Eyes on Earth Episode 37 – Insuring West Africa’s Crops

JOHN HULT:

Hello everyone, and welcome to another episode of Eyes on Earth. Our podcast focuses on our everchanging planet and on the people at EROS and across the globe who use remote sensing to monitor the health of Earth. Today we are talking about West Africa and how satellite data might help encourage new methods of crop production. The Green Revolution boosted agriculture in the second half of the 20th Century with better seeds, chemical fertilizer and other modern innovations. But those improvements are rarely seen in countries like Senegal, Mali or Burkina Faso. Developed countries avoid devastation with crop insurance. But that's not always available in West Africa. A recent innovation called index insurance could help change that by offering automatic payments during bad years. Our guests today are here to talk about how remote sensing can help build and improve those affordable insurance products. Sari Lucille Blakeley earned her Ph.D through the University of California-Santa Barbara through her study of index insurance. She worked in the field before that flying back and forth between the US and a host of African countries to help guide the development of insurance products. Chris Funk is a Research Geographer at EROS who helps design remotely sensed data products for the Famine Early Warning Systems Network from an office at UC Santa Barbara. He works alongside Professor Greg Husak at the school's Climate Hazard Center, where they work to improve satellite-based weather data. Sari, Chris, Greg welcome to Eyes on Earth!

FUNK: 

Thank you. Nice to be here.

BLAKELEY: 

Yeah. Great to be here.

HUSAK: 

Thanks a lot.

HULT: 

Well, let's get into this here. First off, let's talk about what agriculture looks like in West Africa and how that's different from what we might see in the U.S. How large are these farms? What's grown there and what impact does the climate have on agriculture? Sari, do you want to take that one?

BLAKELEY: 

Sure. Yes, so just to start off with what it looks like to farm in West Africa. We are talking about farmers who have very small farming lands. Somewhere between the size of like one to 5 hectares which is about 2.5 acres to 12 acres, and they are typically called small holder farmers because they are growing subsistence crops. Things like sorghum, millet, maize, ground up for the most part, and there's a couple that grow things like cotton but that's more of a cash crop than for subsistence.    These crops are really highly dependent on good rainy seasons because without good rainy seasons the crops don't survive. This is an area that has limited irrigation.

HULT: 

So when you say limited irrigation, you mean the irrigation pivots that we see in the United States. Are they just not there at all or is it maybe just a handful of people who have access to this kind of stuff?

BLAKELEY: 

There is very limited penetration of irrigation in these areas. There is some relatively rich farmers who may have irrigation but for the vast majority they have no access to irrigation. If there's any type of irrigation happening what so ever, it is people carrying pails of water to places.    

HULT: 

Wow. So much different than what we would expect to see in the U.S.

BLAKELEY: 

Yeah. Exactly.

HULT: 

And another difference that we talked about a little bit already is the insurance. What is index insurance? How does that differ from traditional crop insurance? I mean is there any crop insurance for these folks in West Africa?

BLAKELEY: 

Traditional insurance pays out based on indemnities. So if there is damage, there is a payout. If there is no damage, there is no payout. That kind of insurance we really don't see at all in West Africa. There is nearly zero indemnity insurance because of the fear of something called "moral hazard," where people purposely damage crops in order to get a payout. Now index insurance itself doesn't have this "moral hazard" because its payout is based on weather. If the weather is bad, then there is a payout. With the assumption if there's bad weather, the farmers are having a bad crop year and they are going to need a payout of some sort.

HULT: 

Okay, so how could this be helpful for West Africa? Does it make the insurance less expensive without adjusters? I mean, how does it work?

BLAKELEY: 

Yeah, so that's one of the big benefits actually of index insurance is that it is less expensive than traditional insurance. With traditional insurance you have to have someone go to a field and survey the field, assess what the maximum payout is going to be, and then come back to the field at the end of the season and survey it again to see if there's a payout that's necessary, and then determine how much of that payout should be made. Whereas with index insurance, basically the farmer buys a policy insuring however much land they own and then the payout is based on whether or not, for example, if they're using rain, whether or not there was enough rain for the year or not. It cuts out this need to have a person physically go to the crops and survey whether or not they have done well.

HULT: 

So by looking at the baseline of the weather, you're able to do this a lot more efficiently and affordably, and hopefully that translates into being affordable for the farmers. Why would this be helpful though? I mean, why would it be a good idea to have index insurance, aside from covering bad years? Is there anything else you would hope to see if index insurance were widely available?

BLAKELEY: 

Yeah, there is something called "productive risks." Productive risks are a risk that you want to take in order to improve your productivity. This could be things like improved seeds, fertilizer, potentially investing long-term into irrigation methods or tractors. I mean that would really improve the productivity of these farmers resulting in them having more good years to rely on. The hope is that with index insurance, farmers can use the policy itself as a safety net. So therefore they can take out a loan to buy fertilizer and then if it is a bad year, they don't get hit hard with debt.

HULT: 

And when we are talking about productive risk, the baseline that we are talking about is seeds, isn't it? I mean, we are not necessarily talking about huge combines at the initial, sort of, entry point. We are talking about seeds that grow in bad weather. Is that right?    

BLAKELEY: 

Yeah. Drought-resistant seeds are a big one that would be a good investment for these farmers that they often do not take just because of the premium it takes to buy it in the first place.

HULT: 

Chris do you have anything you would like to add to that?

FUNK: 

West Africa is this huge area with millions and millions of these really poor small holder farmers on these 2.5-acre plots of land and in the last 20 years, 30 years we just have not seen an increase in yields. In the meantime, the population has doubled and is still going up very, very quickly. These households are trapped in this cycle of poverty and it's been impossible for most of them to break out of that. Sari's work is really important because with index insurance it both gives them a safety net in a bad year but then as Sari was describing so well, the safety to innovate and try to break the cycle.

HUSAK: 

The point of what Chris is saying is very nice, in that not only can these productive risks help overcome deficits in poor performing years but they can also raise production in good rainfall years and allow farmers to either increase their income or savings and also build more of a security net through storage for those bad years. So it's a twofold impact. It helps protect against bad years but also, ups the production in good years, allowing for more security.

HULT: 

Sounds like there is a lot of hope. There is a lot of promise. That's what we are aiming for with this. But you guys collaborated on a research paper recently that kind of got into the weeds, because we're obviously not there. What are the drawbacks to index insurance in its current form? Is the data that is available and used now good enough? Could it be improved and how does the research that you guys have done help to improve these products?    

BLAKELEY: 

Probably the only biggest issue in index insurance is basis risk. Basis risk is this fancy term for essentially explaining that farmers sometimes don't get the payouts that they expect. This can be due to a variety of different issues. The most worrisome of which is when a payout should have happened because it was a poor year on the ground, but the satellites missed it. One of the most interesting ways to make sure that this doesn't happen is potentially by combing different datasets. In our paper, for example, we look at using rainfall and reverence evapotranspiration in order to capture different payouts and we do find that the two datasets don't reflect necessarily the same bad years, which leaves a big opportunity for combining the two datasets into a single product for index insurance.

HULT: 

Gotcha, yeah. And evapotranspiration, just so we are clear on this, this is evaporation from the Earth's surface    and transpiration from the leaves of plants. It is sort of the combined measure. Is that right?

BLAKELEY: 

So evapotranspiration can be thought of as the water out of the system. If rainfall is the water into the system, reference evapotranspiration is the water out of the system. And yes, reference evapotranspiration is the amount of water that has been evaporated combined with the transpiration from the plants. You can kind of think of it as, how much moisture does the atmosphere want to have.

HULT: 

So basically, you are looking at it as water in and water out and combining those metrics or the possibility of combining those metrics. How did looking at remote sensing, these particular datasets, in the paper, how could that contribute to these insurance products? Tell us a little bit about what you looked at here. I am thinking about the precipitation data because that did come from FEWS Net, right? From Climate Hazard Center. Is that right? Chris or Greg, do you want to talk about that data?

FUNK: 

Sure. So the rainfall product is something that we have almost spent 20 years developing. I was first brought in to work with USGS and FEWS Net in like 1999 to try and improve the rainfall products. We have been chipping away at it for a very long time and we now have a really good product called the Climate Hazards Infrared Precipitations Stations or CHIRPS dataset. This dataset and datasets like it are really amazing. It takes advantage of the constellation of satellites that are orbiting the Earth and lets us make a pretty darn good estimate of rainfall anywhere on the planet. So    places like Niger or Mali is really remote and far away from any rain gauge. But we can do a pretty good job of estimating how much rain a farmer is going to get in these locations. These products were originally developed to support Famine Early Warning, right, and humanitarian responses. The exciting thing that we are trying to do now is leverage these data streams to try to help people before they need humanitarian assistance. So, that is a pretty exciting endeavor.

HUSAK: 

Maybe to add to the other side of that equation. As Sari mentioned the reference evapotranspiration leverages global climate models and basically models the conditions over the recent period based on assimilating a variety of data inputs from available stations and satellite information, and physical models as well. The parameters or the output of that model are used to drive the reference evapotranspiration equations, which relies on things like temperature, humidity, winds and solar radiation primarily to determine that atmospheric demand.

HULT: 

How will improving these products and refining how well they work, using remote sensing, help the people on the ground who are trying to sell these products? Talk about how these products might help the farmers.

BLAKELEY: 

I mean, I can talk for days about bad index insurance products because there is a lot of them out there. But I think that part of the thing that we are trying to do is just make sure that the methodologies for creating index insurance are sound. That they can be replicated with other groups. That they are actually thinking through who they are trying to insure and what they're trying to insure, before just hopping into a new project that just happens to insure people.

HULT: 

Gotcha. So really what you're talking about, or what you guys are trying to do, is to avoid some of that stuff where bad products are trotted out before they are ready and give the entire idea a bad name.

BLAKELEY: 

Exactly.

HULT: 

Is that a bridge to far, or what?    

BLAKELEY: 

No, I say that frequently.

FUNK: 

Yes, that's fair.

BLAKELEY: 

There's a lot of questions about selling insurance to poor people. Especially poor people who may not necessarily know what it is that they're buying. But the honest answer is that this is already happening and there are bad products out there. And if you don't want to have bad products, you have to have a way to create good ones.

HUSAK: 

Something that didn't come out in the paper so much, but Sari's done a lot of work, being on the ground in these villages, talking to farmers. Helping them understand how the insurance payouts work and the financial sort of, economic terms of it. And how it would help them in good and bad years. As well as working with famers to identify the index that they feel comfortable receiving payouts on. So looking at the last 10 or 15 or 20 years ... which years would the farmers have wanted a payout based on their recollection? And then finding a product that aliens with that, to help give confidence to the farmers, that what they're buying will is based on a genuine product that will benefit them.

HULT: 

So making a better product means a more trustworthy product, which is good for not just the product that you're selling, but the concept of index insurance as a whole.

BLAKELEY: 

Exactly. When a farmer can trust in a product that's going to payout in the bad years, instead of having to double guess whether it's going to or not, they can then have confidence to purchase drought resistant seeds that is going to improve their productivity. But if they have to worry about the insurance product not paying out when they need it, they are still not going to invest in productive risks that will improve their overall productivity. And so having a trustworthy product is really important in something like index insurance.

HULT: 

How is the climate going to affect the farms of West Africa in the future, and is there hope that this might ease what might happen or ease the impact of what might happen?    

HUSAK: 

We know the conditions throughout the planet are changing in various ways. And when you have an index that is based on a reference period, like rainfall for instance is maybe getting wetter, over the course of that period and the rainfall today maybe a little different than it was 30 years ago over West Africa. That may mean a relative dry year something that is maybe the driest year in the last 10 years, may not appear as a severe payout year because 30 years ago the conditions were quite different, and this dry year today would not qualify as an exceptional drought year as we are designing these indices and the appropriate level of payout. We need to consider a changing climate and these low frequency shifts in the climate and how that will impact the payouts.

HULT: 

Anything you would like to add there, Chris?

FUNK: 

Yeah, sure. One of the things that I am getting really interested in is the use of combinations of remote sensing and forecasts to guide farmer decision making. We know that the Earth is getting warmer and that will have negative impacts on crops. We know that there are going to be dry seasons and wet seasons, but we are starting to be able to use things like cellphones, sms messaging to push information out to the farmers. And so we might be able to see a nearby future where we see combinations of things like index insurance and agricultural advisories that are telling small holder farmers how to prepare for a dry season or giving them information so they can really double down on their investments and make bigger profits on good years. That could be years away, not decades. So that will be exciting to see if that happens.

HULT: 

This is all very interesting information, and we will be watching in the future to see how this data is used for index insurance. Is there anything else that we haven't talked about that you would like to bring up at this point? Any closing thoughts here?

FUNK: 

I guess just that we are all one people on one planet. It is really possible for us to help each other and it's really great to see how relatively small investments in remote sensing can provide information that can help the livelihoods of millions of people. At least I feel really lucky to be able to work on a project like that.     

HUSAK:    

These data are allowing us to develop insurance or financial tools that can help respond to crisis or mitigate the impacts of them. Whether that is through putting actual food in people's mouths or putting money in their wallets that will help them buy the essential resources which they need. I think that is the goal of this work. To better help the farmers in these developing countries and help empower them to have more ownership and resiliency to the conditions they are facing.

BLAKELEY: 

I think I would just like to highlight the fact that this data is available, and most of the time freely available. This is really important because it can be used for things like index insurance, which sure, that can help a lot of people, but also it is available to a lot of other people who can come up with even more innovative technologies, tools to help farmers gain more resilience to bad years. It's really important just to have these tools available because otherwise we would not be able to do any of these projects, really.

HULT: 

Thank you guys so much for joining us. This has been a fascinating conversation. I really appreciate you guys coming on the show.

FUNK: 

Thanks a lot, John!

HUSAK: 

Thanks for having me!

BLAKELEY: 

Thanks for having us!

All: 

Thanks for having us!

HULT:

We hope you tune in for the next episode of Eyes on Earth. Check out our EROS Facebook and Twitter pages to watch for the newest episodes. You can also subscribe to us on Apple Podcasts. This podcast is a product of the U.S. Geological Survey, Department of Interior.                                        `