Farmers who bought crop insurance in 2022 will receive dramatically less in disaster aid than they have in recent years because of a “progressive factoring methodology” USDA made to the Emergency Relief Program for last year's losses, according to an analysis by the American Farm Bureau Federation.
ERP, a program created by USDA to distribute ad hoc disaster assistance, was funded for 2022 with a $3.2 billion appropriation from Congress that was significantly less than the estimated, uncovered losses.
For farmers with crop insurance, a base payment is calculated and then reduced according to the progressive factoring methodology at an increasing rate between $2,000 and $10,000. A base payment of more than $10,000 would be cut by 90%.
Beginning farmers as well as minority and "limited resource" producers, a group classified as “underserved,” can get insurance premiums and fees reimbursed.
“Though initially welcomed by farmers and ranchers recovering from exceptional drought conditions, severe hurricanes, derechos, flooding and other natural disasters, a change in how assistance is calculated will drastically reduce the support many impacted producers receive,” the AFBF analysis by economist Daniel Munch says.
“In particular, the program’s new progressive factoring methodology limits sufficient support to a small percentage of operations, a puzzling approach when natural disasters devastate operations of all types.”
According to the analysis, a producer with 600 acres of corn and an average yield of 100 bushels an acre could get a payment of $11,853 under ERP for 2022 – 88% less than the operation would have received under the 2020 and 2021 versions of the program. An underserved farmer with a similar operation would receive $30,537 under the latest version of ERP, or 75% less than they would have gotten under the program in 2020 and 2021.
It’s easy to be “in the know” about what’s happening in Washington, D.C. Sign up for a FREE month of Agri-Pulse news! Simply click here.
In a lengthy statement provided to Agri-Pulse on Friday, USDA noted that the actual uncovered losses totaled $12 billion, even more than the $10 billion estimate when Congress was considering the funding.
If the department had used a flat factor for calculating final payments in lieu of the progressive factor If the decision had been made to apply a flat factor, the flat factor would have been 27%. In order for a farmer to get a larger payment under that flat factor versus the progressive factor USDA used, the gross payment would have had to been around $30,000, the statement said.
"When designing and deploying a program as complex as ERP, we’ve made every effort to incorporate lessons learned from our previous disaster programs as well as glean important input from producers, commodity groups, members of Congress and other stakeholder groups before opening the program for applications. The end result is a more advantageous, equitable distribution of limited funds to more producers in need of assistance," the statement said.
USDA is not using progressive factoring to reduce payments to producers who paid for Noninsured Crop Assistance Program rather than crop insurance, so the cut in payments from 2020 and 2021 is lower. For example, a spinach producer in Oregon with NAP coverage would receive 35% less under ERP 2022 than he or she would have under similar conditions in 2020 or 2021, the analysis says.
For more news, go to www.Agri-Pulse.com.
