Order Code RS21212
Updated June 30, 2006
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 regularly has made supplemental financial assistance available to
farmers and ranchers, primarily in the form of crop disaster payments and emergency
livestock assistance. A drought in portions of the Midwest and Hurricanes Katrina and
Rita in the Gulf affected 2005 agricultural production in those regions. In response to
the 2005 hurricanes, Congress so far has provided about $1.6 billion in agricultural
assistance in two emergency supplemental acts (P.L. 109-148, P.L. 109-234). These
funds are primarily for the cleanup and rehabilitation of damaged farmland, watersheds,
and private forest land, and for various forms of farm commodity assistance. Separately,
USDA also has transferred $250 million of existing funds for crop, livestock, tree, and
aquaculture assistance, exclusively for 2005 hurricane victims. To date, Congress has
not authorized any emergency crop or livestock payments for 2005 production losses
outside of the Gulf states. However, the Senate-reported version of the FY2006
agriculture appropriations bill (H.R. 5384) contains $4.0 billion in various forms of farm
assistance, including payments for major crop and livestock losses caused by any 2005
disaster. Similar provisions for non-hurricane states were contained in the Senate-passed
version of an FY2006 supplemental bill (H.R. 4939), but were deleted in conference
because of a threatened Administration veto of the measure. 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.
Congressional Research Service ˜ The Library of Congress

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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.
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 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 in subsequent years. (For more information, see
the “Federal Crop Insurance” section of CRS Report RL33037, Previewing a 2007 Farm

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Bill and CRS Report RL30739, Federal Crop Insurance and the Agriculture Risk
Protection 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. 103-
354, 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.
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. USDA estimates FY2005 NAP payments of $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

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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
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, and $23 million in FY2005.
Recent Congressional Action
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) crop disaster payments, (2) livestock
assistance, (3) tree assistance, and (4) emergency conservation assistance. (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.)
FY2006 Supplemental Acts (P.L. 109-148, P.L. 109-234)
For the 2005 crop year, agricultural production was adversely affected by drought
in portions of the Midwest and by an extremely active and severe hurricane season in the
Gulf states. To date, Congress has provided approximately $1.6 billion in emergency
supplemental assistance for USDA programs in two separate supplemental acts (P.L. 109-
148 and P.L. 109-234), all of which is restricted to the hurricane-affected states. This
includes funds for growers and processors of various farm commodities ($250 million),
livestock assistance ($140 million), farm debris cleanup ($200 million), watershed
rehabilitation ($351 million), rural development ($118 million), and a new program to
assist nonindustrial timber growers for 2005 hurricane losses ($504 million). Separately,
USDA has transferred $250 million of existing funds to provide direct payments for crop,
livestock , tree, and aquaculture losses, exclusively for 2005 hurricane victims.
Disaster Provisions in Pending Appropriations Bill (H.R. 5384)
Some farm groups are pressuring Congress to provide additional farm disaster
assistance for 2005 production losses caused by any natural disaster, not limited to
hurricanes. The Senate-reported version of the pending FY2006 agriculture

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appropriations bill (H.R. 5384) contains an emergency supplemental title (Title VIII) that
would provide $4.0 billion in various forms of farm disaster and economic assistance, as
estimated by the Congressional Budget Office (CBO). Included in the Senate bill is an
estimated $1 billion in crop disaster assistance and $1 billion in livestock disaster
assistance, as well as direct economic assistance (unrelated to natural disasters) of $1.6
billion for traditional growers of grains, cotton, peanuts, and oilseeds, $147 million for
dairy farmers, and $100 million for growers of specialty crops (fruits, nuts, and
vegetables) and livestock. Similar provisions to those in Title VIII were contained in the
Senate-passed version of a supplemental bill (H.R. 4939) earlier this year. However,
agricultural assistance was reduced to $500 million in the enacted version (P.L. 109-234),
and was provided exclusively to Gulf state producers. Many farm state Senators support
the Title VIII assistance, stating that regions other than the Gulf states were affected by
natural disasters in 2005 and need supplemental assistance. The Administration
threatened to veto H.R. 4939 if it contained any agricultural assistance beyond that
provided for the hurricane states, stating that crop insurance and other ongoing USDA
support programs adequately assist farmers affected by natural disasters and market
conditions.
Crop Disaster Payments
Congress has provided ad-hoc crop disaster payments in various emergency
supplemental acts for nearly every crop year since 1988. H.R. 5384, as reported by the
Senate, would require USDA to provide crop disaster payments in a similar fashion as
past disaster supplementals. Under the Senate provision, a crop producer in any region
of the country would be potentially eligible for assistance if individual losses to a 2005
crop were in excess of 35%, caused by any type of disaster, regardless of whether the
farmer was in a declared disaster area. For losses in excess of the 35% threshold, an
eligible producer could then receive a payment equal to 50% of the established price for
the commodity (or 35% of the price if the producer waived crop insurance coverage.)
Losses in 2006 (up until the date of enactment) due to flooding in California, Hawaii, and
Vermont only would be eligible. Payments also would be triggered if the producer
harvested a disaster-damaged crop, but experienced a lower market price because of
quality losses. Maximum payments would be $80,000 per person, as in the past. Although
CBO estimates payments of $1 billion under the Senate provision, the bill allows for
“such sums as necessary” to fully fund the payment formula. All commercially grown
crops would be eligible for a payment under this formula except for sugar cane and sugar
beets, which have separate disaster payment programs. The proposed payments in the
Senate bill would not be permitted to duplicate any payments already made to the Gulf
region following the hurricanes. Earlier in the year, P.L. 109-234 authorized assistance
of $80 million for sugar cane, $95 million for fruits, vegetables, and nursery products,
and $35 million in tree assistance.
Livestock Assistance
The Senate bill contains funding for an array of emergency livestock programs that
have been implemented on an ad-hoc basis in past years. Such sums as necessary
(estimated at $1.0 billion) would be provided for a Livestock Compensation Program
(LCP), similar to the LCP that was administered by USDA in 2002. The purpose of the
program is to compensate livestock growers for the additional cost of having to procure

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livestock feed in the marketplace following a disaster. It would provide payments to all
producers of beef, dairy, sheep, goats, and catfish in any county that was declared a
disaster area by the Secretary between January 1, 2005, and the date of enactment,
regardless of the individual producer’s loss experience. USDA would be required to use
the same payment mechanism as in 2002, but the Senate provision limits payments to
75% of the 2002 payment rates. The Senate bill also would authorize necessary funds
(estimated at $20 million) for a Livestock Indemnity Program (LIP) to compensate
producers for livestock killed by a natural disaster in 2005 or in 2006 (up to the
enactment date). The payment rate would be left to the discretion of the Secretary of
Agriculture, but the rate could not be set less than 30% percent of the market value of the
applicable livestock at the time of the disaster. The bill also would provide $13 million
to help producers replace and retain ewe lamb breeding stock. Funding in the Senate bill
is in addition to the estimated $95 million in LCP funds and $45 million in LIP funds
provided by P.L. 109-148, exclusively to the Gulf states.

Conservation Assistance
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, subject to annual appropriations. However, almost all of its funding in recent
years has come from emergency supplemental appropriations. The Senate-reported bill
would provide $17 million to the ECP for all regions, in addition to the $200 million
provided exclusively to the Gulf states by an earlier FY2006 supplemental act (P.L. 109-
148). The Senate bill would also provide $54 million in Emergency Watershed Protection
funding to supplement the $300 million already provided by P.L. 109-148.
Economic Loss Payments
The Senate-reported bill also provides an estimated $1.8 billion in bonus payments
to growers of grains, cotton, peanuts, and oilseeds who receive direct payments under the
farm commodity income support programs, and to participating dairy farmers who
receive payments under the Milk Income Loss Contract (MILC) program. These
payments would be available to eligible producers nationwide, regardless of whether they
were subject to crop losses. Under the Senate language, an eligible crop producer would
receive an additional payment of 30 percent of the direct payment received on a 2005
crop. Dairy farmers would receive up to $147 million in bonus MILC payments. Similar
market loss payments were made in FY1999-FY2001 in various supplementals to
compensate producers for then-prevailing low commodity prices. For fruit, vegetable, and
livestock producers, the Senate bill provides a combined total of $100 million to the
states, with the condition that the funds be used in some manner to support these
commodities.
For more information on the FY2007 agriculture appropriations bill, see CRS Report
RL33412, Agriculture and Related Agencies: FY2007 Appropriations.

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