The weather outlook for the Southern Great Plains and Southeast regions in 2024 and beyond signals a heightened risk of intense downburst events and extended periods without rainfall[1]. This shift poses a big challenge for rainfed farms, especially with the transition from La Nina to El Nino ENSO patterns, which could mean too much rain in certain southern areas.
The timing of these weather events is crucial for farming success. Farmers recognize this and use various strategies like crop insurance, safety net programs like Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC), and disaster programs. Combining these tools strategically, following program guidelines, helps strengthen individual farms’ resilience against unpredictable weather.
Recent events, especially those resulting in financial support, strongly influence farmers’ decisions—this is known as ‘recency effects.’ A study in the Southern Great Plains[2] found that when a weather disaster triggered a government program payment in the previous year, farmers were more likely to buy crop insurance the next year. This effect was even stronger for farmers already using crop insurance who had received both indemnity and a government program payment. Interestingly, as D2 drought weeks increased, policy sales also rose by a factor of 1.017, underlining the impact of recent experiences on risk management choices.
Farmers also stack safety net programs based on expected weather challenges. A recently published analysis[3] showed that combining a safety net program with crop insurance led to better financial outcomes under a wide range of potential yields compared to relying on any one program alone. For rainfed wheat farmers, the best strategy involved combining PLC and revenue protection multi-peril crop insurance, along with planting a double crop of summer soybeans or grain sorghum alongside winter wheat. This not only maximized net returns but also reduced return variability.
PLC wasn’t triggered for the 2022 crop year, and commodities triggering a PLC payment rate were limited in 2020 and 2021 due to high commodity prices. ARC payments depended on county-level yields, reflecting weather-related damages to crops. As a result, many farmers have widely chosen ARC County (ARC-CO) coverage for 2023. Combining ARC-CO election with crop insurance has proven to yield higher net returns than relying solely on crop insurance, although payment limits can result in lower payments than PLC when the price program triggers.
With deadlines for 2023 disaster programs approaching in January, followed by ARC/PLC election and crop insurance deadlines later in the spring, the importance of whole-farm risk management is clear. Navigating these challenges requires farmers to carefully combine available tools, adapt to evolving climate projections, and strengthen their operations against future uncertainties.
Days with Excess Precipitation (Greater than 3 inches) in the Southeast over time. (Figure 19.3 from the IPCC 2018)
[1] Intergovernmental Panel on Climate Change (IPCC), 5th Assessment. https://www.ipcc.ch/report/ar5/wg2/north-america/
[2] Unpublished study by Hagerman, A.D., L.H. Lambert, and M. Fan “Recency effects of drought and government disaster payments on crop insurance decisions in the Southern Great Plains.” Presented at the Agricultural and Applied Economics Association Annual Meeting, Austin, TX: August, 2021.
[3] Westbrook, L., D.M. Lambert, A.D. Hagerman, L.H. Lambert, E.A. DeVuyst, and C.A. Maples. 2023. “Should Producers of Rainfed Wheat Enroll in Agricultural Risk Coverage or Price Loss Coverage?” Choices Magazine. Vol 38(Q4). Available online at: https://www.choicesmagazine.org/choices-magazine/submitted-articles/should-producers-of-rainfed-wheat-enroll-in-agricultural-risk-coverage-or-price-loss-coverage
