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
Price: $29.95

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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
Price: $29.95

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