Order Code RS21212
Updated May 29, 2007
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 has regularly made supplemental financial assistance available to
farmers and ranchers, primarily in the form of crop disaster payments and emergency
livestock assistance.
The conference agreement on the FY2007 Iraq war supplemental bill (H.R. 1591)
contained an estimated $3.5 billion in emergency agricultural assistance. The total
included an estimated $1.85 billion in crop loss assistance and $1.43 billion in livestock
aid, compensating agricultural producers for losses in any one of the last three years —
2005, 2006, or early 2007. The President vetoed the measure on May 1, 2007, primarily
because of Iraqi war provisions. Agricultural disaster provisions similar to those in the
vetoed bill are expected to be included in a future supplemental bill. However, the future
of disaster provisions remains uncertain A free-standing agricultural disaster bill (H.R. 2207)
with provisions nearly identical to those in the vetoed bill is expected to be considered
soon on the House floor. However, the future of disaster assistance remains uncertain
since the Administration has stated its
opposition to any disaster aid that is not offset by
other spending reductions. 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
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administratively determined deadline date, which varies by crop and usually coincides
with the planting season. Crop insurance is available for most major crops.
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
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. Since
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% of yield and 100% 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. (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 of 2000 (P.L. 106-224), for a summary
of the issues addressed in the 2000 legislation.)
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
principal clientele are farmers who grow a crop that is ineligible for federal crop
insurance. NAP is not subject to annual appropriations. Instead, it receives such sums
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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.
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. NAP payments were $110 million in FY2005 and $66
million in FY2006.
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% 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
appropriations. Traditionally, an appropriation was made for EM loans within the regular
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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
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, $30 million in FY2004, $23 million in FY2005, and approximately $51 million
in FY2006.
Agricultural Disaster Provisions in the Vetoed
Conference Agreement on FY2007 Supplemental
AppropriationsH.R. 2207 and the
Vetoed Conference Agreement on the FY2007
Supplemental Appropriations Bill (H.R. 1591)
Since 1988, Congress frequently has supplemented the ongoing federal farm disaster
assistance programs with additional emergency aid. The 109th Congress provided
approximately $1.6 billion in ad-hoc emergency farm disaster spending exclusively for
the Gulf states in two emergency supplemental acts (P.L. 109-148 and P.L. 109-234) in
response to agricultural losses caused by Hurricanes Katrina, Rita, and Wilma. (For a
history of the congressional response to agricultural disasters, see CRS Report RL31095,
Emergency Funding for Agriculture: A Brief History of Supplemental Appropriations,
FY1989-FY2006.)
Farm state members made several attempts in the 109th Congress to provide
emergency farm assistance for 2005 and 2006 crop losses nationwide. However,
leadership and Administration insistence on a budgetary offset prevented any action. In
the 110th Congress, the conference agreement on the FY2007 Iraq war supplemental
spending bill (H.R. 1591) contained assistance for crop and livestock losses in any one
of the last three years — 2005, 2006, or early 2007. The measure was vetoed on May 1,
2007, because of Administration opposition to a timetable for troop withdrawal from Iraq.
Agricultural disaster provisions similar A free-standing agricultural disaster bill (H.R. 2207) with provisions nearly identical
to those in the vetoed bill areis expected to be
included in a future supplemental bill considered soon in the House. However, the
future of disaster provisions remains
uncertain,assistance remains uncertain since the Administration has stated its
opposition to any disaster aid that is not
offset by other spending reductions.
As estimated by the Congressional Budget Office, the H.R. 2207 (and the vetoed
conference agreement on H.R.
1591 contained 1591) contain total farm disaster aid of $3.5 billion,
including an estimated $1.85 billion
for crop loss assistance and $1.4 billion for livestock
feed and mortality losses. Not
included in the final agreement was aeither bill was an earlier Senate provision that
would have provided $100
million in grants to small, non-farm agricultural businesses in
disaster areas or a House
provision that would have compensated spinach producers and
processors for market
losses following last year’s health advisory on bagged spinach.
Separately, the conference
agreement concurredH.R. 2207 concurs with a Senate provision to extend authority for a dairy income
income support program. (See CRS Report RL33475, Dairy Policy Issues, for more on this
this funding issue.)
The following is a description of the major farm disaster provisions in
H.R. 2207,
which are identical to the vetoed conference agreement on H.R. 1591.
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Crop Loss Assistance. The conference agreement on H.R. 1591 provided such
H.R. 2207 provides such sums as necessary to fund a
crop disaster payment program for 2005, 2006, or early 2007
production losses. CBO
estimates the cost of the crop loss provisions at $1.85 billion. In
order to reduce the cost
of the program, a producer cannot receive a payment for more
CRS-5
than one crop year. If a
producer opts for a payment on 2007 losses, only crops planted
prior to February 28,
2007, would be eligible. Eligible producers would receive a payment
on losses in excess
of 35% of normal crop yields. The payment rate would be 50% of the
established market
price for the commodity. Also included in the agreement was a
bill is a prohibition on any crop disaster
payments to a producer who either waived crop insurance
or did not participate in the
Noninsured Assistance Program in the year of the loss. Also,
the sum of disaster
payments, crop insurance indemnities, and crop marketings cannot
exceed 95% of what
the value of the crop would have been in the absence of losses.
Deleted from the conference agreement were House provisions to provide $25 million to
Not included in H.R. 2207 (or in the vetoed conference agreement on H.R. 1591)
were provisions in the House version of H.R. 1591 that would have provided $25 million
to spinach growers and handlers who were unable to market the crop following the
September 2006 health advisory, and a separate $24 million disaster program for sugar
beet growers.
Livestock Assistance. The vetoed conference agreement on H.R. 1591 contained
beet
growers, or $140 million in additional funds for citrus, irrigated crop, and livestock losses
caused by the 2005 hurricanes.
Livestock Assistance. H.R. 2207 contains necessary sums to fund a Livestock
Compensation Program (LCP) that would reimburse
to reimburse livestock growers for feed losses caused by
a natural disaster. CBO estimates the cost of
the LCP provision at $1.38 billion.
Payments would be made to producers of beef, dairy,
sheep, goats, and catfish, in any
county that was declared a disaster area by the President
or Secretary of Agriculture
between January 1, 2005, and February 28, 2007, with
payments limited to one year of
losses. The agreement limitedbill limits the payment rate to 70%
of the payment rate used in previous years.
For the same time period, the vetoed
conference agreement containedH.R. 2207 contains necessary funds (estimated by CBO at $33
million) for
a Livestock Indemnity Program to reimburse producers for replacing
livestock killed by
a natural disaster, at a payment rate of at least 30% of the market value
of the livestock
prior to death. Also included in the conference measure wasH.R. 2207 is $20 million to dairy
producers for production losses in disaster-designated counties. A Senate provision for
H.R. 2207 does not
contain $13 million in economic assistance for sheep growers that was originally included
in the Senate-passed version of H.R. 1591, but was deleted in conference.
Conservation. The conference agreement containedH.R. 2207 contains $20 million in additional
funding for the
Emergency Conservation Program (ECP) to assist farmers in the cleanup
and restoration
of farmland damaged by a natural disaster. The final language did not
bill does not stipulate what regions would
receive the funding. However, the House version of H.R. 1591 stated that
funds were
primarily for farmland damaged by a January 2007 freeze, while the Senate
original Senate
version of the vetoed bill intended its funds to primarily assist Western wildfire victims. The conference agreement
also would have restored
H.R. 2207 also restores $115 million in FY2007 funding to the Conservation Security
Program, which was prohibited by the FY2007 continuing resolution. Deleted in
conference was a Senate provision for $50 million for the Emergency Watershed
Protection Program.