while Compeer Financial, a lender, insurer, and third largest farm credit system cooperative in the US, will provide an industry perspective on the tool’s usability.

“If regenerative agriculture is less risky, then risk mitigation should be valued and passed on to farmers in the form of reduced premiums for crop insurance.”

— Tim Bowles, BFI Co-Associate Faculty Director

This research stems directly from a roundtable discussion and report published by the Berkeley Food Institute in 2020. In June 2020, BFI and the Center for Law, Energy, & the Environment at the UC Berkeley School of Law convened farmers, policy experts, investors, and academics in a virtual roundtable to discuss strategies to ease the transition to regenerative agriculture. The roundtable resulted in a report written by graduate student researcher Fiona McBride titled “Redefining Value and Risk in Agriculture.” The report outlines a series of recommendations, including reforming crop insurance and redefining risk to reflect the benefits associated with regenerative practices.

According to Bowles, pricing risk reduction can present a significant, data-driven opportunity to help farmers transition to diversified farming practices, without having to rely on new markets, like carbon markets, or finding new funding sources. “Valuing the risk mitigation of more diversified systems can unlock potential sources of funding for transitioning farmers,” says Bowles, “by leveraging an existing market for risk.”