Order Code RS21212
Updated April 2, 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 regularly has made supplemental financial assistance available to
farmers and ranchers, primarily in the form of crop disaster payments and emergency
livestock assistance.
Both the House- and Senate-passed versions of the FY2007 Iraq war supplemental
bills (H.R. 1591 and S. 965) contain titles that would provide assistance for crop and
livestock losses in any one of the last three years — 2005, 2006, or early 2007. The
House bill provides total farm disaster aid of $3.4 billion, including an estimated $1.8
billion for crop losses, and $1.5 billion for livestock losses. The Senate measure
contains just under $4.2 billion in agricultural assistance, including an estimated $2.1
billion for crop losses and $1.6 billion in livestock aid. The Senate measure also
includes $100 million in grants to small, non-farm agricultural businesses in disaster
areas. The Administration is opposed to any disaster aid that is not offset by other
spending reductions, and has threatened to veto the supplemental appropriations bill
primarily because of Iraq war-related provisions. 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

---

CRS-2
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% 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. 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

---

CRS-3
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 FY2006 NAP payments of $117 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% 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

---

CRS-4
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.
Comparison of House- and Senate-Passed FY2007
Farm Disaster Aid (H.R. 1591, S. 965)
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 last
year. In the 110th Congress, both the House- and Senate-passed versions of the FY2007
Iraq war supplemental bills (H.R. 1591 and S. 965) contain titles that would provide
assistance for crop and livestock losses in any one of the last three years — 2005, 2006,
or early 2007.
As estimated by the Congressional Budget Office, the House-passed bill provides
total farm disaster aid of $3.4 billion, which includes an estimated $1.8 billion for crop
loss assistance and $1.5 billion for livestock feed and mortality losses. The Senate-passed
measure contains just under $4.2 billion in agricultural assistance, including an estimated
$2.1 billion in crop loss assistance and $1.6 billion in livestock and dairy loss assistance.
The Senate measure also includes $100 million in grants to small, non-farm agricultural
businesses in disaster areas. Not included in these disaster aid totals are additional funds
for a dairy income support program that expires later this year. (See CRS Report
RL33475, Dairy Policy Issues, for more on this funding issue.) Conference on the
measure is pending. The Administration is opposed to any disaster aid that is not offset
with other spending reductions, and has threatened to veto the bill primarily because of
Iraq war-related provisions. The following is a comparison of the major farm disaster
provisions in the two bills,
Crop Loss Assistance. Both the House and Senate bills provide such sums as
necessary to fund a crop disaster payment program for 2005, 2006, or early 2007
production losses. 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 in the House bill, and 55% in the Senate bill. The House bill
would prohibit disaster payments to any producer who waived crop insurance or did not
participate in the Noninsured Assistance Program in the year of the loss. The Senate bill

---

CRS-5
does not apply this prohibition, but would reduce the payment rate to 20% of the market
price for these producers. Both bills contains a provision stating that 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. CBO estimates the cost
of the crop loss provisions at $1.8 billion in the House bill, and $2.1 billion in the Senate
bill. The House bill separately provides $25 million to spinach growers and handlers who
were unable to market the crop following the September 2006 health advisory, and $24
million to sugar beet growers for disaster losses.
Livestock Assistance. Both bills provide necessary sums to fund a Livestock
Compensation Program (LCP) that would reimburse livestock growers for feed losses
caused by a natural disaster. Both bills would provide payments to producers of beef,
dairy, sheep, and goats (and catfish in the House bill only) in any county that was declared
a disaster area by the President or Secretary of Agriculture between January 1, 2005, and
early 2007, with payments limited to one year of losses. The estimated cost of funding
the LCP formula is $1.5 billion in both bills. For the same time period, both bills provide
necessary funds (estimated at $31 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. The Senate bill also
provides $95 million for payments to dairy producers for production losses in disaster-
designated counties, and $13 million in economic assistance for sheep growers.
Conservation. The House- and Senate-passed bills provide additional funding for
the Emergency Conservation Program (ECP) to assist farmers in the cleanup and
restoration of farmland damaged by a natural disaster. The $20 million in ECP funds in
the House bill is primarily for farmland damaged by a January 2007 freeze, while the $35
million in the Senate bill is geared toward, but is not exclusively for, wildfire relief in
Montana. The Senate bill also provides $50 million for the Emergency Watershed
Protection Program, and restores $115 million in FY2007 funding to the Conservation
Security Program, which was prohibited by the FY2007 continuing resolution.
Small Business Economic Loss Payments. The Senate bill provides an
estimated $100 million in payments to small businesses that “suffered material economic
losses” during the 2005 or 2006 crop year as a result of crop or livestock losses associated
with a natural disaster. The grant money would be allocated to states that had at least 50%
of their counties declared disaster areas during 2005 or 2006. Each state department of
agriculture in an eligible state would provide direct payments to eligible businesses using
the available funds.
Tree Assistance Program. The Senate bill contains an estimated $40 million
for an existing Tree Assistance Program, to assist nursery and ornamental growers who
experienced natural disasters in 2005, 2006, or early 2007. Growers would receive up to
75% of the actual costs to replant eligible products.

---