Crops > Cost & Return > Government Programs

Crop Disaster Payments Are Now a SURE Thing

AgDM Newsletter
August 2008

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Use this Decision Tool to estimate payments for Supplemental Revenue Assistance (SURE).

Federal disaster payments for areas that have suffered severe crop losses have been around for a long time. However, they have usually been implemented on an ad hoc basis each time widespread productions problems arose. The new farm bill changes this.

Supplemental Revenue Assistance

The 2008 farm bill, officially known as the Food, Conservation and Energy Act of 2008, creates an Agricultural Disaster Trust Fund. A major part of this fund will finance Supplemental Revenue Assistance (SURE) payments, which are designed to supplement the protection producers can purchase from private crop insurance companies. In fact, a producer must purchase insurance for all crops produced each year to be eligible for the SURE disaster program, starting in 2008.

Farmers who have land in a county that has been declared a “secretarial designated” disaster county, or land in a county that is contiguous to a disaster county, may be eligible to receive a SURE payment. The Farm Service Agency (FSA) is in the process of determining if the Iowa Governor’s office should request this designation for any Iowa counties. Farming operations not in eligible counties could also qualify if they have more than a 50 percent loss in crop production due to weather related causes.

SURE is a revenue guarantee program, similar to crop revenue insurance without the increasing guarantee feature. If the farm’s actual crop revenue is less than the guarantee, the SURE payment makes up 60 percent of the difference. The actual crop revenue includes not only the estimated value of the crop produced, but also other USDA payments and crop insurance indemnity payments received. This prevents farmers from receiving double payments for the same losses. All guarantees and actual revenues under SURE are calculated as the sum for all crops and in all counties involved in the “farming operation”, even if land in more than one county or state is involved. Payments are not made for losses to individual crops or insurance units.

The Guarantee

The SURE guarantee is simply the sum of all the crop insurance guarantees purchased for the current crop year, increased by 15 percent. The extra 15 percent is designed to fill part of the revenue gap not covered by insurance. For example, a producer who purchased a 75 percent guarantee on all crops would have that raised to 86.25 percent for SURE. There is also an overall “cap” on the SURE guarantee equivalent to a 90 percent insurance guarantee on all crops.
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If the crop insurance proven yield (APH yield) is less than the yield used by the Farm Service Agency to calculate counter cyclical payments (CCPs), then the CCP yield is used instead for calculating the SURE guarantee. Producers who have used “plug” yields to calculate their APH yields in some low production years will also have their SURE yield recalculated.

Actual Revenue

The SURE “actual revenue” includes the actual number of bushels harvested for each crop valued at the average cash marketing year price as determined by the USDA. For corn and soybeans this price is calculated from September through August, so the actual revenue and payments for 2008 crops will not be known until September 2009. Advance payments could be authorized, but this has not been announced. The cash marketing year price may be higher or lower than the harvest futures price used to calculate crop insurance indemnity payments.

In addition, the actual revenue includes any crop insurance indemnity payments and prevented planting payments received for the 2008 crop, and 15 percent of any direct payments, counter cyclical payments and loan deficiency payments received for the 2008 crop. Unless corn and soybean prices drop considerably in the next year, the direct payments will be the only commodity program received for the 2008 crop. If payments are received under any other USDA crop disaster programs, these are included, as well.

If the actual revenue calculation is below the SURE guarantee, the producer will be paid 60 percent of the difference. There is a limit of $100,000 per year per eligible producer, based on the same rules outlined for other commodity programs in the new farm bill.

Insure All Crops

To be eligible for SURE payments a producer must insure all of his/her eligible crops. Approximately 90 of the corn and soybeans in Iowa are covered by crop insurance each year. However, only a small percent of other crops such as oats, wheat and hay are typically insured. Even a small patch of hay that is not insured can cancel eligibility for SURE payments on all the acres of corn and soybeans on the same farm.

Fortunately, producers who did not insure some of their crops in 2008 can still become eligible for SURE payments by paying the catastrophic (CAT) policy fee of $100 for each uninsured crop to FSA by September 16. Crops not eligible for private insurance but which are eligible for the Noninsured Assistance Program (NAP) offered through FSA also need to be covered or have the $100 fee paid. These include many horticultural crops, as well as pasture that has had livestock grazing on it this year.

The maximum charge is $300 for insurable crops (CAT) and $300 for non-insurable crops (NAP) per producer per county, and $900 total each for CAT and NAP. Note that paying this fee only makes the producer eligible for the SURE payment--it does not make the uninsured crops eligible for crop insurance or NAP payments in 2008. After 2008 all crops must be insured by the sales closing date, which is March 15 for most Iowa crops. If all crops are already insured, no other signup is necessary.

Stay in touch with your local FSA office for more details on SURE.

Use this Decision Tool to estimate payments for Supplemental Revenue Assistance (SURE).

Supplemental Revenue Assistance (SURE) Example

 

William Edwards, retired economist. Questions?