Risk Management Products for Improving Ag Economics and Environmental Impacts

Full implementation of Integrated Pest Management (IPM) and Best Management Practices (BMPs) could reduce pesticide and fertilizer use, costs and risks by 40% to 50%. Real and exaggerated risks associated with IPM/BMPs have been consistently identified as a primary reason why farmers do not adopt them. Corn and cotton account for 50% of pesticides used on major crops. In ongoing Phase I research, we have complied a detailed compendium of IPM/BMP tactics used in corn and cotton: identified those most likely to impact input use, yields and profits; assessed risk as barrier to adoption; located experts and actuarial data to support probability and severity of failure; and developed feasible scenarios for offering comprehensive IPM/BMP financial risk management products to protect farmers and their advisors from consequences of failures. In Phase II, we will complete data packages for comprehensive financial risk management in corn and cotton through to pricing by an underwriter, including determining optimum product form to maximize benefits to users and rural economics. Methods and results from this project will have applications in broadening adoption of economically and environmentally sound practices in other crops, livestock, aquaculture and forestry, with potential for improving air, water and soil quality.