Order Code RS21212
Updated November 2, 2004August 29, 2005
CRS Report for Congress
Received through the CRS Web
Agricultural Disaster Assistance
Ralph M. Chite
Specialist in Agricultural Policy
Resources, Science, and Industry Division
Summary
The U.S. Department of Agriculture (USDA) offers several permanently authorized
programs to help farmers recover financially from a natural disaster, including federal
crop insurance, the noninsured assistance program and emergency disaster loans. Since
1988, Congress frequentlyregularly has made supplemental financial assistance available to
farmers and ranchers on an ad-hoc basis, primarily in the form of direct crop disaster
payments and emergency livestock assistance. Most recently, Congress provided an
estimated $3.5 billion for 2003 and 2004 crop and livestock losses, and for other
purposes, in supplemental agricultural disaster assistance within the FY2005 Military
Construction Appropriations Act (P.L. 108-324). This report reviews ongoing and
recently enacted ad-hoc emergency USDA disaster programs. It will be updated as
To date, no emergency
assistance has been provided for 2005 agricultural losses. A severe drought in portions
of the Midwest growing region, Hurricane Katrina, and other 2005 weather-related
disasters might intensify pressure for Congress to consider such assistance. This report
will be updated as conditions warrant.
Ongoing Major USDA Disaster Programs
USDA has at its disposal three major programs designed to help crop producers
recover from the financial effects of natural disasters — federal crop insurance,
noninsured assistance program (NAP) payments, and emergency disaster loans. All three
of these programs have permanent authorization and receive regular annual funding.
Federal Crop Insurance
The federal crop insurance program is administered by USDA’s Risk Management
Agency. The program is designed to protect crop producers from unavoidable risks
associated with adverse weather, and weather-related plant diseases and insect
infestations. A producer who chooses to purchase an insurance policy must do so by an
administratively determined deadline date, which varies by crop and usually coincides
with the planting season. Crop insurance is available for most major crops.
Congressional Research Service ˜ The Library of Congress
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The federal crop insurance program was instituted in the 1930s and was subject to
major legislative reforms in 1980, and again in 1994 and 2000. The Agriculture Risk
Protection Act of 2000 (P.L. 106-224) pumped $8.2 billion in new federal spending over
a five-year period into the program primarily through more generous premium subsidies
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to help make the program more affordable to farmers and enhance farmer participation
levels, in an effort to preclude the need for ad-hoc emergency disaster payments. For the
2003 crop year, the federal government provided $2.0 billion in premium subsidies.
Additionally, the government absorbs most of the losses of the program (total indemnities
paid less total premiums), which are variable from year to year depending on weather
conditions. In the 2003 crop year, total premiums slightly exceeded total indemnities.
A year earlier, in crop year 2002, net program losses were approximately $1.2 billionSince
2000, the federal subsidy to the crop insurance program has averaged about $3.3 billion
per year, up from an annual average of $1.1 billion in the 1990s and about $500 million
in the 1980s. Nearly two-thirds of the current federal spending is used to subsidize
producer premiums, and the balance primarily covers the government share of program
losses and reimburses participating private insurance companies for their administrative
and operating expenses.
Under the current crop insurance program, a producer who grows an insurable crop
selects a level of crop yield and price coverage and pays a premium that increases as the
levels of yield and price coverage rises. However, all eligible producers can receive
catastrophic (CAT) coverage without paying a premium. The premium for this portion
of coverage is completely subsidized by the federal government. Under CAT coverage,
participating producers can receive a payment equal to 55% of the estimated market price
of the commodity, on crop losses in excess of 50% of normal yield, or 50/55 coverage.
Although eligible producers do not have to pay a premium for CAT coverage, they
are required to pay upon enrollment a $100 administrative fee per covered crop for each
county where they grow the crop. The fee can be waived by USDA for financial hardship
cases. Any producer who opts for CAT coverage has the opportunity to purchase
additional insurance coverage from a private crop insurance company. For an additional
premium paid by the producer, and partially subsidized by the government, a producer can
increase the 50/55 catastrophic coverage to any equivalent level of coverage between
50/100 and 85/100, (i.e, 85 percent of yield and 100 percent of the estimated market
price), in increments of 5%.
For many insurable commodities, an eligible producer can purchase revenue
insurance. Under such a policy, a farmer potentially can receive an indemnity payment
when actual farm revenue falls below the target level of revenue, regardless of whether
the shortfall in revenue was caused by poor production or low farm commodity prices.
P.L. 106-224 requires USDA to subsidize premiums for revenue insurance coverage at
the same rate as traditional crop insurance policies. P.L. 106-224 also required USDA to
conduct two or more pilot programs to evaluate the effectiveness of revenue insurance for
livestock farmers. New livestock insurance pilot programs were established for 2002 for
hog producers and were expanded for 2003 and 2004. (For more on the 2000 reforms, see
in subsequent years. (For more information, see the
“Federal Crop Insurance” section of CRS Report RL33037, Previewing a 2007 Farm Bill
and CRS Report RL30739, Federal Crop Insurance and the Agriculture Risk Protection Act
Act of 2000 (P.L. 106-224).)
Noninsured Assistance Program (NAP)
Producers who grow a crop that is currently ineligible for crop insurance may be
eligible for a direct payment under USDA’s noninsured assistance program (NAP). NAP
has permanent authority under the Federal Crop Insurance Reform Act of 1994 (P.L. 103354, as amended), and is administered by USDA’s Farm Service Agency. The program’s
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principal clientele are farmers who grow a crop that is ineligible for federal insurance.
NAP is not subject to annual appropriations. Instead, it receives such sums as are
necessary through USDA’s Commodity Credit Corporation, which has a line of credit
with the U.S. Treasury to fund an array of farm programs.
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Eligible crops under NAP include any commercial crops grown for food or fiber that
are ineligible for crop insurance, and include mushrooms, floriculture, ornamental
nursery, Christmas tree crops, turfgrass sod, aquaculture, and ginseng. Trees grown for
wood paper or pulp products are not eligible. To be eligible for a NAP payment, a
producer first must apply for coverage under the program by the application closing date,
which varies by crop, but is generally about thirty days prior to the final planting date for
an annual crop. Like catastrophic crop insurance, NAP applicants must also pay a $100
per crop service fee at the time of application. In order to receive a NAP payment, a
producer must experience at least a 50% crop loss caused by a natural disaster, or be
prevented from planting more than 35% of intended crop acreage. For any losses in
excess of the minimum loss threshold, a producer can receive 55% of the average market
price for the covered commodity. Hence, NAP is similar to catastrophic crop insurance
coverage in that it pays 55% of the market price for losses in excess of 50% of normal
historic production. A producer of a noninsured crop is subject to a payment limit of
$100,000 per person and is ineligible for a payment if the producer’s qualifying gross
revenues exceed $2 million. For 2003 crop losses, totalUSDA estimates FY2005 NAP payments were
approximately $229of $247 million.
Emergency Disaster Loans
When a county has been declared a disaster area by either the President or the
Secretary of Agriculture, agricultural producers in that county may become eligible for
low-interest emergency disaster (EM) loans available through USDA’s Farm Service
Agency. Producers in counties that are contiguous to a county with a disaster designation
also become eligible for an EM loan. EM loan funds may be used to help eligible
farmers, ranchers, and aquaculture producers recover from production losses (when the
producer suffers a significant loss of an annual crop) or from physical losses (such as
repairing or replacing damaged or destroyed structures or equipment, or for the replanting
of permanent crops such as orchards). A qualified applicant can then borrow up to 100%
of actual production or physical losses (not to exceed $500,000) at a below-market
interest rate (which is currently 3.75%).
Once a county is declared eligible, an individual producer within the county (or a
contiguous county) must also meet the following requirements for an EM loan. A
producer must (1) be a family farmer and a citizen or permanent resident of the U.S.; (2)
experience a crop loss of more than 30 percent or a physical loss of livestock, livestock
products, real estate or property; and (3) be unable to obtain credit from a commercial
lender, but still show the potential to repay the loan. Applications must be received
within eight months of the county’s disaster designation date. Loans for nonreal estate
purposes generally must be repaid within one to seven years; loans for physical losses to
real estate have terms up to 20 years. Depending on the repayment ability of the producer
and other circumstances, these terms can be extended to 20 years for nonreal estate losses
and up to 40 years for real estate losses.
The EM loan program is permanently authorized by Title III of the Consolidated
Farm and Rural Development Act (P.L. 87-128), as amended, and is subject to annual
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appropriations. Each yearTraditionally, an appropriation iswas made for EM loans within the regular
agriculture appropriations bill. However, most of the funding for the program in recent
years has been provided through emergency supplemental appropriations. Emergency
provisions in the Consolidated Appropriations Act of 2000 (P.L. 106-113) provided
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funding to make $547 million in EM loans over a multi-year period. Total EM loans
made were $90 million in FY2001, $58 million in FY2002, just under $100 million in
FY2003, and an estimated $31 million in FY2004$30 million in FY2004, and $22 million, to date, for FY2005.
Emergency USDA Disaster Programs
Since 1988, Congress frequently has supplemented the regularly funded disaster
assistance programs with additional emergency aid. Funding for these programs generally
are provided in emergency supplemental appropriations bills. Among these major ad-hoc
farm disaster programs are (1) direct disaster payments, (2) livestock assistance, (3) tree
assistance, and (4) emergency conservation assistance. Most recently, the FY2005
Military Construction Appropriations Act (P.L. 108-324) contained supplemental funding
that is expected to provide an estimated $3.5 billion in assistance for 2003 and 2004 crop,
livestock, and
tree losses, primarily in response to ongoing drought in the West and a
series of 2004
hurricanes that damaged or destroyed agricultural production in the
Southeast Southeast. For 2005,
portions of the Midwest and West have been stricken with severe or extreme drought that
has severely affected agricultural production. Yet to be determined is what effect an active
2005 hurricane season, particularly Hurricane Katrina which made landfall in late August,
will have on U.S. crop production. If crop and livestock feed losses caused by 2005
disasters are severe, pressure might intensify for Congress to consider emergency
assistance.
For a summary of all emergency supplemental spending for agriculture since 1988,
see CRS Report RL31095, Emergency Funding for Agriculture: A Brief History of
Supplemental Appropriations, FY1989-FY2005. For a review of the emergency
agricultural assistance included in P.L. 108-324 in response to the 2004 hurricanes and
the ongoing Western drought, see CRS Report RL32581, Assistance After Hurricanes and
Other Disasters: FY2004 and FY2005 Supplemental Appropriations.
Crop Disaster Payments
For virtually every crop year from 1988 through 2004, Congress has authorized
emergency crop disaster payments (CDP) to eligible producers affected by any type of
natural disaster that caused a significant reduction to that year’s crop yields. Any producer
of a commercially grown crop was potentially eligible for a direct disaster payment within
these programs regardless of whether the crop was insurable or non-insurable, and even
if a producer waived crop insurance coverage. Most recently, emergency provisions
attached to the FY2005 military construction appropriations act (P.L. 108-324) provided
“such sums as are necessary” to fully fund a disaster payment formula for 2003 and 2004
crop losses. Prior to enactment, the Congressional Budget Office estimated that total
CDP payments would be $2.3 billion. However, the total amount provided is permitted
to exceed the CBO estimate, since the act provided necessary sums to fully fund the
program. As of mid-August 2005, USDA estimated crop disaster payments of $2.37
billion for 2003 and 2004 losses. The application deadline is September 9, 2005.
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Under P.L. 108-324, a producer is potentially eligible for assistance if individual
crop losses were in excess of 35% in either 2003 or 2004, regardless of whether the
farmer was in a declared disaster area. For losses in excess of the 35% threshold, an
eligible producer can receive a payment equal to 65% of the relevant price for the
commodity. Payments can be made for only one of the two years’ losses, except for
producers in Virginia and North Carolina, which under the act arewere allowed to receive
payments in both years. Any producersproducer who had the opportunity to insure the crop and
waived insurance for that year will be slightly penalized, and receive a payment equal to
60% of the relevant price. All commercially grown crops are eligible for a payment under
this formula except for cottonseed and sugarcane, which have separate disaster payment
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programs authorized by P.L. 108-324. A participating producer also has to agree to
purchase crop insurance for the next two crop years, or, when insurance is not available,
to purchase coverage under the noninsured assistance program for two years. The sum of
disaster payments, crop insurance indemnities, and crop marketings cannot exceed 95%
of the historical value of crop production. Maximum payments are $80,000 per person,
and individuals with adjusted gross income in excess of $2.5 million are ineligible. The
$2.5 million income limitation is waived if more than 75% of income is derived from
farming. Also, a Florida producer cannot receive a crop loss payment under P.L. 108-324
if the producer already received a crop loss payment under USDA’s Florida Hurricane
Disaster Assistance Program, which was implemented by USDA before enactment of P.L.
108-324 in response to the 2004 hurricanes using existing funds.
Livestock Assistance
Prior to 1996, USDA had the legislative authority to provide an array of livestock
assistance programs which were used primarily to help farmers purchase feed off the farm
when on-farm feed losses were significant. However, these emergency livestock programs
were suspended by the 1996 farm bill until 2002, because many policymakers felt that
some of these programs duplicated the federal assistance provided by crop insurance and
NAP. Despite the suspension of the previously authorized livestock assistance programs
by the 1996 farm bill, Congress funded an ad-hoc Livestock Assistance Program (LAP)
within various emergency supplemental acts in subsequent years. Since 1996, emergency
assistance was made available for livestock feed losses in 1998 ($270 million authorized),
1999 ($200 million), 2000 ($430 million), and in 2001 and 2002 ($250 million).
As provided in P.L. 108-324, LAP payments will be made for 2003 and 2004
livestock feed losses, which CBO estimates will cost $475 million. The application
deadline is September 9, 2005. The 2003/2004 LAP
will provide provides direct payments to eligible
livestock producers who suffered grazing losses
due to natural disasters during either
calendar year (not both). Before an individual
producer can be eligible, the producer’s
county must have suffered a minimum 40% loss
of available grazing for at least three
consecutive months due to a disaster during the year.
The county also had to have been
declared a disaster area by either the President or the
Secretary of Agriculture in 2003 or
2004. Once the county qualifies for assistance, a
producer has to have a minimum loss
of 40% in order to qualify for a payment to
compensate for a portion of the producer’s
purchase of off-farm feed. Producers with
more than $2.5 million of gross revenue are
ineligible. The maximum payment is
$40,000 per person.
USDA has other authorities that can be activated when disasters strike livestock
growers. Producers in counties declared eligible by USDA occasionally are permitted to
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cut hay or graze livestock on land idled under the Conservation Reserve Program (CRP).
The CRP is a USDA program that allows participating farmers to idle environmentally
fragile farmland for 10 years in return for annual federal rental payments. USDA also has
exercised its standing authority to release a portion of its inventory of nonfat dry milk,
purchased under the dairy price support program, which has been converted into livestock
feed and provided to certain drought-stricken
states. Separately, in 2002 and 2003, USDA
implemented a new Livestock Compensation
Program (LCP), which made payments to
all producers of beef, dairy, sheep, and goats
in any county that was declared a disaster
area by the Secretary between January 1, 2001,
and February 20, 2003, regardless of the
individual producer’s loss experience. The
program was not specifically authorized by
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Congress but was initially implemented by
USDA under existing authorities, and later
supplemented with funding provided in the
FY2003 omnibus appropriations act (P.L.
108-7).
Tree Assistance Program
The Tree Assistance Program (TAP) provides financial assistance to orchard growers
to help them replant eligible trees, bushes, and vines that have been damaged or destroyed
by a natural disaster. A grower who loses more than 15% of eligible trees to a natural
disaster can be reimbursed for 75% of the cost of replanting eligible losses. Payments are
limited to 500 acres and no more than $75,000 per person. The program had been funded
on an ad-hoc basis in several years between 1992 and 1998 for eligible growers anywhere
in the country. TAP was permanently authorized by the 2002 farm bill (P.L. 107-171),
subject to annual appropriations. FY2004 appropriations were made for specific state
losses: $12.5 million for California wildfires, $9.7 million for Michigan fire blight (a
bacterial disease), and $5 million for an April 2003 ice storm in New York. The
FY2005 FY2005
supplemental appropriations measure attached to the Military Construction
Appropriations Act (P.L. 108-324) fully fundsfunded TAP for any tree losses occurring between
between December 1, 2003 and December 31, 2004, at a CBO-an estimated cost of $35 million.
Emergency Conservation Program
The emergency conservation program (ECP) provides funds to farmers and ranchers
for sharing the cost of rehabilitating farmland damaged by natural disasters, and for
carrying out water conservation measures during severe drought. It is permanently
authorized by Title IV of the Agricultural Credit Act of 1978 (P.L. 95-334), subject to
annual appropriations. However, almost all of its funding in recent years has come from
emergency supplemental appropriations. Cost-sharing may be offered for such measures
as removing debris from farmland, re-leveling or grading farmland, and restoring
permanent livestock fences and structures. Funds can be used to replace or restore a
conservation practice or to restore the land to a condition similar to that existing prior to
a natural disaster, and may not be offered to address a conservation problem existing prior
to the disaster. Funding was provided in FY2004 (P.L. 108-199) for use in southern
California to recover from wildfires. An emergency appropriation of $80 million was
made in FY2001 (P.L. 106-387) for all regions. A portion of this appropriation was
carried over into subsequent years, until all available ECP funding was exhausted during
FY2004. Funding was replenished by disaster provisions in the FY2005 Military
Construction Appropriations Act (P.L. 108-324), which providesP.L. 108-324, which
provided a total of $150 million,
available to any eligible producer nationwide.