In the aftermath of a string of natural disasters during the 2011 cropping season, the USDA has announced $308 million will be provided in aid to 33 states and Puerto Rico. The funds will come in addition to crop insurance and disaster payments previously promised under SURE and the Livestock Indemnity Program.
“2011 was a record year for farming and agriculture throughout the United States,” said Agriculture Secretary Tom Vilsack during a Wednesday afternoon press conference. “Farmers experienced a record amount of income and saw record exports (and) safer food. (There was also) a variety of opportunities to increase markets from local and regional food systems to bio-based products.
“2011 was also a year that saw a substantial number of natural disasters that impacted close to 55 million acres of farmland across the country. Floods, drought, and tropical storms did a great deal of damage throughout the country.”
The $308 million will be available to producers and communities “as quickly as possible. We’re making the announcement now so as producers begin spring plans … they know they’ll have resources available to finance repairs or improvements.”
The funds will be split between three projects: the Emergency Conservation Program, the Emergency Forest Restoration Program, and the Emergency Watershed Protection Program.
The $308 million is divided as follows:
- $215.7 million to the Emergency Watershed Protection Program (under the NRCS) will provide financial and technical assistance to assist public safety and restoration.
“Funding is allocated to a project and NRCS will then contract heavy construction work with local contractors,” said Vilsack. “Typical projects funded with the program include removing debris from waterways, protecting stream banks, reseeding damaged areas and in some cases, with landowner’s permission, purchasing flood plain easements on eligible land.”
- $80 million to the Emergency Conservation Program (under the FSA) will provide resources to remove debris from farmland, to restore livestock fences, conservation structures and provide water for livestock during severe drought.
The USDA county committees “assisted us in determining the eligibility based on on-site inspections of damaged land.”
- $12 million to the Emergency Forest Restoration Program (under the FSA).
“This will provide payments to eligible owners of non-industrial private forested land in order to … restore land damaged by natural disaster.”
The payments are “a critical component of the safety net provided to (those) impacted by natural disasters,” said Vilsack. “It highlights the importance of having that safety net, whether crop insurance (some $17.2 billion paid out over the last three years to 325,000 producers) or supplementing the disaster assistance programs under the 2008 farm bill (having benefited some 250,000 producers with over $3.5 billion in payments).”
Farm bill and crop insurance
What are Vilsack’s expectations for how disaster payments will be handled in the next farm bill?
A new direction began with the 2008 farm bill “when Congress made an effort with the SURE program and Indemnity Livestock and Forage programs and assistance programs. (They were) trying to avoid ad hoc disaster assistance.”
From that experience, “we realized the experience of having (such an approach) and also recognizing there needs to be a swifter reaction to natural disasters. The SURE program is very complex and requires calculations. It takes a year or two of delay in order to get resources to folks for disasters. … That’s a problem because folks need the help (immediately) when faced with a farm or loan payment.”
For the 2012 farm bill “there is recognition we need a safety net. And it needs to rely heavily on crop insurance and a continued expansion of crop insurance. We’ve seen about 135 new policies initiated in the last couple of years.
“And we need to have something that supplements crop insurance. So -- if you’re faced with a natural disaster, faced with a serious decline in commodity prices, faced with a huge increase in input costs – you can weather that storm.
“That’s why I think you’ll see some kind of revenue protection program discussed. The key question will be how it fits into the fiscal constraints that Congress will set. How can it be explained to (legislators) representing the 98 percent of Americans who don’t farm and the 84 percent that” live in urban areas.
What about the coming farm bill and the cost of crop insurance, which jumped to $11.3 billion in fiscal year 2011? The jump comes alongside record farm income and skyrocketing land values.
Vilsack said the crop insurance program currently requires a 12 to 14 percent return on investment to remain solvent. Beyond that, “we’ve taken steps to reduce taxpayer exposure by renegotiating the reinsurance agreement that backs up the crop insurance program.”
This was done in addition to “placing limitations on administrative and operating expenses paid out of the premiums. We saved collectively about $6 billion, reallocated $2 billion into other programs and committed $4 billion over 10 years to deficit reduction.”
USDA is also “constantly taking a look at the actuarial soundness of the program. We have to make sure when we make a commitment to cover, we’re in a financial position to do so. And we also want to make sure when we’re reviewing the actuarial data for the program that the premiums charged to producers are fair and reasonable and transparent as can be.”
A recent evaluation determined that “perhaps, corn and soybean producers were paying their fair share. Those premiums have been reduced and are looking at potentially further reductions depending on what the data shows us.”