Order Code RS21212
Updated June 26, 2007July 3, 2008
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 (NAP), and emergency disaster loans. Since
Since 1988, Congress has regularly made supplementalemergency financial assistance available to
farmers and ranchers, primarily in the form of crop disaster payments and emergency
livestock livestock
assistance.
The FY2007 Iraq war supplemental appropriations billact (P.L. 110-28), as
amended, is expected to provide, H.R. 2206)
contains an estimated $3.0 billion in emergency agricultural assistance. The total
includes an estimated $1.55 billion in crop loss assistance and $1.23 billion in livestock
aid, compensating agricultural producers for losses in any one of the last three years —
2005, 2006, or early 2007. The Administration originally had opposed any supplemental
farm disaster assistance that was not offset by equivalent spending reductions, but
ultimately accepted a smaller package of farm assistance, without offsets, as part of the
enacted agreement.
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 4 billion in emergency agricultural
assistance for crop and livestock losses occurring in 2005, 2006, or 2007, for which
applications are still being accepted..
In order to provide a regular supplement to crop insurance and NAP payments, the
Food, Conservation, and Energy Act of 2008 (P.L. 110-246, the 2008 farm bill) includes
authorization and funding for a crop disaster program for FY2008-FY2011. The 2008
farm bill also authorizes three new livestock assistance programs and a tree assistance
program over the same period. Primarily in response to the recent Midwest floods and
other disasters, the FY2008 Supplemental Appropriations Act (P.L. 110-252) contains
a total of $480 million in emergency funding to eligible farmers to defray the cost of
clean-up and rehabilitation of farmland and watersheds following a disaster.
Ongoing Major USDA Disaster Programs
Over the years, USDA has had 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
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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.
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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
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. In recent years, program costs have been increasing steadily,
mainly because premium subsidies and company reimbursements are based on total
premiums, and total premiums have been rising in tandem with farm commodity prices.
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 (rising to $300 per crop per county in 2009, as required
by the 2008 farm bill (P.L. 110-246)). The fee can be waived by USDA for financial hardship
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.)Insured producers also can be eligible for reduced coverage if they are late or
prevented from planting because of flooding. (For more information on the federal crop
insurance program, see CRS Report RL34207, Crop Insurance and Disaster Assistance
in the 2008 Farm Bill).
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
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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
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 (rising to $250 in 2009 as required by the
2008 farm bill). 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, and an estimated $154 million in
FY2007.
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
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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
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, $30 million in FY2004, $23 million in FY2005, and approximately $51 million
in FY2006.
Agricultural Disaster Provisions in the FY2007 Iraq
War Supplemental Appropriations Act (P.L. 110-28)
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 in 2005.
(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, Title IX of the FY2007 Iraq war supplemental appropriations act (P.L.
110-28, H.R. 2206) contains $3.0 billion in emergency agricultural disaster assistance,
primarily for crop and livestock losses in any one of the last three years — 2005, 2006,
or early 2007. The conference agreement was approved by both chambers on May 24,
2007, and signed by the President on May 25, 2007. (An earlier conference agreement
on an FY2007 Iraq war supplemental bill, H.R. 1591, containing $3.5 billion in farm
disaster aid was vetoed on May 1, 2007, because of Administration opposition to a
timetable for troop withdrawal from Iraq.) The Administration originally had opposed
any farm disaster assistance that was not offset by other spending reductions, but
ultimately accepted a smaller package of assistance, without offsets, as part of the overall
agreement.
As estimated by the Congressional Budget Office (CBO), the $3.0 billion of farm
disaster aid in P.L. 110-28 includes $1.55 billion for crop loss assistance and $1.23 billion
for livestock feed and mortality losses. Not included in the final act was an earlier Senate
provision in H.R. 1591 that would have provided $100 million in grants to small, nonfarm 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, P.L. 110-28 also extends authority for a
dairy income support program. (See CRS Report RL33475, Dairy Policy Issues, for more
on this funding issue.)
The following is a description of the major agricultural disaster provisions in the
final version of the FY2007 Iraq war supplemental appropriations act (P.L. 110-28):
Crop Loss Assistance. P.L. 110-28 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 $1.55 billion. In order to reduce the cost
of the program, a producer cannot receive a payment for more than one crop year. If a
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producer opts for a payment on 2007 losses, only crops planted prior to February 28,
2007, are eligible. Eligible producers can receive a payment on losses in excess of 35%
of normal crop yields. The payment rate is 42% of the established market price for the
commodity. Also included in the act 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. USDA is required to make payments
within 60 days of receiving a completed application; otherwise, the recipient is entitled
to receive later payments with accrued interest.
Livestock Assistance. P.L. 110-28 contains necessary sums to fund a Livestock
Compensation Program (LCP) to reimburse livestock growers for feed losses caused by
a natural disaster. CBO estimates the cost of the LCP provision at $1.2 billion. Payments
are to be made to producers of beef, dairy, poultry, hogs, 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. To save money, the act limits the payment rate to 61% of the payment rate used
in previous years. For the same time period, P.L. 110-28 contains necessary funds
(estimated by CBO at $29 million) for a Livestock Indemnity Program to reimburse
producers for replacing livestock killed by a natural disaster, at a payment rate of at least
26% of the market value of the livestock prior to death. Also included in the final version
of the act is $16 million to dairy producers for production losses in disaster-designated
counties. A separate provision requires forage producers to have participated in a crop
insurance pilot program for forage crops in order to be eligible for the crop disaster or
livestock assistance programs. Livestock groups are concerned that this provision might
disqualify many livestock farmers for assistance, since participation in the pilot program
was relatively low.
Conservation. P.L. 110-28 contains $16 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 act does not stipulate what regions will
receive the funding. However, the House version of the vetoed bill (H.R. 1591) stated
that funds were primarily for farmland damaged by a January 2007 freeze, while the
original Senate version of the vetoed bill intended its funds to primarily assist western
wildfire victims. Separately, P.L. 110-28 in effect provides additional funds for the
Emergency Forestry Conservation Reserve Program, a new program that helps restore
forest lands in the South that were damaged by the 2005 hurricanes. The act removes
statutory language that prohibited any spending beyond calendar year 2006, which CBO
estimates will cost $115 million in FY2007.$51 million in FY2006, and $75
million in FY2007.
Disaster Assistance in the 2008 Farm Bill
During the congressional debate on the omnibus farm bill, some policymakers
wanted to make permanent in the farm bill some level of disaster payments to supplement
the crop insurance program. Consequently, Title XV of the Food, Conservation, and
Energy Act of 2008 (P.L. 110-246, the 2008 farm bill) authorizes a new $3.8 billion trust
fund to cover the cost of making agricultural disaster assistance available on an ongoing
basis over the next four years (FY2008-FY2011) through five new programs.
Supplemental Crop Revenue Assistance Program
The largest of the new farm disaster assistance programs authorized through the 2008
farm bill is a supplemental revenue assistance payment program for crop producers. The
program is designed to compensate eligible producers for a portion of crop losses that are
not eligible for an indemnity payment under the crop insurance program (i.e., the portion
of losses that is part of the deductible on the policy.) An eligible producer can receive a
payment equal to 60% of the difference between a target level of revenue and the actual
total farm revenue for the entire farm. The target level of revenue will be based on the
level of crop insurance coverage selected by the farmer, thus increasing if a farmer opts
for higher levels of coverage. To be eligible for a payment, a producer must be in or
contiguous to a county that has been declared a disaster area by either the President or the
Secretary of Agriculture. Payments are limited so that the disaster program guarantee level
cannot exceed 90% of what income likely would have been in the absence of a natural
disaster.1
The producer also must have at least the minimum level of crop insurance (CAT)
coverage for insurable crops and participate in the NAP program for non-insurable crops.
The statute makes an exception for the 2008 crop year by allowing producers who did not
purchase crop insurance or NAP coverage in advance to be eligible for the program, as
long as they pay the equivalent administrative fee for coverage within 90 days of
enactment. Final payments for 2008 crop losses cannot be determined until late 2009,
since a portion of the disaster payment formula is based on the national average market
1
For a more detailed description of the authorized payment formula, see the full page text box
in CRS Report RL34207, Crop Insurance and Disaster Assistance in the 2008 Farm Bill.
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price of the commodity, which is determined at the end of the marketing year. For
example, the 2008 marketing year for corn and soybeans ends September 30, 2009.
Other Farm Bill Disaster Programs
In addition to the supplemental crop revenue assistance payment program described
above, the 2008 farm bill also authorizes and funds four smaller disaster programs
through FY2011: (1) Livestock Indemnity Payments, which compensate ranchers at a rate
of 75% of market value for livestock mortality caused by a disaster; (2) Livestock Forage
Disaster Program, to assist ranchers who graze livestock on drought-affected pastureland
or grazing land; (3) Emergency Assistance for Livestock, Honey Bess and Farm Raised
Fish, which will provide up to $50 million to compensate these producers for disaster
losses not covered under other disaster programs; and (4) Tree Assistance Program, for
orchardists and nursery growers who can receive a payment to cover 70% of the cost of
replanting trees or nursery stock following a disaster (up to $100,000 per year per
producer).
Emergency Supplemental Farm Disaster Assistance
In virtually every crop year between 1988 and 2007, Congress has provided ad hoc
disaster assistance to farmers and ranchers with significant weather-related production
losses. Ad-hoc assistance has been made available primarily through emergency
supplemental appropriations to a wide array of USDA programs.2
2008 Supplemental Assistance
Primarily in response to the 2008 Midwest floods, the FY2008 Supplemental
Appropriations Act (P.L. 110-252) contains a total of nearly $480 million in emergency
funding to eligible farmers to defray the cost of clean-up and rehabilitation of farmland
and watersheds following a disaster. Of the total amount available, $89.4 million is for
the Emergency Conservation Program, which assists farmers in the cleanup and
restoration of farmland damaged by a natural disaster, and $390.5 million is for
Emergency Watershed Protection Program, which is designed to relieve imminent hazards
created by natural disasters and to alleviate future flood risk. No emergency supplemental
disaster assistance has been authorized for 2008 crop and livestock losses, since new
programs were authorized and funded through the 2008 farm bill, as described above.
2005-2007 Supplemental Assistance
Title IX of the FY2007 Iraq war supplemental appropriations act (P.L. 110-28)
provided emergency agricultural disaster assistance, primarily for crop and livestock
losses in any one of the last three years — 2005, 2006, or early 2007. Subsequently,
Congress extended the assistance for crop and livestock losses in all of 2007 in the
FY2008 Consolidated Appropriations Act (P.L. 110-161, Division A, Section 743). Both
2
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.
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laws limit payments to one of the three years, as selected by the producer. As estimated
by CBO, the cost of 2005-2007 assistance is approximately $3.4 billion, including $2.14
billion for crop loss assistance and $1.24 billion for livestock feed and mortality losses.
USDA is still accepting applications for the various programs authorized by P.L. 110-28,
as amended. The following is a description of the major agricultural disaster provisions.3
Crop Loss Assistance. P.L. 110-28, as amended by P.L. 110-161, provides such
sums as necessary to fund a crop disaster payment program for 2005, 2006, or 2007
production losses. CBO estimates the cost of the crop loss provisions at $2.14 billion. In
order to contain program costs, a producer cannot receive a payment for more than one
crop year. Eligible producers can receive a payment on losses in excess of 35% of normal
crop yields. The payment rate is 42% of the established market price for the commodity.
The act also prohibits 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. P.L. 110-28 also required USDA to make payments to farmers who
experienced quality losses to their 2005-2007 crops, as well as for quantity losses. On
June 23, 2008, USDA began to accept applications for crop quality loss payments.
Livestock Assistance. P.L. 110-28, as amended by P.L. 110-161, contains
necessary sums to fund a Livestock Compensation Program (LCP) to reimburse livestock
growers for feed losses caused by a natural disaster. CBO estimates the cost of the LCP
provision at $1.2 billion. Payments are being made to producers of beef, dairy, poultry,
hogs, 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 December 31, 2007,
with payments limited to one year of losses. To contain costs, the act limits the payment
rate to 61% of the payment rate used in previous years. For the same time period, P.L.
110-28, as amended, contains necessary funds (estimated by CBO at $39 million) for a
Livestock Indemnity Program to reimburse producers for replacing livestock killed by a
natural disaster, at a payment rate of at least 26% of the market value of the livestock
prior to death. The statute also includes $16 million to dairy producers for production
losses in disaster-designated counties.
Conservation. P.L. 110-28 contains $16 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 act did not stipulate which regions will
receive the funding, but it was anticipated that it would benefit farmland damaged by a
January 2007 freeze and assist western wildfire victims. Separately, P.L. 110-28 in effect
provides additional funds for the Emergency Forestry Conservation Reserve Program, a
new program that helps restore forest lands in the South that were damaged by the 2005
hurricanes. The act removes statutory language that prohibited any spending beyond
calendar year 2006, which CBO estimates will cost $115 million in FY2007.
3
For more information on these disaster programs, see various USDA fact sheets accessed at
[http://www.fsa.usda.gov/FSA/webapp?area=home&subject=diap&topic=landing]