Irrigation as Climate Adaptation: Evidence from U.S. Crop Insurance

Bruno Chaves Morone Pinto and Taro Mieno

No 404420, 2026 Annual Meeting, July 26 - 28, 2026, Kansas City, Missouri from Agricultural and Applied Economics Association

Abstract: This paper examines the impact of extreme heat and water deficit on federal crop insurance indemnities for corn and soybeans, differentiating by irrigation status. Using county-level administrative data from the USDA Risk Management Agency for 2011–2023, we normalize indemnities into yield-equivalent shortfalls (bushels per acre) and estimate how Extreme Degree Days and water deficit relate to insured losses for irrigated versus non-irrigated production under Revenue Protection and Yield Protection policies. Compared with rainfed operations, irrigated operations are significantly less heat sensitive, with the residual effect of extreme heat on irrigated operations statistically indistinguishable from zero for corn. Water deficit exhibits a U-shaped relationship with insured losses: non-irrigated operations realize more losses under high levels of water deficit, while irrigated operations have more indemnities associated with very negative water deficit values (excess moisture). These results are robust to alternative temperature thresholds, compound heat-drought interactions, and alternative fixed effects specifications. Our findings suggest that irrigated operations are associated with substantially lower weather sensitivity of insured losses in the contract-defined loss region, pointing to a potential adaptation dividend for the Federal Crop Insurance Program.

Keywords: Risk; and; Uncertainty (search for similar items in EconPapers)
Pages: 28
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea26:404420

DOI: 10.22004/ag.econ.404420

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