Alyssa Lane
Natural disasters can be devastating for farmers, causing crop failures, preventing planting, and prohibiting harvesting. Luckily, there are various insurance options available to farmers to help them manage the risks associated with natural disasters. The federal government plays a significant role in assisting agricultural producers cope with financial losses caused by natural disasters. The USDA, for example, offers a suite of disaster assistance programs and crop insurance options to help farmers manage risk and protect their operations. Additionally, the federal crop insurance program, the Noninsured Disaster Assistance Program (NAP), and Emergency Farm Loans are three major ways the federal government provides assistance to farmers affected by natural disasters.
| Characteristics | Values |
|---|---|
| Type of insurance | Federal crop insurance program, Noninsured Crop Disaster Assistance Program (NAP), Emergency Farm Loans |
| Who provides it? | USDA's Risk Management Agency, Farm Service Agency |
| Who is it for? | Farmers and ranchers |
| What does it cover? | Losses due to drought, flood, fire, freeze, tornadoes, pest infestation, wind erosion, hurricanes, and other natural disasters |
| What is not covered? | Losses due to a producer's neglect or malfeasance, failure to reseed, or failure to follow good farming practices |
| How to apply? | Contact your local USDA Service Center or visit the RMA website to find a crop insurance agent |
What You'll Learn
Federal Disaster Assistance Programs
The US Department of Agriculture (USDA) offers a variety of programs to help farmers recover from natural disasters. These include:
- Federal Crop Insurance Program: This program helps protect producers from "drought, flood, or other natural disasters". It is available for over 100 commodities across the US and is administered by the Federal Crop Insurance Corporation (FCIC), a wholly-owned government corporation and agency of the USDA.
- Noninsured Crop Disaster Assistance Program (NAP): This program provides financial assistance to producers of crops that are not insured under the federal crop insurance program when low yields, loss of inventory, or prevented planting occurs due to natural disasters.
- Emergency Farm Loans: These low-interest loans are made available to producers in counties designated as disaster areas by the President or the Secretary of Agriculture. They can be used to help producers recover from production losses or physical losses.
- Tree Assistance Program (TAP): TAP provides financial assistance to qualifying orchardists and nursery tree growers to replant or rehabilitate eligible trees, bushes, and vines damaged by natural disasters.
- Livestock Indemnity Program (LIP): LIP provides benefits to livestock producers for livestock deaths in excess of normal mortality caused by adverse weather or by attacks by animals reintroduced into the wild by the federal government.
- Livestock Forage Disaster Program (LFP): LFP provides compensation to eligible livestock producers who have suffered grazing losses due to drought or fire on eligible land.
- Emergency Assistance for Livestock, Honeybees, and Farm-Raised Fish (ELAP): ELAP provides financial assistance to eligible producers for livestock, honeybee, and farm-raised fish losses due to disease, adverse weather, or other conditions not covered by other USDA disaster assistance programs.
- Emergency Livestock Relief Program (ELRP): ELRP provides livestock producers with emergency relief payments to compensate for increases in supplemental feed costs.
- Emergency Conservation Program (ECP): ECP provides funding for farmers and ranchers to rehabilitate farmland damaged by natural disasters and to carry out emergency water conservation measures during periods of severe drought.
- Emergency Forest Restoration Program (EFRP): EFRP provides financial payments to eligible private forest landowners to restore forests damaged by natural disasters or insect and disease infestations.
- Emergency Watershed Protection Program (EWP): EWP provides personalized advice and financial assistance to relieve imminent threats to life and property caused by natural disasters that impair a watershed.
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Federal Crop Insurance Program
The Federal Crop Insurance Program (FCIP) is a key federal support program for agriculture in the United States. The program is administered by the Federal Crop Insurance Corporation (FCIC), a wholly-owned government corporation managed by the Risk Management Agency (RMA) of the United States Department of Agriculture (USDA). The FCIP provides financial protection to agricultural producers against losses due to adverse events, including natural disasters.
The history of the FCIP can be traced back to the 1930s, when farmers were struggling to recover from the Great Depression and the Dust Bowl drought. The program was established to provide insurance for farmers' produce, ensuring they received compensation for crops even during challenging years. The Federal Crop Insurance Act of 1980 further encouraged participation by authorizing a subsidy for premiums and expanding coverage to additional crops and regions.
The FCIP offers protection against a range of natural disasters, including drought, excess moisture, damaging freezes, hail, wind, and disease. It covers an extensive list of agricultural commodities, such as barley, corn, cotton, flaxseed, oats, peanuts, potatoes, rice, rye, sorghum, soybeans, sugar beets, sugarcane, sunflowers, sweet potatoes, tobacco, and wheat. The program has seen increased participation over the years, with insured acreage rising from 206 million acres in 2000 to 444 million acres in 2021.
The USDA partners with private insurers to deliver the FCIP. The federal government subsidizes crop insurance premiums to make them more affordable for farmers and shares the risks associated with catastrophic losses. In recent years, the FCIP has introduced new insurance products and pricing mechanisms to better reflect each producer's unique risks and improve the program's financial sustainability.
The FCIP is an essential tool for farmers and ranchers, providing a safety net to help them manage risks and protect their operations from the financial impacts of natural disasters. It plays a crucial role in promoting the economic stability of agriculture and ensuring the nation's food security.
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Noninsured Disaster Assistance Program
The Noninsured Disaster Assistance Program (NAP) is a form of financial assistance administered by the USDA for producers of non-insurable crops. In the event of a natural disaster that causes crop losses or prevents planting, farmers can enrol in NAP and are eligible to receive payments on their lost crop to help recoup their lost expenses for the year.
NAP covers crops that cannot be covered by traditional crop insurance options, filling a gap in risk management for many production agriculture operations. Commercially produced crops and agricultural commodities for which crop insurance is not available are generally eligible for NAP. Eligible crops include those grown specifically for food, fibre, livestock consumption, biofuel or bio-based products, or be commodities such as value loss crops like Christmas trees and ornamental nurseries, honey, maple sap, and many others.
To be eligible for NAP, a producer must be a landowner, tenant or sharecropper who shares in the risk of producing an eligible crop and is entitled to an ownership share of that crop. The individual's or entity's average adjusted gross income (AGI) limitation cannot exceed $900,000.
NAP provides basic coverage equal to a catastrophic level of risk protection, where the loss exceeds 50% of the expected yield at 55% of the average market price. Additional "buy-up" coverage is available in increments between 50% of the approved yield up to as much as 65% of the approved yield and 100% of the average market price.
NAP's annual payout limit is $125,000 or $300,000, depending on the type of coverage. Annual premiums are calculated based on crop acreage, yield, coverage level and market price. Beginning, limited resource and socially disadvantaged farmers are eligible for a 50% discount on their annual NAP premiums.
To receive NAP benefits, producers must fill out a form within 60 days of the end of the coverage period for the particular NAP-covered crop. Individuals must provide evidence of production and note whether the crop was marketable, unmarketable, salvaged or used differently than intended.
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Emergency Farm Loans
The U.S. Department of Agriculture (USDA) provides emergency loans to help eligible farmers and ranchers rebuild and recover from sustained losses due to natural disasters like tornadoes, floods, droughts, or quarantines. The Emergency Loan Program is triggered when a natural disaster is designated by the Secretary of Agriculture or declared by the President under the Stafford Act.
Farmers and ranchers who own or operate a farm/ranch located in a county declared or designated as a primary disaster or quarantine area can apply for an emergency loan. To be eligible, applicants must be established family farm operators with sufficient farming or ranching experience, U.S. citizens or permanent residents, and have at least a 30% loss in crop production or a physical loss to livestock, livestock products, real estate, or chattel property. Applicants must also have an acceptable credit history and be unable to secure credit from commercial sources.
The maximum loan amount for an Emergency Loan is $500,000, and applicants may borrow up to 100% of their actual production or physical losses. The funds from the loan can be used to restore or replace essential property, pay production costs associated with the disaster year, pay essential family living expenses, reorganize the farming operation, and refinance certain non-real estate debts.
The repayment terms for the loans vary depending on the loan purpose, collateral, and repayment ability. Loans for crops, livestock, and non-real estate losses typically have a repayment term of 1 to 7 years, while loans for physical losses to real estate have a repayment term of up to 40 years.
To apply for an emergency loan, farmers and ranchers must submit the required documentation to their local USDA Service Center or FSA County Office.
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Disaster Assistance Programs for specific disasters
Disaster assistance programs are available to help farmers recover from the financial impact of natural disasters. The U.S. Department of Agriculture (USDA) offers a variety of disaster assistance programs to help farmers, ranchers, agricultural producers, land owners, non-profits, and businesses. The USDA's Farm Service Agency (FSA), Natural Resources Conservation Service (NRCS), and Risk Management Agency (RMA) provide programs such as emergency conservation, livestock assistance, crop assistance, tree assistance, forest restoration, and farm loans.
Livestock Forage Disaster Program (LFP)
The LFP provides compensation to eligible livestock producers who have suffered grazing losses due to drought or fire on native or improved pastureland with permanent vegetative cover or land planted specifically for grazing.
Livestock Indemnity Program (LIP)
The LIP provides benefits to livestock producers for livestock deaths in excess of normal mortality caused by adverse weather or attacks by animals reintroduced into the wild by the federal government.
Emergency Assistance for Livestock, Honeybees, and Farm-Raised Fish (ELAP)
The ELAP provides emergency assistance to eligible producers of livestock, honeybees, and farm-raised fish for losses due to disease, adverse weather, or other conditions not covered by LFP and LIP, such as blizzards and wildfires.
Emergency Livestock Relief Program (ELRP)
The ELRP provides emergency relief payments to livestock producers with approved applications through the 2021 Livestock Forage Disaster Program, compensating for increases in supplemental feed costs due to severe drought or wildfire.
Emergency Loan Program
The Emergency Loan Program provides loans to help producers recover from production and physical losses due to drought, flooding, other natural disasters, or quarantine. Loans can help replace essential property, purchase inputs like livestock, equipment, feed, and seed, cover family living expenses, or refinance farm-related debts.
Disaster Set-Aside Program
The Disaster Set-Aside Program allows producers with existing direct loans from the FSA to "set-aside" scheduled payments for up to one full year if they are unable to make payments due to designated natural disasters.
Emergency Conservation Program (ECP)
The ECP provides funding for farmers and ranchers to rehabilitate farmland, repair fences damaged by natural disasters, and implement water conservation methods during severe droughts.
Emergency Forest Restoration Program (EFRP)
The EFRP offers financial assistance to eligible private forest landowners to restore forests damaged by natural disasters, insect infestations, or disease outbreaks.
Noninsured Disaster Assistance Program (NAP)
The NAP provides coverage for producers of noninsurable crops when low yields, loss of inventory, or prevented planting occur due to natural disasters. Eligible producers must have purchased NAP coverage for the current crop year to receive benefits.
Tree Assistance Program (TAP)
The TAP provides financial assistance to qualifying orchardists and nursery tree growers to replant or rehabilitate eligible trees, bushes, and vines damaged by natural disasters.
In addition to these USDA programs, farmers affected by natural disasters can also seek assistance from FEMA, which provides financial assistance to individuals and households in presidentially declared disaster areas. This includes help with funeral costs, food assistance through D-SNAP, unemployment benefits, mortgage and home repair assistance, and small business disaster loans.
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Frequently asked questions
The Federal Crop Insurance Program is designed to help protect producers from “drought, flood, or other natural disasters”. The program has been expanded greatly since it began in the 1930s and is likely to become an even more important risk management tool.
The Noninsured Disaster Assistance Program (NAP) provides financial assistance to producers of crops that are not insured under the federal crop insurance program when low yields, loss of inventory, or prevented planting occurs due to natural disasters.
The Emergency Farm Loans program provides low-interest loans to help producers recover from production losses or physical losses. Once a county is declared eligible, producers in contiguous counties become automatically eligible as well.
The Tree Assistance Program (TAP) helps orchardists and nursery tree growers replant or rehabilitate eligible trees, bushes, and vines damaged by natural disasters and eligible plant disease.
The Livestock Indemnity Program (LIP) provides benefits to livestock owners and contract growers who experience livestock deaths in excess of normal mortality caused by specific adverse weather, disease, or animal attacks.
