Drought Drives Farm Program Changes

As drought that hit the Corn Belt last summer lingers through fall, USDA announces more farm program changes.

Published on: Oct 15, 2012

FAQ: This past summer's extremely dry conditions are continuing through this fall. What changes have been made by USDA to assist producers during this difficult time?

Answer: This year's widespread drought prompted USDA to expand its assistance and make some changes and modifications to various farm programs. USDA's Farm Service Agency administers federal farm disaster programs, and your local FSA office is the place to go for answers to specific questions you may have. Beth Grabau, public information and outreach specialist at the Iowa FSA state office in Des Moines, supplied the answers to these questions.

DROUGHT HELP: Historic summer drought of 2012 is continuing well into fall, prompting USDA to expand its assistance and make more changes to various farm programs.
DROUGHT HELP: Historic summer drought of 2012 is continuing well into fall, prompting USDA to expand its assistance and make more changes to various farm programs.

USDA's Risk Management Agency has made changes that should benefit livestock producers. For the 2012 crop year, RMA intends to allow haying and grazing of cover crops without affecting the insurability of planted 2013 spring crops. This means farmers and ranchers can plant a cover crop this fall without foregoing crop insurance coverage in 2013, thus giving producers another opportunity to grow needed forage and feed for this fall and winter. Producers are encouraged to contact their crop insurance agent for more information on this change.

FSA's Emergency Loan or EM loan program was recently modified to allow loans for losses to feed, hay and pasture to be made earlier in the crop year. Producers will no longer have to wait until the end of the production cycle to obtain a loan.

Another significant change is in the interest rate for Emergency Loans. The EM loan interest rate was set a 3.75% for a number of years. The rate has now been lowered to better mirror commercial lending rates. The Emergency Loan interest rate is around 2.25% currently. This change will be beneficial for farmers as they recover from income losses related to the drought.  

Question: The county I live in has been designated as a disaster county making Emergency Loans available. Loans are available to replace income from row crops, but what other uses exist for the Emergency Loan program?  

Answer: Emergency Loans are primarily targeted toward helping farms return to normal operations after a disaster. As mentioned, these EM loans can replace lost income from reduced corn or soybean yields; however, EM loans can be used for a variety of applications as long as the loss was caused by the disaster. For example, if an operation liquidates livestock due to a lack of available feed, loan funds can be used to cover lost income from animals sold and lost income from offspring, as well as replacing the livestock. Loan funds can also be used to cover pasture and hay losses and help purchase feed.

The examples mentioned above cover many typical farm enterprises. In addition, EM loan funds can also be used to replace nursery plants and perennial crops, as well as fruit and nut bearing trees.

We also like to remind producers that FSA has Operating Loans and other types of loans available to assist producers in returning to normal farming operations. We encourage farmers to contact their local FSA office to see what programs FSA has available to assist farmers and their operations with disaster recovery.

Question: Considering the advanced growing season and harvest, income tax preparation could begin a little earlier than normal this year. When will FSA send out the 1099 forms for 2012?

Answer: Like all other businesses, 1099's for the 2012 year are required to be issued by January 31, 2013. However, FSA has announced that calendar year 2012 will bring several changes to the way FSA reports a producer's farm program payments to the producer and to IRS.

In past years, IRS Forms 1099-G (Report of Payments to Producers) would be issued to show all farm program payments received from FSA, regardless of the amount. Starting with calendar year 2012, producers whose total reportable payments from FSA are less than $600 will not receive IRS Form 1099-G. Additionally, producers who receive payments from more than one county will only receive one Form 1099-G if the total of all payments from all counties is $600 or more.

Producers who receive less than $600 in combined payments should consult a tax advisor to determine if these payments must be reported on their tax return. If the payments were subject to voluntary withholdings or subject to backup (involuntary) withholdings, a Form 1099-G will be issued regardless of the total amount of the payments.  

The same changes will apply to producers and vendors who normally receive IRS Form 1099-MISC from FSA.

Question: I'm aware SURE (USDA's Supplemental Revenue Assistance Program) coverage wasn't extended for 2012 crops. SURE ended in September 2011. However, NAP (which provides insurance to farmers who have purchased coverage from USDA on crops non-insurable with insurance companies such as fruits, vegetables and other specialty crops) is still a program that's in effect. On our farm we gave away some produce (vegetables) from our drought-damaged crops this year. Our county FSA office says that violated our NAP/SURE coverage. Is this correct?

Answer: Basically, USDA's NAP or Noninsured Crop Disaster Program works just like crop insurance, whereby if a producer destroys some of the crop or gives some of the crop away without having an adjustor come appraise the crop first, then FSA will assign the guarantee to the NAP policy and there are no benefits provided. In this case, since the crop was given away there will be no records to determine production. So just like having crop insurance, there is no way to determine loss on the crop.

NAP provides financial assistance to producers of non-insurable crops when low yields, loss of inventory or prevented planting occur due to a natural disaster. Crops eligible for NAP include crops grown for food, such as vegetables, which federal crop insurance does not cover.