The Pigford Case: USDA Settlement of a Discrimination Suit by Black Farmers

Tadlock Cowan
Analyst in Natural Resources and Rural Development

Jody Feder
Legislative Attorney

On April 14, 1999, Federal District Court Judge Paul L. Friedman approved a settlement agreement and consent decree resolving a class action discrimination suit (commonly known as the Pigford case) between the U.S. Department of Agriculture (USDA) and black farmers. The suit claimed that the agency had discriminated against black farmers on the basis of race and failed to investigate or properly respond to complaints from 1983 to 1997. The deadline for submitting a claim as a class member was September 12, 2000. Many voiced concern over the structure of the settlement agreement, the large number of applicants who filed late, and reported deficiencies in representation by class counsel. A provision in the 2008 farm bill (P.L. 110-246) permitted any claimant in the Pigford decision who had not previously obtained a determination on the merits of a Pigford claim to petition in civil court to obtain such a determination. A maximum of $100 million dollars was also authorized for new claims settlements.

On February 18, 2010, Attorney General Holder and Secretary of Agriculture Vilsack announced a $1.25 billion settlement of these so-called Pigford II claims. The process for adjudicating the individual claims has not been finalized. The Administration included $1.15 billion in its FY2010 supplemental budget request for settlement costs. An amendment (S.Amdt. 3407) to H.R. 4213, the Tax Extenders Act of 2009, to authorize the funding failed on March 10, 2010. On May 28, 2010, the House passed its version of H.R. 4213 and included the $1.15 billion for the settlement.

A provision in the settlement permitted the plaintiffs to void the settlement if Congress did not appropriate the $1.15 billion by March 31, 2010. Appropriators did not meet that deadline, although USDA Secretary Tom Vilsack sent letters in March to congressional leaders asking them to appropriate money for the settlement, saying that resolving cases of discrimination is a department priority. Because the settlement is clearly a priority of both the USDA and the White House, plaintiffs are unlikely to exercise their right to void the settlement in the near term. Unlike the original Pigford decision, the Pigford II settlement does not include a suggested settlement amount, although it does provide for higher payments to claimants who go through a more rigorous review and documentation process. A moratorium on foreclosures of most claimants' farms will be in place until after claimants have gone through the claims process. Payments to successful claimants may begin in the middle of 2011.

This report highlights some of the events that led up to the Pigford class action suit and outlines the structure of the original settlement agreement. It also discusses the number of claims reviewed, denied, and awarded, and some of the issues raised by various parties.


Date of Report: June 15, 2010
Number of Pages: 10
Order Number: RS20430
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Brazil’s WTO Case Against the U.S. Cotton Program

Randy Schnepf
Specialist in Agricultural Policy

U.S. and Brazilian trade negotiators reached agreement on June 17, 2010, on a "Framework" regarding a World Trade Organization (WTO) dispute settlement case over U.S. cotton subsidies and GSM-102 agricultural export credit guarantees. The Framework agreement—which lays out a number of "steps and conversations"—represents a path forward for a negotiated solution to the dispute, while avoiding WTO-sanctioned trade retaliation by Brazil against U.S. goods and services. The Framework would limit trade-distorting U.S. cotton subsidies and provide benchmarks for further changes to the GSM-102 program. The Framework agreement must still be formally accepted by Brazil's Foreign Trade Council of Ministers (CAMEX) to avoid retaliation.

The so-called Brazil cotton case is a long-running WTO dispute settlement case (DS267) initiated by Brazil—a major cotton export competitor—in 2002 against specific provisions of the U.S. cotton program. In September 2004, a WTO dispute settlement panel found that certain U.S. agricultural support payments and guarantees—including (1) payments to cotton producers under the marketing loan and counter-cyclical programs, and (2) export credit guarantees under the GSM-102 program—were inconsistent with WTO commitments. In 2005, the United States made several changes to both its cotton and GSM-102 programs in an attempt to bring them into compliance with WTO recommendations. However, Brazil argued that the U.S. response was inadequate. A WTO compliance panel ruled against the United States in December 2007, and the ruling was upheld on appeal in June 2008.

In August 2009, a WTO arbitration panel—assigned to determine the appropriate level of retaliation—announced that Brazil's trade countermeasures against U.S. goods and services could include two components: (1) a fixed amount of $147.3 million for cotton payments, and (2) a variable amount based on GSM-102 program spending. The arbitrators also ruled that Brazil would be entitled to cross-retaliation if the overall retaliation amount exceeded a formula-based variable annual threshold. Cross-retaliation involves countermeasures in sectors outside of the trade in goods, most notably in the area of U.S. copyrights and patents.

Based on the arbitrators' formulas, using 2008 data, Brazil announced in December 2009 that it would impose trade retaliation against up to $829.3 million in U.S. goods, including $268.3 million in eligible cross-retaliatory countermeasures. In March 2010, Brazil released a list of 102 goods of U.S. origin that would be subject to import tariffs of up to 100%, followed by a preliminary list of U.S. patents and intellectual property rights that it could restrict. Brazil announced an April 6 deadline for imposing the tariffs, barring a joint settlement.

Brazil and the United States were engaged in intense negotiations to find a mutual agreement to avoid the trade retaliation prior to the April 6 deadline. In early April, 2010, the United States offered a three-point proposal including establishment of a $147.3 million annual fund to provide technical assistance and capacity-building for Brazil's cotton sector, near-term modifications to the operation of the GSM-102 program, and special recognition for certain Brazilian beef imports into the United States. As a result, Brazil agreed to postpone until April 22 the implementation of WTO-approved countermeasures. On April 20, 2010, the two parties signed a memorandum of understanding (MOU) that officially detailed the specifics of the $147.3 million fund. As a result, Brazil extended the suspension of trade retaliation until mid-June, pending the agreement of the aforementioned "Framework forward."


Date of Report: June 18, 2010
Number of Pages: 40
Order Number: RL32571
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Agriculture in the WTO: Limits on Domestic Support

Randy Schnepf
Specialist in Agricultural Policy

Most of the provisions of the current farm bill, the Food, Conservation, and Energy Act of 2008 (P.L. 110-246), do not expire until 2012. However, hearings on the 2012 farm bill have already begun. Congress is in the process of reviewing farm income and commodity price support proposals that might succeed the programs due to expire in 2012. 

A key question likely to be asked of virtually every new proposal is how it will affect U.S. commitments under the WTO's Agreement on Agriculture (AA), which commits the United States to spend no more than $19.1 billion annually on domestic farm support programs most likely to distort trade. The AA spells out the rules for countries to determine whether their policies are potentially trade-distorting, and to calculate the costs. This report describes the steps for making these determinations.


Date of Report: June 16, 2010
Number of Pages: 11
Order Number: RS20840
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Food and Drug Administration FY2011 Budget and Appropriations

Susan Thaul
Specialist in Drug Safety and Effectiveness

The President's budget request for FY2011 included $4.032 billion for the Food and Drug Administration (FDA). The total is made of $2.508 billion in direct appropriations (which FDA calls budget authority) and $1.523 billion in user fees. Overall, the request is 23% more than the enacted FY2010 total appropriation, with budget authority up 6.2% and fees up 65.2%. Most of the increase would come from proposed new user fees to support generic drug activities, food export certification, reinspection, and food inspection and facility registration. For continuing user fee programs (prescription drug, medical device, animal drug, animal generic drug, tobacco product, mammography quality standards, export certification, and color certification fees), the $1.233 billion request is 33.7% above FY2010. 

Budget justification documents describe FY2011 agency initiatives in food safety, medical product safety, and regulatory science. They also show the program-level budget request (both budget authority and user fees) and describe activities in each of FDA's program areas: human drugs, biologics, animal drugs and feeds, devices and radiological health, tobacco products, and toxicological research. 

The Commissioner of Food and Drugs has testified to the subcommittees on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies of both the Senate and House Committees on Appropriations. Neither subcommittee has yet issued FY2011 appropriations language.


Date of Report: June 16, 2010
Number of Pages: 11
Order Number: R41288
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Renegotiation of the Standard Reinsurance Agreement (SRA) for Federal Crop Insurance

Dennis A. Shields
Specialist in Agricultural Policy

Under the federal crop insurance program, farmers can purchase crop insurance policies to manage financial risks associated with declines in crop yields and/or revenue. The program covers more than 100 crops and is administered by the U.S. Department of Agriculture's (USDA's) Risk Management Agency (RMA), which acts as both regulator and reinsurer. To encourage farmer participation and reduce the need for ad hoc disaster assistance, the federal government subsidizes the purchase of crop insurance policies, which are sold and serviced through 15 approved private insurance companies. Insurance company losses are reinsured by USDA, and their administrative and operating (A&O) costs are reimbursed by the government.

A Standard Reinsurance Agreement (SRA) between USDA and the private companies spells out expense reimbursements and risk-sharing by the government, including the terms under which the government provides subsidies and reinsurance (i.e., insurance for insurance companies) on eligible crop insurance contracts sold or reinsured by insurance companies. As a result, the SRA plays a central role in determining program costs. The SRA does not affect policy premiums paid by farmers, which are based on RMA's estimates of risk and on subsides set in statute.

RMA is in the process of renegotiating the SRA that has been in effect since 2004. Some have criticized it as being too generous for insurance companies following a significant increase in government costs in recent years. Although Congress does not directly approve any new agreement, Congress has been interested in its oversight capacity, particularly with respect to cost-effectiveness and effects on farmer participation, the industry's selling and servicing of crop insurance products to farmers, and baseline funding levels for the next farm bill.

Since A&O reimbursements under the current SRA are based on a percentage of premiums, their dollar amount has risen sharply in recent years as premiums have risen to reflect higher crop prices. The A&O reimbursement increased from an average of $881 million during FY2004- FY2006 to $1.6 billion in 2009. Some observers argue that reimbursements should be pegged to something other than premiums, such as a flat fee per policy sold, to better reflect actual costs and to help reduce federal expenditures. The insurance industry contends that reimbursements are currently less than actual delivery expenses.

Similarly, company underwriting gains (the amount by which a company's share of retained premiums exceeds its indemnities) have increased substantially in recent years, as weather has been generally favorable for growing crops. Some have argued that if the government share of gains is increased in exchange for a larger government share of losses, average taxpayer costs would decline. The insurance industry contends that a certain provision of the current SRA ("net book quota share") is a tax on underwriting income and crowds out private reinsurance.

RMA released its first draft of the 2011 SRA on December 4, 2009, a second draft in mid- February 2010, and a "final" draft on June 10, 2010. The most recent draft places a cap on A&O reimbursements to control costs, and limits a company's expenditures on agent commissions. Among the proposed changes to underwriting provisions, the final draft improves profit potential and reduces company risk in higher-risk states. The draft also directs proceeds from an increase in the net book quota share to companies operating in "underserved states." Throughout the negotiations, the industry has been concerned that overall funding reductions are excessive. RMA expects that most companies will sign the agreement in time for it to take effect in July 2010. The new SRA will cover crops with policy closing dates after July 1, 2010 (e.g., 2011-crop corn).


Date of Report: June 10, 2010
Number of Pages: 19
Order Number: R40966
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Federal Crop Insurance: Background and Issues

Dennis A. Shields
Specialist in Agricultural Policy

The 111th Congress is considering the effectiveness and operations of the federal crop insurance program. The House Committee on Agriculture has been seeking input from farmers and others on the program in advance of the next farm bill debate. Meanwhile, concern about the federal budget deficit is coinciding with the rising cost of the federal crop insurance program. This report provides a primer on the federal crop insurance program and discusses related issues.

The federal crop insurance program began in 1938 when Congress authorized the Federal Crop Insurance Corporation. The current program, which is administered by the U.S. Department of Agriculture's Risk Management Agency (RMA), provides producers with risk management tools to address crop yield and/or revenue losses on their farms. In purchasing a policy, a producer growing an insurable crop selects a level of coverage and pays a portion of the premium—or none of it in the case of catastrophic coverage—which increases as the level of coverage rises. The federal government pays the rest of the premium (averaging nearly 60% of the total).

Insurance policies are sold and completely serviced through 15 approved private insurance companies. The insurance companies' losses are reinsured by USDA, and their administrative and operating costs are reimbursed by the federal government.

In 2009, federal crop insurance policies covered 265 million acres. Major crops are covered in most counties where they are grown. Four crops—corn, cotton, soybeans, and wheat—accounted for 73% of total acres enrolled in crop insurance. Most crop insurance policies are either yieldbased or revenue-based. For yield-based policies, a producer can receive an indemnity if there is a yield loss relative to the farmer's "normal" (historical) yield. Revenue-based policies protect against crop revenue loss resulting from declines in yield, price, or both. The most recent addition has been insurance products that protect against losses in whole farm revenue rather than just for an individual crop.

Government costs for crop insurance have increased substantially in recent years. After ranging between $2.1 and $3.6 billion during FY2000-FY2006, costs rose to $5.7 billion in FY2008 and $7.3 billion in FY2009 as higher policy premiums from rising crop prices drove up premium subsidies to farmers and expense reimbursements (which are based on total premiums) to private insurance companies. Reimbursements and risk-sharing between USDA and private insurance companies are spelled out in a Standard Reinsurance Agreement (SRA), which plays a large role in determining program costs. USDA is currently renegotiating the SRA for the 2011 reinsurance year (which begins July 1, 2010) to address issues such as the calculation of reimbursements.

Insurance companies, farm groups, and some Members of Congress remain concerned that significant reductions in federal support, including possible cuts stemming from the new SRA, will negatively impact the financial health of the crop insurance industry and possibly jeopardize the delivery of crop insurance. The crop insurance industry argues that cuts to the program were already made in the 2008 farm bill, and additional cuts would be unfair. Others point to recent increases in operating expense reimbursements and underwriting gains, questioning whether these higher levels are necessary for maintaining a viable crop insurance industry. A main concern for most would likely be saving federal dollars without adversely affecting farmer participation, policy coverage, or industry interest in selling and servicing crop insurance products to farmers.


Date of Report: May 28, 2010
Number of Pages: 20
Order Number: R40532
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Agriculture-Based Biofuels: Overview and Emerging Issues

Randy Schnepf
Specialist in Agricultural Policy

Since the late 1970s, U.S. policymakers at both the federal and state levels have enacted a variety of incentives, regulations, and programs to encourage the production and use of agriculture-based biofuels. Initially, federal biofuels policies were developed to help kick-start the biofuels industry during its early development, when neither production capacity nor a market for the finished product was widely available. Federal policy has played a key role in helping to close the price gap between biofuels and cheaper petroleum fuels. Now, as the industry has evolved, other policy goals (e.g., national energy security, climate change concerns, support for rural economies) are cited by proponents as justification for continuing policy support.

The U.S. biofuels sector has responded to these government incentives by expanding output every year since 1996, with important implications for the domestic and international food and fuel sectors. The production of ethanol (the primary biofuel produced in the United States) has risen from about 175 million gallons in 1980 to 10.7 billion gallons per year in 2009. U.S. biodiesel production is much smaller than its ethanol counterpart, but has also shown strong growth, rising from 0.5 million gallons in 1999 to an estimated 776 million gallons in 2008 before being impeded by the nationwide financial crisis.

Despite this rapid growth, total agriculture-based biofuels production accounted for only about 4.3% of total U.S. transportation fuel consumption in 2009. Federal biofuels policies have had costs, including unintended market and environmental consequences and large federal outlays (estimated at $6 to $8 billion in 2009). Despite the direct and indirect costs of federal biofuels policy and the small role of biofuels as an energy source, the U.S. biofuels sector continues to push for greater federal involvement. But critics of federal policy intervention in the biofuels sector have also emerged.

Current issues and policy developments related to the U.S. biofuels sector that are of interest to Congress include the following:

• Many federal biofuels policies (e.g., tax credits and import tariffs) require routine congressional monitoring and occasional reconsideration in the form of reauthorization or new appropriations funding.

• The 10% ethanol-to-gasoline blend ratio—known as the "blend wall"—poses a barrier to expansion of ethanol use. The Environmental Protection Agency (EPA) is currently evaluating the viability of raising the ethanol blending limit (per gallon of gasoline) for standard engines from 10% to 15%, which would have important market and policy implications.

• The evolution of EPA's methodology for estimating lifecycle greenhouse gas emission reductions of different biofuels production paths (relative to their petroleum counterparts) and the treatment of indirect land use changes will determine which biofuels qualify under the Renewable Fuel Standard.

• The slow development of cellulosic biofuels has raised concerns about the industry's ability to meet large federal usage mandates, which, in turn, has raised the potential for future EPA waivers of mandated biofuel volumes and has contributed to a cycle of slow investment in and development of the sector.


Date of Report: June 11, 2010
Number of Pages: 34
Order Number: R41282
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FY2010 Supplemental Appropriations for Agriculture

Jim Monke
Specialist in Agricultural Policy

Two separate bills are advancing in the 111th Congress that could provide nearly $4 billion of supplemental funds for agricultural programs in FY2010. The agricultural provisions in these bills have a relatively small funding impact compared with the nonagricultural provisions in the bills.

H.R. 4213 (commonly known as the "tax extenders" bill) would provide up to $3.6 billion for agriculture-related programs. The House and Senate are trading amendments to reconcile differences between each chamber's version of the bill. The most recent House-passed version from May 28, 2010, includes $1.48 billion for agricultural disaster assistance, $1.15 billion for a settlement of the Pigford lawsuit against the U.S. Department of Agriculture (USDA), and $1.06 billion to extend tax provisions for biodiesel and conservation. The Senate-passed version from March 10, 2010, does not contain funding for the Pigford settlement, but does include the other provisions.

H.R. 4899 (a supplemental appropriations bill for war spending and disaster response) would provide smaller appropriations for agriculture, totaling up to $150 million after offsets in the Senate-passed bill and $303 million in a House draft bill. A Senate-passed version from May 27, 2010, would provide $32 million for the farm loan program (to support an additional $950 million of loans), $150 million for international food aid, $18 million for emergency forest restoration, and additional authorities for a rural development housing loan program. It also contains a $50 million offset from the Biomass Crop Assistance Program (BCAP). A May 26, 2010, draft summarized by the House Appropriations Committee would provide slightly less for the farm loan program ($27 million to support $850 million of loans), the same $150 million for P.L. 480 for Haiti, significantly more for rural housing loans ($173 million of budget authority to support $12 billion of loan guarantees), and $50 million for food purchases in a domestic nutrition assistance program. The House draft offsets $97 million within agriculture with rescissions from unobligated balances from past emergency appropriations.

Both bills await further floor action to resolve differences between the chambers.


Date of Report: June 4, 2010
Number of Pages: 12
Order Number: R41255
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Agricultural Disaster Assistance

Dennis A. Shields
Specialist in Agricultural Policy

Ralph M. Chite
Section Research Manager

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 Crop Disaster Assistance Program (NAP), and emergency disaster loans. The federal crop insurance program is designed to protect crop producers from unavoidable risks associated with adverse weather, and weather-related plant diseases and insect infestations. Producers who grow a crop that is currently ineligible for crop insurance may be eligible for a direct payment under NAP. Under the emergency disaster (EM) loan program, 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 loans.

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) included authorization and funding for five new disaster programs to cover losses through FY2011. The largest of the new programs is the Supplemental Revenue Assistance Payments Program (SURE), which 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.

The 2008 farm bill also authorized three new livestock assistance programs and a tree assistance program. The Livestock Indemnity Program (LIP) compensates ranchers at a rate of 75% of market value for livestock mortality caused by a disaster. The Livestock Forage Disaster Program (LFP) assists ranchers who graze livestock on drought-affected pastureland or grazing land. The Emergency Assistance for Livestock, Honey Bees, and Farm-Raised Fish Program (ELAP) compensates producers for disaster losses not covered under other disaster programs. Finally, the Tree Assistance Program (TAP) provides payments to eligible orchardists and nursery tree growers to cover 70% of the cost of replanting trees or nursery stock following a natural disaster. For individual producers, combined payments under SURE, LIP, LFP, and ELAP may not exceed $100,000. For TAP, a separate limit of $100,000 per year per producer applies.

The new programs are designed to address the ad hoc nature of disaster assistance provided to producers during the last two decades. Since 1988, Congress has regularly made emergency financial assistance available to farmers and ranchers, primarily in the form of crop disaster payments and livestock assistance.

Following widespread crop losses in 2009 due to excessive rain, legislation was introduced in late 2009 in both chambers (S. 2810 and H.R. 4177) to make emergency payments to producers for losses in calendar year 2009. The Senate Finance Committee subsequently attached emergency agricultural assistance to the House-passed version of the Tax Extenders Act of 2009 (H.R. 4213). The Senate amended and passed the bill on March 10, 2010. The House is now considering the Senate-passed version. The legislation would provide a supplemental "direct payment" to producers in designated disaster counties who receive direct payments for crops under the 2008 farm bill (e.g., wheat, corn, upland cotton, rice, peanuts, and soybeans). The threshold for loss due to a natural disaster is 5%, much lower than historical norms, and the payment would be 90% of a farm's direct payment in 2009. (The loss threshold compares with previous disaster programs that typically paid for losses in excess of 35% at 65% of established prices.) Provisions are also included for payments to specialty crop producers ($300 million), producers and first handlers of cottonseed ($42 million), and aquaculture producers ($25 million) for high feed costs in 2009. The Congressional Budget Office estimates the total cost at $1.48 billion.


Date of Report: May 21, 2010
Number of Pages: 12
Order Number: RS21212
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