farmgate: The SURE Program: A Permanent Formula For Calculating Disaster Assistance.(UPDATED)
The ACRE program has received considerable attention as a prime element in the new Farm Bill, but another program—entitled SURE—also merits the attention of farmers. SURE is the permanent disaster program, which Congress had only authorized from year to year in previous legislation. But being part of the permanent legislation, it requires action on the part of farmers and farm owners.
SURE is an acronym for SUpplemental REvenue program and producers who may have suffered a disaster for the 2008 crop need to pay attention to its details, and will have to sign up for the program by September 16. Eligibility for 2008 requires the prior purchase of crop insurance (and the deadline was last March) or the purchase of catastrophic coverage (CAT) insurance on insurable crops and Noninsured Assistance Program (NAP) coverage on non insurable crops. CAT and NAP coverage is $100 per crop per county, with a $300 per county maximum and a $900 per farm maximum, with credit given for crop insurance previously purchased. 2009 eligibility will be the same, however the sign-up period will be more timely. A concise explanation is provided by University of Nebraska public policy specialist Brad Lubben in the latest issue of Cornhusker Economics.
While CAT, NAP, and crop insurance establish eligibility for disaster assistance, the producer has to live in a county that has been declared an agricultural disaster county. That is a USDA designation, but does not always follow typical Presidential disaster declarations. Requests originate from local FSA committees, and need state approval before being forwarded to USDA. The threshold for a request is a 30% loss of a major crop in the county due to weather. Without the county designation, a farm needs to have a 50% loss of production for individual eligibility.
To receive a payment from the SURE program, an extensive calculation is made which includes a wide range of variables and formulas. Some of those include the insurance price and yield election, the actual production history yield, the harvested acreage and yield, crop insurance indemnity payments, and other federal payments. Once farm revenue is calculated, it is subtracted from the SURE guarantee, and the payment is 60% of the product. Lubben provides an extensive explanation of the calculation.
Another perspective is offered by Kansas State ag economist Art Barnaby, whose analysis shows extensive decisions that have yet to be made by USDA staff members.
1) SURE claims are to be settled with the marketing year average price, but Barnaby says that means a SURE payment will have to be delayed until a year after the damaged crop would have been harvested.
2) Barnaby also says one of the variables that enter into the SURE calculation is the “insurance price guarantee,” but for farmers with revenue type crop insurance, there is no certainty that the SURE payment will be based on the spring guarantee or the harvest option price.
3) Another question mark is generated by the variable for “actual production history,” which Barnaby says will jeopardize payments for producers with less than 4 years of crop yield history, and some of those years may have been prior disaster years that would skew any payment.
4) Yet another question arises for purchasers of GRP and GRIP insurance, which are county-wide yield based, because Barnaby says those yields may not be applicable to individual farmers who have to submit their actual production history.
5) And another question arises about the insurance indemnity payment that is subtracted before the SURE payment is made. Barnaby says the way USDA defines whether it is the gross or net payment will make a difference to producers who buy higher coverage levels for crop insurance.
Those and other issues that Barnaby lists as undecided at this point are the so-called “devil in the details” for the SURE program. He says the SURE program will curtail crop diversification, since Cornbelt farms will eliminate wheat from their rotation, and he believes that more Illinois farmers will switch to continuous corn. Additionally, with the $100,000 payment limit on SURE, larger farmers with crop insurance will exceed the payment limitation for SURE eligibility.
Summary:
The SURE permanent disaster program is still a work in progress, but may give financial benefit to farmers with extreme variability in their crop yields. It is designed to provide a constant flow of USDA money to crop producers who have had to wait in the past for Congress to approve an ad hoc disaster program. Payments are based on a complex calculation, but many of the elements are yet undecided.
Iowa State University economists have developed a decision aid calculator to help compute disaster payments under the SURE program. Find it here.
Posted by Stu Ellis on August 12, 2008 12:31 AM to farmgate