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Wednesday, January 12, 2011

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 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 on or before September 30, 2011. The 2008 farm bill programs are designed to address the ad hoc nature of disaster assistance provided to producers during the last two decades.

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.

In the 111
th Congress, concerns that existing programs would not cover crop losses in 2009 led to the introduction of legislation that would have made additional emergency payments to producers. While agricultural disaster provisions did not pass Congress, the Administration announced in 2010 that it would implement a 2009 disaster assistance package estimated at $630 million under “Section 32” authority, making payments to producers of rice, soybeans, sweet potatoes, and cotton who suffered at least a 5% loss in certain counties.

In the 112
th Congress, legislators might consider reauthorizing the five disaster programs established in the 2008 farm bill. Without reauthorization, the disaster programs will not cover losses after September 30, 2011. Importantly, the programs do not have “baseline funding,” which means that if Congress wants to reauthorize them, it will need to find either new funding or budget offsets to pay for an extension of the programs. Also, some observers expect Congress, as part of the next farm bill debate, to consider how the constellation of government programs, including disaster assistance, helps farmers manage their business risks in a cost-effective manner.

Date of Report: January 6, 2011
Number of Pages: 10
Order Number: RS21212
Price: $29.95

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