Soil Moisture Information Improves Drought Risk Protection Provided by the USDA Livestock Forage Disaster Program

The USDA Livestock Forage Disaster Program (LFP) offers financial assistance to farmers and ranchers with grazed forage losses caused by fire or drought. Payments for drought losses are based on the U.S. Drought Monitor (USDM), which is designed to integrate meteorological, agricultural, hydrological, ecological, and socioeconomic droughts. Because soil moisture deficit is a more specific measure of agricultural drought, we hypothesized that basing LFP payments on soil moisture observations could better reduce producers' risk. Therefore, our objectives were to 1) quantify relationships of forage yield with USDM-based LFP payment multipliers and with in situ soil moisture, 2) develop an alternative LFP payment multiplier structure based on in situ soil moisture, and 3) quantify risk reduction using the current and alternative payment structures. We focused on Oklahoma, United States, which has led the nation in LFP payments received and has >25 years of in situ soil moisture observations statewide. Using non-alfalfa hay yield as a surrogate for forage production, we found that LFP payment multiplier values and soil moisture anomaly were each related to yield, and soil moisture anomaly explained 54% of yield variability. However, the USDM-based LFP payment structure sometimes resulted in payments for above-average yield, and higher payments did not always correspond with greater yield losses. We developed an alternative soil-moisture-based payment structure that reduced financial risk by >20% compared with the current USDM-based structure. Our study identifies an improved LFP payment structure for Oklahoma that can be evaluated and refined in other states or nationwide using other soil moisture data sources.