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Within the drought area, in 1983 crop insurance expects to pay out approximately $550 million of indemnities. That is an alltime record, and frankly very close to what the alltime previous record was for all types of disaster payments.
You can see the breakout of the major drought areas on the map that is on the wall, and very quickly the totals before you, about $550 million in indemnities on drought corps, drought affected areas, about 95 million principally in wheat, or a total indemnity expectation this year of $650 million.
Another quick breakout of the crops covered by PIK and those not covered by PIK, and while participation was not at the level we would have liked to have seen it at in the principal feed grain area, the PIK participation in that area was very high.
On the other hand, in the Southeast, where peanuts and tobacco, for example, were major crops and PIK was not as extensively used, the participation levels in crop insurance are quite high, in most instances over 50 percent, and in some cases in peanuts and tobacco running 70 to 80 percent participation, so in that respect crop insurance to a large degree offset what the lack of PIK provided in some parts of the Southeast.
We would like to illustrate this very briefly for you. The impact of a participant using PIK, a participant using PIK and crop insurance as compared to those who did not take advantage of either program which was available, of course, to all concerned, and very quickly if you will look with me at the chart currently on the screen, on the left-hand column you see the situation in the predrought time of March, with the normal crop and a predrought situation, both with a no-participation PIK, and PIK and Federal crop insurance.
Then if you move over to the postdrought situation, and look at the producer with a 40, 60, or 80 percent loss in his acreage, and you can see the dramatic difference that a result of crop insurance and PIK had in the individual producer, and in the case of the participant or the producer who had PIK and crop insurance, he was essentially whole and in fact ended up being slightly ahead of what he would have been under a normal cropping situation.
We believe that that has very adequately indicated that the PIK participant did have the blow significantly softened for him, and substantially softened, where they also participated in crop insurance. We also think that the record of our individual yield program indicate that the crop insurance program is a valuable tool.
We expect and have already seen indications from the commercial lending and Farm Credit System that the financial community intends to substantially require the use of insurance this year, in many cases in combination with some sort of hedging arrangement.
Ve intend within Farmers Home to also look very strongly to the use of crop insurance underlying collateral for such years in our program.
For 1984 in cotton and rice, the individual yield program will be the only program offered by the Federal crop insurance program, the old individual program, or the old area program will be discontinued. The individual yield program will also be universally available in corn, in wheat and soybeans and our other major crops.
Mr. Chairman, this completes very quickly our review with you in the major items concerning our actions in crop insurance and with the Farmers Home Administration.
Secretary BLOCK. Thank you very much, Mr. Naylor.
Mr. Chairman, that concludes our formal presentation and we are prepared to answer your questions.
The CHAIRMAN. Thank you very much, Mr. Secretary.
The staff has prepared for the members a listing of the major drought relief programs currently authorized by law. I would ask unanimous consent to include those in the record at this point, before we continue with the questions.
[The information follows:
MAJOR DROUGHT RELIEF PROGRAMS
FmHA Emergency Disaster Loan Program Production loss loans
disaster counties. (GAO and Committee believe Act makes
CCC Disaster Payment Program Payments authorized to producers of
Grazing and Haying of Conservation-Use Acreage Secretary au-
Crop Insurance Expanded crop insurance coverage available under
CCC Emergency Feed Program Secretary authorized to reimburse livestock and poultry producers for up to 50% of cost of feed purchased commercially if producers, because of disaster, have suffered substantial loss in feed production, lack adequate feed, and must, therefore, make larger than normal feed purchases. Status Program has not been implemented.
CCC Livestock Feed Program CCC is authorized to (1) donate its
Small Business Administration Loans Through September 30, 1983,
FmHA Economic Emergency (EE) Loans While technically not
The CHAIRMAN. Mr. Secretary, before we continue with the questions, I am going to say this. I was called by a friend from Texas this morning. I was not in the office when he called, but a note was given me, and I will quote:
The drought situation in Texas is worse than people think it is. What is needed is a feed program, not more loan programs. A supplemental feed program is in order. Ranchers have started selling off their livestock, and there is a need to maintain a mother herd. However, this may not come pass if there is no help in the offing.
All they need is just enough food for feed stock, and he knows there is stored grain in the Midwest that can be used for this, but Secretary Block goes on and ignores them all. Will you kindly ask him this question for me.
Secretary BLOCK. Mr. Chairman, that question has been brought to my attention, and I understand the desperation felt by some ranchers in Texas that are looking for feed for their cattle.
As we look at the size of this drought across the country, I think one has to appreciate the steps that have already been taken. We also have to appreciate what we are asking for in terms of a supplemental feed program. We are asking to open up the granary door to producers in Texas. I assure you if we do that we open up the granary door to producers in all of these States, because there are not only ranches but some hog farmers that don't have enough grain to feed their hogs next year.
But do we give everybody some feed for their livestock at the expense of the Federal Treasury? Frankly, once the payment-in-kind obligations are met, we will not have a large reserve of corn to give away. Certainly this corn would be used, but the Federal Government does not have large stocks. We could get into some of the same problems that we had in the case of the harvest for PIK for cotton, as the Texas cotton farmers certainly remember.
I have spoken to farmers in many States and I would report to you that in many places where the drought is extremely severe, the farmers are not in favor of a nationwide feed program. They also point out that there already has been adequate aid.
Furthermore, I would point out that in the face of criticisms that all of us are receiving for the amount of money that is spent on farm programs, it is not so easy to draw the line then add some more to it. You are going to find that there is no simple answer and that if you open that door more, there will be more criticism over the projected $21 billion spent in support of the farm programs. Of course, there are going to be those who would cheer you for having done it, but at this point in time I think that we have provided a great deal of assistance, and I believe we have done the right things. The CHAIRMAN. I think the members are being summoned.
Secretary BLOCK. I think I have pretty well covered the dilemma in which we find ourselves. My opinion is that to open up the feed program would be a mistake.
The CHAIRMAN. Mr. Secretary, let me just quote to you from-I don't know if this was made available to you—this sheet on programs.
Secretary BLOCK. I haven't seen it, sir.