Ad-Hoc Money Fuels Farm Safety Net

OMAHA (DTN) -- As U.S. senators look at the next farm bill, they are trying to reconcile how so many more farmers now have crop insurance coverage, but USDA has been tasked with paying out nearly $70 billion in ad-hoc assistance to farmers while commodity safety-net programs have failed to kick in.

"This is something we need to look at in terms of need (and) what's happened" since the 2018 farm bill, Sen. Debbie Stabenow, D-Mich., chairwoman of the Senate Agriculture Committee said on Thursday.

The Senate Agriculture Committee on Thursday held a hearing looking at commodity programs and crop insurance. A few key themes stuck out from the hearing.

1. AD-HOC DISASTER AID HAS OVERTAKEN ARC-PLC

Congress and presidents over the past six years have provided nearly $70 billion in ad-hoc aid to producers. That aid can be slow, and often payments to farmers come long after the disasters occurred.

"The realities suggest the existing safety nets need to be enhanced and that we must find a quicker, better way to deliver assistance to producers," said Sen. John Boozman, R-Ark., ranking member of the committee.

Boozman also pointed out the Agricultural Risk Coverage and Price Loss Coverage programs are not providing support for crop producers because of the high commodity prices.

"How do we maybe capture some of that $70 billion, put it into programs people can rely on and use responsibly and make it work better?" Boozman said.

The challenge, however, is ad-hoc disaster aid for farmers doesn't automatically boost funding Congress can use to write the next farm bill.

2. NOT MUCH AID FOR 2022 DISASTERS

Congress authorized $10 billion in disaster aid to cover financial losses from 2020 and 2021. USDA used those funds to create the Emergency Relief Program (ERP), which has paid out more than $8 billion to more than 350,000 applicants.

The omnibus federal spending bill that passed Congress last December provided $3.74 billion in ad-hoc disaster aid for 2022 losses. That funding, however, won't allow USDA to provide the type of aid offered for previous years' losses.

"The funding provided won't allow us to provide a comparable level of relief for producers reporting losses compared to those impacted in 2020 and 2021," said Robert Bonnie, USDA undersecretary for Farm Production and Conservation.

Bonnie added that USDA also right now is working to provide a one-time payment to rice producers from $250 million that was carved out in the omnibus bill because rice farmers saw relatively flat prices in 2022, even though their input costs soared.

3. AD-HOC FOR HIGH INPUT COSTS?

The Trump administration created the Market Facilitation Program (MFP) to pay producers due to falling commodity prices during trade and tariff disputes with China. Sen. Tommy Tuberville, R-Ala., said reference prices for ARC and PLC have not kept up with rising inflation costs. He asked if USDA has considered a similar program.

"Despite USDA's farm safety net, producers are still struggling to break even due to skyrocketing inflation and rising food, fuel and fertilizer," Tuberville.

USDA has not made such a move, but Bonnie cited USDA is investing funds to encourage protection of domestic fertilizer, and the department continues to look for ways to expand enrollment in crop insurance.

4. COMPLAINT OVER ERP 2

In January, USDA announced signup for the Emergency Relief Program Phase 2 (ERP 2) for those 2020 and 2021 disasters. Under ERP Phase 1, USDA sped up payments by using crop insurance information and other data that producers already provide to USDA. For ERP 2, USDA is specifically looking at declines in gross revenue. That requires showing declines in revenue from an IRS Schedule F or distributions from a cooperative, for instance. That includes providing revenue from crop insurance payments or the Noninsured Crop Disaster Assistance Program (NAP), and other aid payments received, based on benchmark years from 2018-2020.

Based on complaints he's received from farmers, Sen. John Hoeven, R-N.D., said "version two needs some work" and should "adhere more to version one based on the feedback

Bonnie said the approach was to ensure USDA got aid out to producers who might not have had access to crop insurance or NAP. "We think the revenue-based approach does that," Bonnie said. "We think it will bring in new customers." Bonnie indicated if funds are left over, USDA would consider another round of payments for a "shallow-loss program."

"We think this approach allows us to get more producers in," Bonnie said.

A spokesperson for Hoeven emailed DTN that the senator and his staff "don't think USDA accurately measures crop losses due to natural disasters in phase two. We gave USDA the legal framework for the program in WHIP Plus, and ERP 2 gets away from that. We're urging USDA to reconsider this approach for phase two and redesign the program to accurately deliver relief to farmers."

5. TRYING TO BROADEN CROP INSURANCE

Marcia Bunger, administrator for the Risk Management Agency, told senators that crop insurance has been the key safety net for her and her husband's corn and soybean farm in South Dakota. In her role now, she seeks to elevate specialty crop growers, urban and organic farmers "to have the same type of policy my husband and I have had for 27 years."

Bunger said USDA has doubled revenue protection levels for Whole-Farm Revenue Protection and tripled coverage levels for the Micro Farm Program. Ideally, those increases will allow smaller and beginning farmers to sign up for those policies.

Stabenow asked about the Post-Application Coverage Endorsement (PACE) crop insurance, which provides incentives for farmers who use split applications of nitrogen fertilizer. Stabenow noted USDA has expanded the counties in which farmers can enroll but pointed out, "We have not yet seen any more added in Michigan and in other states."

Bonnie said there is a learning curve with a new insurance product like PACE, but ideally, it will see more participation this year. PACE was actually pitched to RMA through groups such as the National Corn Growers Association.

"This is an innovation that we hope will work and gets out and gives opportunities for producers to try new things to think about ways they can improve their stewardship." Bonnie said.

Bunger also later pointed out the expansion of crop insurance over the past two-plus decades. In 2000, RMA offered 300 various policies and covered $30 billion in potential liability. Now, RMA offers 600 different policies and covers more than $200 billion in liability each year.

"So, we are seeing a great deal of interest in every policy we stand up," she said.

6. PROTECTION FOR PROLONGED DROUGHT

Bunger also told Sen. Ben Ray Lujan, D-N.M., that RMA has granted a waiver to Western states from the USDA "one-in-four" rule for prevented planting. The Trump administration implemented the "one-in-four" planting rule to reduce prevented-planting claims and incentivize producers to plant if at all possible. Lujan said farmers in his state facing multiple years of drought would be excluded from coverage without the change. Bunger told Lujan a waiver was granted and "We are looking at this next year revising those rules," she said.

7. FARM SERVICE AGENCY NEEDS

While inflation has risen, Tuberville pointed out USDA loan size limits have remained flat. Zach Ducheneaux, director of the Farm Service Agency, agreed that is a problem that could be addressed in the next farm bill.

"I hear the same concerns from a lot of producers I have a chance to talk with," Ducheneaux said.

Ducheneaux also cited that underserved communities face different problems in not being eligible for programs such as ARC or PLC because they do not have historic base acres that set the parameters to pay farmers under those programs. There also are no base acres for grazing land, for instance.

See "USDA Forecasts 2023 Net Farm Income to Fall 16% From 2022 But Remain Above 20-Year Average" here: https://www.dtnpf.com/….

Also see "Ag Economist Says Big Losses Would be Needed for ARC, PLC to Pay Farmers in 2023" here: https://www.dtnpf.com/….

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

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