Wildfires and Hurricanes Indemnity Program (WHIP)

Wildfires and Hurricanes Indemnity Program (WHIP)

May 7, 2020
Wildfires and Hurricanes Indemnity Program (WHIP)
The U.S. Department of Agriculture (USDA) administers a
producers varied depending on whether they had purchased
suite of programs that assists farmers and ranchers with
policies under the federal crop insurance program (crop
recovering from a natural disaster. Most of these programs
insurance) or the Noninsured Crop Disaster Assistance
are permanently authorized and receive funding from
Program (NAP). These subsidized crop insurance policies
mandatory sources. In recent years, Congress has
indemnify yield, revenue, or margin losses on more than
supplemented these programs with additional assistance,
100 eligible crops. NAP offers a minimum level of
often referred to as ad hoc assistance. In 2018, USDA
coverage for reduced yields and losses on crops not eligible
created the Wildfires and Hurricanes Indemnity Program
for crop insurance. For full eligibility, both crop insurance
(WHIP) to implement the bulk of this ad hoc assistance.
and NAP must be purchased prior to a natural disaster.
Under 2017 WHIP, producers who purchased a crop
USDA has implemented two versions of WHIP along with
insurance or a NAP policy could receive payments for
multiple subprograms and block grants to states. This In
70%-95% of the expected value of the crop depending on
Focus provides an overview of WHIP and its components.
the level of coverage purchased. For producers who did not
For an overview of all USDA disaster assistance programs,
purchase a policy in advance of the natural disaster,
see CRS Report RS21212, Agricultural Disaster
payments were limited to 65% of expected value of the
Assistance.
crop. All payments were reduced by the value of the crop
Supplemental Appropriation Timeline
harvested, if any, and any insurance indemnity paid through
crop insurance or NAP. All participants were required to
Following an active hurricane and wildfire season in 2017,
purchase crop insurance or NAP for the next two crop
the Bipartisan Budget Act of 2018 (BBA 2018, P.L. 115-
years.
123) authorized $2.36 billion for agricultural production
losses. The BBA 2018 funding is limited to crop, tree, bush,
Payments under 2017 WHIP were limited to $125,000 per
and vine losses from a wildfire or hurricane occurring in
person or legal entity if less than 75% of the participant’s
2017. USDA announced that the bulk of the BBA 2018
adjusted gross income (AGI) was from farming. If more
funding would be applied to the creation of a new
than 75% of the participant’s AGI was from farming, then
supplemental program—WHIP (referred to as 2017 WHIP).
payments were limited to a maximum of $900,000 per
USDA also used $340 million for a block grant to the State
person or legal entity.
of Florida to assist the citrus industry.
WHIP+
Additional production loss occurred in 2018 and 2019
USDA implemented the FY2019 supplemental as WHIP+,
following prolonged flooding, hurricanes, wildfires, and
similar to 2017 WHIP. The FY2019 supplemental
other natural disasters across the country. Congress
appropriation expanded covered losses for crops, trees,
authorized over $3 billion in supplemental funding to cover
bushes, and vines in 2018 and 2019 as well as eligible
these losses in P.L. 116-20 (FY2019 supplemental). USDA
natural disasters, including Hurricanes Michael or Florence,
announced the majority of the FY2019 supplemental
other hurricanes, floods, tornadoes, typhoons, volcanic
appropriation funding as an expanded version of WHIP,
activity, snowstorms, and wildfires. The FY2020
referred to as WHIP+. The FY2019 supplemental also
appropriation further expanded WHIP+ to include reduced
required payments for additional losses not previously
crop quality and losses from drought and excessive
covered, including crops that were prevented from being
moisture.
planted in 2019, on-farm stored commodities, and milk
losses. The FY2019 supplemental appropriation authorized,
Payments for WHIP+ are based on several factors,
and USDA made available, block grants to select states to
including (1) the expected value of the crop, (2) the level of
cover livestock, poultry, and forestry losses.
insurance or NAP coverage, (3) a WHIP+ payment factor,
(4) the value of the crop harvested, and (5) insurance
Pursuant to BBA 2018, funding for 2017 WHIP expired on
payments received. Payment calculations vary based on the
December 31, 2019. Prior to its expiration, approximately
level of production loss; market value of crop loss; and
60% of funds were unobligated. On December 20, 2020, the
physical tree, bush, and vine loss or damage. Producers who
FY2020 Further Consolidated Appropriation Act (P.L. 116-
purchased crop insurance or NAP are eligible for payments
94, Division B, §791) repurposed $1.5 billion of those
of 75%-95% of the expected value of the crop depending on
funds to WHIP+, expanded eligibility, and added program
the level of coverage purchased. Payments for producers
requirements.
who did not purchase a crop insurance or NAP policy are
2017 WHIP
limited to 70% of the expected value of the crop. Similar to
2017 WHIP, all WHIP+ participants are required to
The 2017 WHIP program made payments to farmers and
purchase crop insurance or NAP for the next two crop
ranchers with crop, tree, bush, and vine losses from a
years.
wildfire or hurricane occurring in 2017. Payments to
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Wildfires and Hurricanes Indemnity Program (WHIP)
Also similar to 2017 WHIP, payment limits for WHIP+ are
purchased, and payments ranged from 10% to 15% of the
based on an individual’s or entity’s average AGI and how
PPL indemnity received. Producers who received a top-up
much of that income is from farming. Generally, payments
payment are required to purchase crop insurance for the
are limited to $125,000 per person or legal entity. However,
next two crop years, similar to WHIP+ requirements.
unlike 2017 WHIP, if more than 75% of the participant’s
AGI is from farming, then payments are limited to
Sugar Beets
$250,000 for each crop year with an overall payment limit
The FY2020 appropriation requires that all WHIP+ sugar
of $500,000 for all crop years.
beet losses in 2018 and 2019 be paid through cooperative
processors. Cooperatives enter into agreements with USDA
State Block Grants
to administer assistance to their members. Sugar beet
Both the BBA 2018 and the FY2019 supplemental
producers who are not members of a cooperative processor
appropriation provided USDA with the flexibility to
may apply for WHIP+ through USDA’s Farm Service
provide assistance through block grants to states. Block
Agency.
grants provide funding to states through agreements
negotiated with USDA. The states, in turn, use the funding
Issues for Congress
in accordance with the agreement to assist producers with
The U.S. farm policy mix that provides assistance to
qualifying losses not covered by other USDA disaster
agricultural producers for damage and loss following
programs. One block grant was issued under 2017 WHIP to
natural disasters has evolved to include both permanent and
the State of Florida to assist the citrus industry with the cost
ad hoc support. Over the past 20 years, Congress has
of buying and planting replacement trees—including
authorized permanent disaster assistance programs and
resetting and grove rehabilitation—and for repairing
expanded federally subsidized crop insurance and NAP
damage to irrigation systems, among other activities.
policies to reduce the need for ad hoc disaster assistance.
Following enactment of the 2008 farm bill (P.L. 110-246),
Under WHIP+, USDA announced over $800 million for
Congress appropriated little in the way of supplemental
block grants to Alabama, Florida, and Georgia for losses of
disaster assistance for agriculture for several years. This
timber, cattle, and poultry as well as necessary expenses
changed in 2018 with enactment of the BBA 2018 and the
related to losses of horticulture crops and pecan production.
creation of 2017 WHIP. With the resurgence in ad hoc
The FY2020 appropriation requires that USDA provide an
assistance, Congress might reassess the effectiveness of the
additional $400 million of the repurposed funds for WHIP+
permanent disaster assistance programs as well as NAP and
through block grants with states.
crop insurance coverage. Also, by covering the losses of
farmers who chose not to purchase insurance, Congress
Other Covered Losses
may consider whether WHIP and other ad hoc assistance
The FY2019 supplemental and FY2020 appropriation
creates a potential disincentive for future participation in
specifically names eligible production loss types following
crop insurance or NAP.
natural disasters. USDA administers these provisions
Historically, assistance for production losses has been
through separate payments and programs.
provided directly from the USDA to eligible farmers and
On-Farm Storage Loss Program (OFSLP)
ranchers. Block grants to states amounting to $1 billion
through WHIP deviate from the traditional federal
OFSLP provides payments for the uncompensated losses of
agricultural production support framework. Congress may
harvested commodities including grains, oilseeds, and hay
appraise whether these grants are more or less effective in
stored in on-farm structures. Only losses related to eligible
assisting producers. Block grants may allow USDA to
disaster events that occurred during 2018 or 2019 may
leverage federal funds in light of recent staffing shortages.
receive payments. Payments are calculated using a national
However, some states have reported implementation delays,
payment rate per commodity based on 75% of the market or
grant agreement complexities, and difficult agreement
harvest price.
negations with USDA that may be of interest to Congress.
Milk Loss
While authorizing language identified specific crops and
The milk loss program provides indemnity payments to
livestock, disaster events, and percentage of payment
eligible dairy operators for milk that was dumped or
values, Congress left to USDA other decisions on
removed without compensation from the commercial milk
implementing $5.4 billion of assistance. USDA used this
market due to qualifying natural disasters. In some cases,
discretion to implement WHIP consistent with certain
dairy operations receive a partial payment for milk that was
elements of other farm programs. For example, USDA
dumped through a marketing organization, insurance, or
imposed payment limits similar to some farm commodity
other source. Only the compensated portion of milk is
support programs (e.g., Agriculture Risk Coverage and
eligible for the milk loss payment.
Price Loss Coverage programs). However, USDA also
added exceptions for WHIP, such as the higher payment
Prevented Planting
limit if more than 75% of income is derived from farming,
Crops in 2019 that were either prevented from being
and it excluded the AGI means test. As Congress evaluates
planted or delayed in being planted were provided with a
implementation of WHIP, USDA’s use of its administrative
top-up payment. The payment was automatically made to
discretion may be an area of interest.
producers who claimed prevent plant losses (PPL) in 2019
through their federal crop insurance policies. Payments
Megan Stubbs, Specialist in Agricultural Conservation and
varied based on the type of crop insurance policy
Natural Resources Policy
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Wildfires and Hurricanes Indemnity Program (WHIP)

IF11539

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https://crsreports.congress.gov | IF11539 · VERSION 1 · NEW