Federal Disaster Assistance & Crop Insurance Programs:

An Overview

Introduction

The federal government plays a significant role in assisting agricultural producers in coping with financial losses caused by natural disasters. Three essential ways this assistance is provided are through the federal crop insurance program, the Noninsured Disaster Assistance Program (NAP), and the Emergency Farm Loans. These programs are permanently authorized under federal law.

The federal government currently assists farmers through its re-authorized programs from the 2008 Farm Bill, which was first renewed by the 2014 Farm Bill and again in the 2018 Farm Bill. These programs were established as part of an effort to avoid the traditional practice of issuing “ad hoc” disaster assistance. The programs that were renewed are: the Tree Assistance Program (TAP), the Livestock Indemnity Program (LIP), the Livestock Forage Disaster Program (LFP), and the Emergency Assistance for Livestock, Honeybees, and Farm-Raised Fish Program (ELAP). The 2014 Farm Bill also reauthorized the Noninsured Disaster Assistance Program and created two new coverage options. The first is the Stacked Income Protection Plan (STAX), and the second is the Supplemental Coverage Option (SCO). One of the most significant differences between the 2008 and 2014 Farm Bills is that the 2014 Farm Bill no longer requires producers to purchase crop insurance or NAP, which was required under the 2008 Farm Bill. The 2018 Farm Bill has made minimal changes to these sections, reauthorizing them just as the 2014 Farm Bill did. A quick overview of the various changes the 2018 Farm Bill instituted is available here.

Separate from the 2014 Farm Bill, the Farm Service Agency added another disaster assistance program in 2017. This newer program is referred to as the 2017 Wildfires and Hurricanes Indemnity Program (2017 WHIP). The recently passed 2018 Farm Bill has made some minor changes affecting both categories.

Federal Crop Insurance

Federal crop insurance is designed to help protect producers from “drought, flood, or other natural disaster (as determined by the Secretary [of Agriculture]).”  7 U.S.C. § 1508(a).  The program has expanded greatly since it began in the 1930s and is likely to become an even more important risk management tool, especially considering potential changes to traditional federal farm policy. The Federal Crop Insurance Act (FCIA), 7 U.S.C. §§ 1501-1524, permanently authorizes the current program. The regulations implementing the FCIA are found at 7 C.F.R. §§ 400-499.

The FCIA created the Federal Crop Insurance Corporation (FCIC), a wholly owned government corporation and agency of the USDA.  The activities of the FCIC are administered by the USDA Risk Management Agency (RMA) pursuant to the RMA’s authority under the FCIA.  The FCIC is authorized “[t]o carry out the purposes of” the FCIA, including providing reinsurance to private insurance providers who insure producers of eligible agricultural commodities.  7 U.S.C. § 1503.  In addition to reinsuring approved private insurance providers, FCIC subsidizes crop insurance premiums in order to help make crop insurance affordable nationwide.

Federal crop insurance is available for more than 100 commodities throughout the United States.  Policies regarding the commodities available for federal crop insurance are typically published in the Code of Federal Regulations.  Crop insurance policies are typically categorized as either yield loss or revenue loss. Certain types of losses are not covered by crop insurance.  For example, losses due to a producer’s “neglect or malfeasance,” failure to reseed “to the same crop in such areas and under such circumstances as it is customary to reseed,” or failure “to follow good farming practices” are not covered. 7 USC 1508(3)(a)

Legal issues arising under the federal crop insurance program are diverse, intricate, and often complicated.  Producers, lenders, crop insurance companies, crop insurance agents, and others may heed the myriad of issues that can arise under federal crop insurance’s complex statutory, regulatory, judicial, and administrative structure.  While a discussion of these issues is outside the scope of this Overview, a seminal publication discussing many legal issues that can arise in the federal crop insurance context is A Practitioner’s Guide to the Litigation of Federally Reinsured Crop Insurance Claims, available here.

Noninsured Crop Disaster Assistance Program (NAP) 

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. Unlike federal crop insurance, however, NAP is administered by the USDA Farm Service Agency.  NAP is permanently authorized by federal statute and receives recurring funding through the Commodity Credit Corporation (CCC). The 2018 Farm Bill made some changes to NAP, such as the availability of “buy up” coverage, increased service fees, service fee waivers, and premium reductions for qualified military veterans. For additional information regarding NAP, please visit the USDA Farm Service Agency website here.

Emergency Farm Loans 

Subject to several qualifications, emergency farm loans are made available to producers in counties designated as disaster areas by the President or the Secretary of Agriculture. Primarily, these loans are low-interest to help producers recover from production or physical losses.  Once a county is declared eligible, producers in contiguous counties also become automatically eligible.  Emergency farm loans are permanently authorized by Title III of the Consolidated Farm and Rural Development Act and are administered by the USDA Farm Service Agency.  For more information regarding emergency farm loans, please visit the USDA Farm Service Agency website here.

2014 Farm Bill Programs

As noted, the 2008 Farm Bill authorized and funded five disaster programs.  However, funding for these programs expired September 30, 2011.  Of the five programs, the SURE program was not reauthorized, but the remaining programs – TAP, LIP, LFP, and ELAP – were reauthorized in the multi-year comprehensive 2014 Farm Bill.  The four reauthorized programs applied retroactively to September 30, 2011.  For the latest updates regarding the Farm Bill, visit the Ag & Food Law Blog.

TAP allows eligible orchardists and nursery tree growers to receive payments to offset 70% of the costs associated with replanting or rehabilitating eligible trees, bushes, and vines damaged by natural disasters. LIP makes financial assistance available to livestock producers to help offset the costs of cattle deaths over normal mortality rates. LFP provides financial assistance to producers who suffered grazing losses due to drought or fire. ELAP is designed to provide financial assistance for losses not sufficiently covered under other disaster programs.

Outside of the 2014 Farm Bill, the 2018 Bipartisan Budget Act was passed in 2017, which created a new disaster assistance program to be administered by the USDA Farm Service Agency. 2017 WHIP helps producers recover from the effects of wildfires and hurricanes. For more information about 2017 WHIP, please visit the USDA Farm Service Agency website here.

2018 Farm Bill Programs

The 2018 Farm Bill, which passed through Congress with the largest majority of any farm bill, established several notable improvements to the pre-existing crop insurance and disaster relief programs. The 2018 Farm Bill, also known as the Agricultural Improvement Act, strengthened its crop insurance programs by adding improvements to the Whole Farm Revenue Protection Policy (WRFP), providing farmers with more meaningful risk protection. Further, the 2018 Farm Bill directed more funding toward research to develop better policies to address low-frequency catastrophic events like hurricanes. To view the 2018 Farm Bill, please visit the USDA Farmers Guide to 2018 Farm Bill Programs here.

Pandemic Assistance for Producers

The COVID-19 pandemic created disruptions in agricultural supply chains, resulting in unexpected financial losses for several producers nationwide. In response to the economic crisis caused by the pandemic, Congress allocated funds to USDA to aid producers who suffered financial losses due to the pandemic. Congress directed USDA to implement assistance programs to provide direct assistance to producers. Aside from the Congressional funding, USDA also funded assistance programs through the agency’s borrowing authority under the Commodity Credit Corporation (“CCC”) Charter Act. USDA has the authority to borrow from the CCC to support agency-led programs that provide assistance to producers.

With this funding, USDA implemented the Coronavirus Food Assistance Program (“CFAP-1”). Under this program, USDA provides direct financial assistance to farmers and ranchers of eligible agricultural commodities who suffered unexpected financial losses due to the pandemic. Afterward, USDA chose to fund another round of CFAP payments, known as CFAP-2. Under CFAP-2, USDA expanded eligibility to other commodities that were excluded from eligibility for CFAP-1 payments. With remaining funds from CFAP-1 and CFAP-2, USDA announced it would provide another round of CFAP funding to more producers under CFAP-Additional Assistance (“CFAP-AA”).

When the Biden Administration took office, it directed the USDA to examine the previous agricultural COVID-19 assistance programs. Upon completing this review, USDA concluded the previous programs distributed aid inequitably between U.S. producer groups. Thus, to balance the distribution of COVID-related assistance and offer further aid to many producers, USDA formed a new agency-led initiative known as Pandemic Assistance for Producers (“PAP”). The PAP initiative is broken down into four separate parts: (1) expanding producer assistance, (2) funding for existing pandemic-related programs, (3) continuing CFAP payments, and (4) reopening CFAP-2 applications. Under this four-part initiative, USDA provides funding to a broader range of producers across the nation and established new financial assistance programs, such as the Pandemic Livestock Indemnity Program (“PLIP”), Pandemic Assistance for Timber Harvesters and Haulers Program (“PATHH”), Pandemic Market Volatility Assistance Program (“PMVAP”), and the Pandemic Cover Crop Program (“PCCP”). To view the pandemic-related assistance under the PAP initiative, click here.

Federal Regulatory Authority

In crop insurance/disaster assistance, administrative agencies such as USDA/FDA/EPA have been given authority by Congress to create regulations implementing the requirements of the federal law.  In 2024, the Supreme Court of the United States issued two rulings that are expected to have a major impact on how judges decide cases challenging those regulations and that agency authority.

Loper Bright Enters. v. Raimondo, 144 S. Ct. 2244 (2024) overruled the long-standing doctrine of deference established in Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984). Chevron deference was a two-step process that clarified how and when federal courts should defer to an agency regulation interpreting a statute.  Chevron only applied in situations where a court had determined that the statutory language the agency was interpreting was ambiguous.  If it was ambiguous, the court would consider whether the agency’s interpretation of the statutory language was “reasonable”.  If it was reasonable, the court was required to defer to the agency’s interpretation. If it was not, the court would overrule the interpretation.

Loper Bright formally overturned Chevron. In a 6-3 decision, the Supreme Court held that “courts may not defer to an agency interpretation of the law simply because a statute is ambiguous[.]” Following the ruling, courts are instead required to exercise independent judgment in determining whether an administrative agency has acted within its statutory authority.  Courts may still seek guidance from the agencies involved, but courts will no longer be required to defer to an agency’s interpretation of a statute.

In Corner Post, Inc. v. Bd. of Governors of the Fed. Rsrv. Sys., 144 S. Ct. 2440 (2024), the Supreme Court extended the period of time during which a party may file a lawsuit challenging federal agency actions. According to 28 U.S.C.S. § 2401(a), the six-year statute of limitations began to run when an administrative agency’s action was “final.”  In Corner Post, the Supreme Court ruled that an action becomes “final” when a plaintiff suffers an injury, rather than when a “final regulation” is released. This ruling expands the potential for plaintiffs to challenge federal agency rules and regulations that have been final for over six years.

While the full effect of these two rulings remains to be seen, it is highly likely that the agricultural industry will be impacted by the Supreme Court’s decisions. Importantly, the rulings fundamentally change how courts will resolve lawsuits challenging agency regulations for misinterpreting the agency’s statutory authority. Impacts are most likely to be felt in areas of the law, such as crop insurance/disaster assistance, dominated by statutes with relatively ambiguous language where Congress has relied on agency regulations to fill in specifics.

Updated August 23, 2024