The Agricultural Risk Protection Act of 2000
Farm Business Management Update, August 2000
By Jim Pease
Responding to crop disasters, low commodity prices, a big federal surplus, and the desire to be re-elected, Congress recently passed and the President signed the Agricultural Risk Protection Act of 2000. This act authorizes $8.2 billion in spending to provide disaster relief to farmers and ranchers and to reform the federal crop insurance program. The act is very large and complex -- the following provides a summary of major bill provisions. Further information is available at the House Agriculture Committee site: http://agriculture.house.gov/.
Commodity Programs and Disaster Assistance
Market Loss Assistance Paymen: If owners/producers were eligible for a transition payment under a Production Flexibility Contract (PFC) last year, they will receive an equal amount in September 2000 as a Market Loss Assistance (MLA) payment. The payments will total nearly $5.5 billion nationwide. For the 1999 crop year, Virginia producers received $21 million in PFC payments and an equal amount in MLA payments.
Loan Deficiency Payments (LDP): Crop year 2001 producers of wheat, oats, and barley on a farm with a production flexibility contract and who graze their acreage may receive an "LDP-like" payment under the same terms as those who harvest the crops and obtain an LDP. Producers growing corn, wheat, barley, oats, sorghum, and cotton but with no production flexibility contract will be eligible for LDPs for the 2000 crop year. The table below indicates LDP payments to Virginia producers by commodity in 1999:
|Virginia 1999 Loan Deficiency Payments|
|Commodity||Payment (million $)|
Non-insured Crop Disaster Assistance Program (NAP): Virginia 1998 crop disaster assistance payments under this program were $21 million. By USDA discretionary action, all types or varieties of a crop may be considered to be a single eligible crop. Area disaster triggers are no longer required for NAP payments -- individual farm losses trigger payments. To be eligible for NAP, producers must provide annual acreage, yield, and production records for each eligible crop. NAP thus becomes much more like an insurance program. Fees for participation are $100 per crop per county up to a maximum of $900 per producer. Fees are waived for limited resource farmers.
Oilseeds: Producers growing oilseeds eligible for marketing assistance loans are eligible to receive payments of approximately $0.15/bushel. Producers and cottonseed handlers are eligible for payments of approximately $20/ton for the 2000 crop year. These payments will total $100 million nationwide.
Apples and Other Specialty Crops: Loans up to 3 years will be provided to apple producers; and USDA will purchase surplus peaches, apples, and other specialty crops.
Peanuts: Peanut producers will receive $47 million in payments of $30.50/ton quota peanuts and $16/ton for additionals.
Tobacco: Payments totaling $340 million will be made in October 2000 to tobacco producers, quota owners, and quota lessees who suffered a loss in quota in 1999 and produced tobacco in 2000. Virginia is eligible for $19 million in payments.
Wool and Mohair: Payments of $0.20/lb for wool and $0.40/lb for mohair will be made for production during the 1999 marketing year. Honey: A recourse loan program is established for honey, with the loan rate set at 85 percent of the price over the past five years, discarding high and low price.
Premiums: The "buy-up" coverage level above the basic coverage will become cheaper. Those with good insurance experience will receive the following discount premiums.
|Yield % / Price % Coverage Level|
All insurance plans except Group Revenue Insurance (GRP) will receive the above discounts. Equal percentage premium subsidies are offered for insurance plans such as revenue insurance.
Catastrophic Risk Protection (CAT): CAT coverage continues to insure 50 percent of yield and 55 percent of price, but fees are increased to $100 per crop per county. Producers will be allowed to select an alternative CAT coverage based on area yields and losses rather than the standard individual CAT coverage.
Actual Production History (APH) Yields: Producers may record a yield equal to 60 percent of the long-term county average yield for any year that their farm yields fall below that level.
Prevented Planting: Producers may opt out of prevented planting coverage and receive lower premiums. A producer who receives a prevented planting payment equal to 35 percent of the prevented planting guarantee may plant another crop on the same acreage after the latest planting date established for that crop by the Federal Crop Insurance Corporation (FCIC). The second crop would be insurable. Alternatively, the producer may opt to receive 100 percent of the prevented planting guarantee and not plant a second crop.
Double-cropping: Producers may purchase buy-up insurance (beyond basic coverage) on more than one crop planted on the same acreage if double-cropping is an established practice for those crops.
Livestock Insurance: FCIC is instructed to conduct pilot livestock and poultry insurance programs to insure against production and price/income risk. Will it cover contract growers or the integrators?
Penalties: More severe civil penalties for fraud and abuse of the insurance program are defined.
Each of the above provisions will have some impact on Virginia agricultural producers, but the Agricultural Risk Protection Act of 2000 has many, many more provisions. Funding for provisions authorized by the act awaits action by Congress in summer 2000.
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