USDA’s ERP 2022: We’re going the wrong way but we’re sure making time
By Combest, Sell & Associates
Last week, USDA unveiled its long-awaited Emergency Relief Program (ERP) intended to cover crop losses from the 2022 calendar year. It came nearly a year after Congress authorized the program.
One might wonder why the long wait? After all, the program has been built up for five consecutive years.
The first program, known as WHIP, was stood up in 2017 and was restricted to hurricane and wildfire losses. But its formula looked similar to successor programs: the expected value of the crop, multiplied by a factor, minus the actual value of the crop, minus crop insurance indemnity = estimated payment, prior to any adjustments (e.g., pay limits, factor to contain costs within the overall budget for the program, etc.).
The program for 2018 and 2019 built on this model but expanded it to cover nearly the breadth of causes of loss on the farm. Minnesota farm families certainly benefited from this program, known as WHIP Plus.
A big grievance with these programs was the long wait for relief and the burden on producers and local FSA offices so Congress instructed USDA to address this in the program for 2020 and 2021 by relying on RMA data rather than forcing FSA to recreate the wheel.
To his credit, after a long wait, Secretary Vilsack pulled off a policy victory when he unveiled Phase I of the 2020 and 2021 program, known as ERP, with applications pre-filled using RMA data and payments shot right out of the Kansas City office.
Farm families, including those in Minnesota, were generally pleased with the program. As promised by USDA, they were expecting Phase II of the program to look like Phase I but cover losses left uncovered by that first phase (e.g., shallow losses where a crop insurance indemnity was not triggered).
But then something funny happened on the way to Phase II: USDA announced a complete break not only from the formula under previous programs but from all past natural disaster aid programs. Instead of honoring its commitment to producers waiting on top-up payments or to address some other loss not covered due to an anomaly, USDA created a program out of whole cloth where a farmer’s schedule F for the year in question would be compared to past years’ schedule Fs to determine whether and how much of a loss a producer suffered.
Not only is the new program a break from the law, it creates scenarios where producers without crop losses would still receive payments while producers with substantial losses might be denied any at all. As you know, Schedule Fs take into account a lot of stuff. The program, which also had a maximum initial payment of $2,000, was so little subscribed to that USDA hired private contractors to identify people who might qualify for benefits and encourage them to apply.
Fast forward to last week, when the 2022 program was unveiled. It maintains this new-fangled Phase II failure while neutering the value of the Phase I program. By imposing a backdoor pay limit on producers so that very small losses ($2,000 and below) are completely covered but large losses receive little coverage at all and by limiting the netting out of crop insurance premiums paid to “underserved” producers, a producer who suffered $100,000 in losses would receive little more than $11,000. Compare this to 2020 where the same producer would have received $75,000 plus a portion of premiums paid. Both actions by USDA violate the intent of Congress and the language of statute itself.
While Minnesota generally had a good year in 2022, there has been an uptick in losses in 2023. Unless corrected, we fear that USDA’s new approach to disasters could harm not only producers around the country who suffered losses last year but also Minnesota farm families suffering losses this year…and in years to come. We are working to right this ship.
We’ve included a cheat sheet for you and, as always, we are happy to answer any questions. See the cheat sheet here.
MCGA is a client of Combest, Sell & Associates
