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areas and the percentages of the eligible acreage bases of the various crops enrolled in the program. An average of 81 percent of the eligible acreage bases in the 28 drought-affected States are enrolled in the program. The point being, Mr. Chairman, that if you are a full or partial participant in the payment-in-kind program, you're faring the drought much better than a non-participant.
Finally, it means that because of the payment in kind program, there are literally billions of dollars of aid flowing out there right now to rural areas to offset the effects of the drought.
Mr. Chairman, that concludes my presentation.
Secretary BLOCK. Thank you, Mr. Chairman, I would like to call on Administrator Everett Rank for the next presentation.
The CHAIRMAN. Thank you, Dr. Lesher.
STATEMENT OF EVERETT RANK, ADMINISTRATOR, AGRICULTUR
AL STABILIZATION AND CONSERVATION SERVICE, U.S DEPART.
I have in the back of the room an aggregate of the States of the loan programs and payments we made to farmers.
It shows payments made in late 1982 and estimated for calendar year 1983. The first line shows that 1982 deficiency payments were made to these 28 States totaling $1.2 billion. These were advance 1982 payments made in the fall of 1982.
We also had the advance deficiency payments if farmers requested to be signed up in the program, which was approximately $800 million. In 1983, approximately $1 billion diversion payments were also made to the farmers in these States.
For the 1982 price support loans we have approximately made $10 billion in loans in these 28 States for various commodities.
The 1983 PIK entitlement that these farmers have or will soon receive has a market value of approximately $8.7 billion, based on the August 23, estimated market prices. Dairy price support payments for the year 1983 in these 28 States totaled approximately $800 million.
Miscellaneous, which would include, the wool payments, emergency conservation payments, and other minor programs we have, approximately $100 million, for a total of approximately $22.6 billion we have paid in these States.
This next slide, Mr. Chairman, shows the totals for the 28 States of the PIK entitlement value of each State crops, and the number of farms enrolled in each of these commodities. The total paid to these farmers—which I previously stated the value-is approximately $8.6 billion, which is estimated to be the value of these PIK entitlements when these farmers do receive them.
We also have initiated in the States the haying and grazing in which those farms which are in the PIK program, that have livestock, can hay or graze their PIK acres for their own use. As of last night, we've had 1,206 counties in the United States that have been approved for this program. We are implementing this program within a few hours, once a farmer requests it.
We anticipate in time probably half the counties in the United States, which is about 1,400 counties, will probably be in the haying and grazing program.
Mr. Chairman, that concludes my part of the session.
Secretary BLOCK. I would like to call on Under Secretary Frank Naylor now to conclude our presentation.
Mr. Chairman, thank you.
STATEMENT OF FRANK NAYLOR, UNDER SECRETARY OF AGRI.
CULTURE, SMALL COMMUNITY AND RURAL DEVELOPMENT,
Mr. Chairman, after you look at the impact of PIK and the Federal crop insurance program and other programs that have been in place this year as far as the individual in concerned, the next question that obviously has to be asked is what are the programs and what assistance do we have for those producers who still are faced with stress, either for not participating in the programs or for other reasons.
The principle program which the Department has, of course, is the Farmer's Home Administration emergency loan program. That program, and the two questions which we felt were critical to address, were, first of all, to provide for a more rapid turnaround with regard to the handling of the request by Governors for designation, and to provide an assurety to ourselves and to this committee and to the farmers of America that we could handle the increased workload we expect next lending season—which is January to approximately the first of May-for the individuals who apply for emergency loan assistance.
What we'd like to do, Mr. Chairman, is very briefly go through the major points of the program and indicate to you the steps that we are taking to deal with those two questions and then take a few moments to discuss what impact the Federal crop insurance program has had this year, and where we expect it to head in the year ahead.
Mr. Chairman, this first chart very simply reviews what the emergency loan program has to offer. It essentially provides a temporary source of financing through a low-interest loan-the current rate under law is 8 percent. It restores farm operations for disaster victims, and perhaps most importantly, it provides the necessary financial counseling and support and to help that farmer get back on his feet.
Very quickly, what is required to accomplish this on behalf of the Governors and their individual States and this was reviewed with them in Chicago and we have subsequently been in touch with them on a regular basis to be sure that we are coordinating this effort as quickly as possible.
The Governor is required to review his own disaster reports he receives from his committees in his own State to determine whether or not he needs additional assistance over and above what the State is able to provide, and if so, to make a written request to the Secretary of Agriculture for disaster designation for the counties which he feels need this additional assistance.
We have indicated to the Governors that we will handle these in a very rapid turnaround time, approximately 10 days to 2 weeks from the time we actually receive their detailed damage report, which we have reviewed with them on a regular basis, to be sure that is clear.
What you see before you now are the information that are required from the Governor on a county-by-county basis for those counties which he requests. The procedure, once the request is received, is that the Secretary will review the request; Farmer's Home documents the request and makes a recommendation to the Secretary; and then the Secretary makes a determination based on that recommendation as to the individual country designations.
The old guideline, which was the one that we typically used last year, was a 30-percent loss of all crops within the county was necessary before a secretarial designation would be made. In other words, a major significant natural disaster occurred.
We have a second tier this year which reflects—and I think will adequately, more than adequately take care of the counties affected by the drought, and that is a 30-percent loss in a major crop group. That tier is one of the second criteria on which the Secretary will make a designation this year. That will take care of virtually all drought-affected counties.
In addition, there'll be some isolated cases where a limited number of producers are affected. The Secretary does have discretionary authority to deal with those on a case-by-case basis and we intend to do so.
A quick reminder of applicant eligibility. The applicant and the individual producer has to be an established farmer, and he has to be a U.S. citizen. He must individually have a 30-percent production loss and I would—just to remind the committee—these are requirements in the law; these are not discretionary.
He must show intent to continue farming and he must have an adequate repayment ability. He need only go to the county office of the Farmer's Home Administration and file an application. He must do so within 6 months of the designation of the disaster county and to provide the necessary records in order to establish the loan.
The loan benefit that is available under the law is that he can receive a loan for up to 80 percent of his actual loss, up to $500,000. The loan terms depend on the type of loss, the collateral offered and repayment ability, and can vary from 1 year to over 30, depending whether real estate or equipment or crops are used as a basis of collateral.
The loan benefit currently available is for those who are unable to obtain credit elsewhere. The loan rate will be 8 percent. For those that are able to obtain credit elsewhere, the loan rate is currently 1334 percent and that is reviewed on a monthly basis to reflect market conditions.
Mr. Chairman, before I move on to the Federal crop insurance program, I would like to advise the committee, and I think we previously reported to you, that there are several steps which the Secretary of State can do to handle this process.
First, we have directed all the State directors, the Farmers Home Administration, to provide us current damage assessments throughout the region where drought has been a factor. In order to be current on the situation, when a Governor makes a request so that we can turn it around very rapidly, those requests essentially have been received by us during the course of this week.
Many of the Governors have advised us of their intent to request designations, but have not yet actually provided the specific request, and they are beginning to flow in. We are receiving them in significant numbers this week. We expect where we get a full set of information from the Governor on the first pass that it is our intention to turn them around in 10 days to 2 weeks. We are doing that.
We expect a significant upsurge in designations, beginning probably later in the week, and continuing through the next several weeks as the Governors continue to file
and submit their reports to us for request.
In addition, the Secretary has directed and we are, even though we have not yet begun the loan season, adding substantial additional staff in all drought States in order to be properly trained and fully prepared to handle the loan designations and the loan requests which we will be receiving in the drought areas.
Last night the Secretary announced one additional step which we had done on a pilot basis last year which we had not expected to be able to do in time for this year, but, with considerable additional effort by Farmers Home, we will have in place computer links to our computer in Kansas City with all State offices by November 1. That will permit us to process loans and turn checks around in about half the time which we are currently able to do. That will be a major improvement and a major assistance to all the areas that are being affected and will have increased workload in the year ahead.
Mr. Chairman, with that I would like to move very quickly into the Federal crop insurance program. With the passage of that law in 1980, there were some major changes which were projected. It has been a long and tedious project, taking those and getting them into place to make the program truly effective. It was faced with several problems at the outset.
First of all, under the old pilot program, the offer which was made, the product which was offered for many producers, particularly those above average and better in the upper production capability category, simply was not adequate or useful for their individual needs.
Second, the product line as offered in many respects was considered to be in some degrees too expensive or did not for other reasons meet the needs because of the terms of the contract which were available, and there was some concern by producers or assumption that the Government would offer some other alternative in many cases, and perhpas they didn't need to assume the risk of insurance.
We have begun I think effectively to address all of those problems. And for this year, even though it was not as widely used as we would have liked to have seen it, because many of our corn areas have had producers that have felt they were essentially disaster-proof, we still have been able to put into place a major and fundamental change in the entire crop insurance program which will be widely available next year to all the major cropping areas of the country, and this is the individual yield program, or the guaranteed yield program.
Very briefly, I would like to review that with you, and also show you the impact that crop insurance has had this year, even with the participation levels we currently have, because it is substantial.
The major changes in today's crop insurance is the use of it as a risk management tool, a means to provide economic stability of agriculture in an appropriate way, treating agricultural losses in the same way we would a business loss in any situation, which we frankly feel is substantially superior to using emergency loans or other disaster programs. It is a method to reduce the effects of crop losses due to disasters and a very effective way to do it.
Essentially it provides under the new concept an individualized program, insurance loss from most unavoidable causes, and in many cases it is essentially an entire all-risk policy. It provides professional insurance services to the individual producer. The Government pays up to 30 percent of the base premium and all the administrative expenses. This makes it a real bargain for most producers, particularly under the new system.
The delivery system which the corporation now offers is one of two forms: Either a Federal contract offered through independent insurance agencies throughout the country, or a contract under a private insurance company's name offered under that company's agency force. In either case, the benefits and the cost of those policies are exactly the same, and they are available through the local insurance agents with whom the farmer is used to dealing.
Next year we will have approximately 20,000 agents nationwide from which producers have to select all risk crop insurance.
The major change is the individual yield coverage program. It is a dramatic change in the traditional way we have done business and it deals directly with the fundamental problems that we have been experiencing with the program under its pilot stages. It provides coverage based on the demonstrated ability of the producer. It provides more attractive higher yield options. It provides yield guarantees which represent the individual's actual ability to perform, and the costs reflect the individual yield and experience of the producer for the first time.
We have included, Mr. Chairman, a couple of quick examples in the primary feed grain area to give an illustration of the change in the old average plan, which was the same coverage to everybody in the country regardless of their ability as compared to an aboveaverage producer and what he could expect both in corn and in soybeans.
I think you can see the significant improvement. I would also point out the premium costs, which for those in a high-producing area such as this is a very good rate. It runs around 2 to 3 percent for the producer, and keep in mind the Government is paying 30 percent of that.
What was the impact this year of Federal crop insurance, particularly in those areas where the new products were available? I believe I have the right chart up there.