Ethiopian crop insurance and the secret Farm Bill
In late October at Dulles Airport, I bid farewell to Silas Buru, an Ethiopian woman farmer, and Mr. Mengesha Gebremichael, a Relief Society of Tigray staffer. The three of us had spent two weeks together on a speaking tour highlighting an innovative risk management and agricultural weather insurance program called HARITA. The project is now […]
In late October at Dulles Airport, I bid farewell to Silas Buru, an Ethiopian woman farmer, and Mr. Mengesha Gebremichael, a Relief Society of Tigray staffer. The three of us had spent two weeks together on a speaking tour highlighting an innovative risk management and agricultural weather insurance program called HARITA. The project is now being scaled to Senegal and other countries through a collaboration between Oxfam America and the World Food Programme, called the R4 Rural Resilience Initiative.
Even before I arrived home, the themes of agricultural insurance and risk management popped up in the emerging elements of a proposal the Congressional Ag Committee leaders were developing in what would soon be called the “secret Farm Bill.”
And in the weeks that followed, I thought often about the contrast between risk management in the US and Ethiopia.
Managing risk allows farmers to go about the business of farming without fearing that one big storm, one extended drought, or one huge market collapse would mean going out of business. That’s why I, along with most US farmers, enroll in farm programs, take out crop insurance, invest in soil and water conservation practices, and occasionally use hedging tools like forward marketing. That’s why Silas Buru participated in HARITA.
Risk management takes partners – taxpayers, insurance companies, a commodity traders, extension, and banks. All of these from a safety net. But what if the safety net becomes the main support for farmers? That means that a partner will be bearing a heavier burden, and farmers begin to “farm the programs”, rather than the land.
The stage for this kind of lopsided US support was set to come out of the Ag Committees this fall:
• An uncapped shallow-loss revenue proposal would have made payments to farmers experiencing as little as 10% losses to either price drops or production—an uncapped give-away that would have continued to reward the largest producers, and according to the Farm Bureau, encouraged excessive risk.
• The most trade distorting subsidy of all, the marketing loan deficiency payment, was set to continue. This is the subsidy to cotton that triggered the Brazil case and rigs markets: cf. Schnepf, Brazil’s WTO Case Against the U.S. Cotton Program, Congressional Research Service, 10.
• Increased target prices established for corn, wheat, rice, cotton and soybeans could allow farmers to plant crops on the basis of the subsidy and not the market .
• No conservation compliance was linked to either crop insurance or shallow loss revenue programs. This was like asking the government to insure a house built on a mountainside prone to mudslides.
All of these proposals came out of closed door process dominated by large commodity interests and two or three Agriculture Committee leaders in an attempt to pass a Farm Bill that could have been authorized through 2017 with no debate or transparency.
The secret Farm Bill collapsed this week along with the efforts of the Super Committee. For a moment, democracy looks to have won out.
But, what a difference there was between those proposals and the simple and modest weather insurance my Ethiopian friends talked about. Under HARITA, farmers could substitute their work for premiums by implementing conservation practices, improving infrastructure, and diversifying crops. Insurance pay-outs were not based on either production or price but on rainfall falling below a drought threshold on a regional basis.
This way, very poor smallholder farmers, many of whom are women, have access to a safety net. Insurance underwriters know that farmers are making the investments that will make the land more resilient and more productive in the face of climate change. Governments know that the payouts don’t distort the markets. And the whole agricultural system better serves the common good.
When the Farm Bill comes up again for reauthorization in 2012, I hope we might take a few lessons from the community-minded Ethiopians. We need policies that can support a food system where all stakeholders have a voice, where certain crops are not favored over others, and where participation requires attention to the long-term health of the planet and people.