Friday, April 8, 2011

Limited Irrigation Insurance Coverage?

A number of areas in Kansas are already, or poised soon, to see reduced irrigation applications for crops due to a variety of reasons including regulatory compliance, well yield reductions, groundwater control areas, enhanced management efforts and the like.

Applying less than the full crop water needs is called “limited” or “deficit” irrigation, and Kansas is actually encouraging such irrigation as an important water conservation tool.  Our developing groundwater models are showing us that reduced irrigation can be a significant reduction in water use - and if done correctly can be accomplished with less economic impact than other conservation approaches for the same amount of water savings. I've blogged about this before, but basically the last few acre-inches applied to an irrigated crop are the least profitable, so these are the inches that should be targeted for conservation gains if economic concerns are important.  This means deficit irrigation.

Crop insurance plays a part in all of this because it's an important risk management tool for crop producers.  The problem is, currently there is no crop insurance for limited or deficit irrigation - a field may be insured as fully irrigated or as dryland.  Thus the risk factor of deficit irrigating, if one has to, or purposely chooses to do so, looms large.

Not only does dryland crop insurance not adequately cover the production or revenue losses a producer could face with a limited irrigated crop, but it also doesn’t provide as much collateral for the bank, when seeking next year’s loan, as would occur with a limited irrigated crop insurance.  This alone is another reason to  provide this new tool.

Kansas, along with Nebraska and Colorado, has been working with personnel from the USDA Risk Management Agency (RMA) Regional Field Office, and the USDA RMA in Kansas City to develop and offer a pilot program of limited irrigation insurance coverage.  The USDA – RMA has given a tentative approval to develop and offer limited irrigated crop insurance in Kansas, Nebraska and Colorado, perhaps as soon as 2012, if certain products, procedures and milestones can be met.

Agricultural engineers in all 3 states have developed crop production curve tables, also known as Irrigation Yield Adjustment Tables. These tables are expected to serve for the production guarantee during the transition of getting four or more years of limited irrigated crop harvests.  We are fully supporting RMA's efforts as the enhanced management areas of GMD 4 are going to be instant recipients of the program if they implement their reduced water usage plans in 2012 through 2016.


  1. My question is why wouldn't actuarial service be needed here? It seems like there are a lot of variables to manage when you consider crops. Something just seems strange to me. Can someone help me out here?

  2. Insurance Comparisons: The structure of the RMA expected offering is on the web at:

    During RMA's detailed presentation to the Kansas Water Authority last month (the above Powerpoint slides) they made a comment in passing that actuarial data was incorporated in their process. But there was no detailed explanation how. Of course, this facet of the program is my least concern, so I profess not a lot of knowledge and have confidence they know what they're doing.

    What are your reactions thus far? Is this a good offering or a disater in the making?