ERP emergency relief program: $10 billion in relief aid

Narrator: We are grateful that you are joining us for another episode of the Ag View Pitch, as we know that your time is very valuable. Our team at Ag View Solutions is always here for you for any questions or comments that you may have. Please feel free to reach out to us at cbarron@agviewsolutions.com. And now here is your host, Chris Barron. Why you in so much hurry? Is it really worth the worry? Look around, then slow down. What's it like inside the bubble? Does your head ever give you trouble? It's no sin, trade it in. Hang on, help is on its way. I'll be there as fast as I can.

Chris

Barron: Welcome everybody to another episode of the Ag View Pitch, and you are in store for an informative discussion here with Paul Niefer. Paul, how's it going?

Paul

Neiffer: Everything's going good. We actually got some sunshine, but, but that's been very rare. We've had so much rain over here over the last 2 or 3 weeks that I can't believe I actually want the rain to stop. After last year, I didn't think I'd ever say that. But right now I'd like to see it go away.

Chris

Barron: Sometimes with you, Paul, it's like, where are you on the planet though? Because you're like all over the place. So over here means Washington State, I assume.

Paul

Neiffer: Exactly. I am home at least for 2 weeks. 2 more weeks I'm home.

Chris

Barron: Your wife's gonna have to put up with you, but she'll probably survive.

Paul

Neiffer: Yeah, she barely— she'll barely survive.

Chris

Barron: Yeah, well, she got a farmhand that way for a day or 2, so, so sound— sounds good. Well, hey, uh, what we're going to talk about here is ERP. So I'm going to start out by saying, what the heck is ERP?

Paul

Neiffer: Well, many of you have known that we've had the old WHIP plus, you know, the wildfire hurricane indemnity program. Back late September of last year, President Biden had signed an act, and I forget the name of it, uh, doesn't really matter what the name of it is, and essentially it provides an extra $10 billion for farmers that were associated with any type of weather event, drought, hurricanes, de rocho in Iowa, wildfires, floods, excessive heat. We had excessive heat last year out here, winter storms, freezes, smoke exposure, and so on. So Phase 1 just got announced this last Monday or this Monday, and there's about $6 billion of aid that's gonna be available for farmers, but it's only for those farmers that collected crop insurance either in 2020 or 2021.

For other farmers that were affected but didn't get any crop insurance, they're going to be covered in Phase 2, and that's going to come out later in the year. And again, ERP stands for Emergency Relief Program. They've sort of eliminated the WIP+ and they've just replaced it with ERP. You know, essentially they go by ERP. So that's, that's what it's designed to do. Is indemnify those farmers that yes, they received some crop insurance, but what they've said is you didn't receive enough. Essentially, that's my way of looking at it, is even though you got crop insurance, they're going to give you more.

Chris

Barron: So, okay, that's interesting. It's for years 2020 and 2021. So let me ask the question around the idea of percentage. So if you did buy crop insurance, if I understand this right, you are eligible to probably or possibly receive aid. Explain how that works relative to the crop insurance.

Paul

Neiffer: So let's, let's take at— if you had catastrophic coverage, you know, just at the 50% level, you're actually going to recalculate your crop insurance payment based on 75%, and then you're going to take what that payment would have been at 75 compared to what you got at 50%. So essentially half more, you know, well, it's more than that because, uh, it's, it's basically all profit from 75% to 50%. Now if you're at 85%, 80% or 85%, you're actually going to calculate it at 95%. So all these other ones, so like 55% but less than 60% is 82.5%, at least 60% but less than 65% is 85%. So anywhere from a 20— the minimum is a 10% bump up and the maximum is essentially a 25% bump up. Now over on your NAP coverage, because some crops you're not able to get regular crop insurance, so you, you, you get it at the NAP coverage level, that's actually anywhere from a 25 to a 30% bump.

So this, this is a case where it's sort of strange in a way. If you have really high crop insurance level, you know, 85%, you're only going to get an extra 10%. But if you're at that 60% level, you're actually going to get 85%. But, and here's the big but, there's going to be a payment limit, and we'll talk about that here in a second. So real quick, that's sort of how it works.

Chris

Barron: Not to interrupt, but so basically what you're saying then is you're penalized if you bought more insurance. Is that a bad way to look at it?

Paul

Neiffer: Well, in a way yes, in a way no, because what they're going to do too is they're going to reimburse you for the premium that you paid. Oh, okay. So everybody, everybody's going to sort of get up to, uh, so the, the ones that are at 85%, you're really going to get 95% and you're going to get your premium back. Whereas if you're at 60%, you're only going to get up to 85% and get your premium back. So even though you paid more for crop insurance, ultimately in the, in the long run you're going to get more.

Chris

Barron: How do they go off of that? How do you, how do you prove, I mean, you just, the insurance company dollar?

Paul

Neiffer: Yeah, their record. The, the nice thing about this program is you don't have to go down to the local FSA office and sign up. They are going to pre-populate, uh, the, the program for you based on RMA data that they have in their system. So they're going to start probably sometime next week, toward the end of next week. They're having training, my understanding training, uh, early next week on this program. I think a lot of this is probably already in the system. They're just going to tell them, here's what you need to do to print out the report and then send it out to the farmer. Then the responsibility of the farmers to review it, verify that they had a qualifying event. You know, out in our area it's easy, it's all drought. And then, and then verify the numbers, sign off of it, take it back to the office, and then they'll cut you a check.

So potentially, it sounds like to me you could be getting your check here in, uh, 3 weeks, a month, uh, 60 days at the longest.

Chris

Barron: So from when we're recording this, you're talking probably by, by the 1st of July, everybody should be pretty well funded?

Paul

Neiffer: Yeah, yeah, yeah, you should have all your money by the 1st of July. Now When we take that number, so let's say it's at 95% and you actually did 80%, so whatever that difference is, you're going to take that total amount, you're then going to take your premium that you paid, you're going to add that all together, then you're going to multiply it by 75%, and that's what your payment's going to be. Now, if you're one of these underserved farmers, you know, veterans, beginning farmers, um, you know, the, the various types of of races, you know, the Indians, the Asians, the Blacks, the Hispanics, and so on, all those that are what they call the underserved, instead of multiplying it by 75%, you're then going to multiply it by 90%. So they're going to get an extra 15 basis points on their calculations.

And that's been true on a lot of other programs, so this isn't necessarily anything new. But that's something that's going to help them out a little bit. Okay, so now the one thing we have to understand is that unlike crop insurance where you have no limit, I mean, you could receive $500,000, $1 million, $2 million of crop insurance and there's no cap on that payment, there is a cap on these payments. So if you're a corporation, an LLC, LLP, anything like that, the payment limit is going to be $125,000. If you do specialty crops, potatoes, onions, vegetables, fruits, and so on, then there's another $125,000, so potentially up to $250,000.

If you can prove to FSA that more than 75% of your AGI, your, your adjusted gross income, not gross income but the net after expenses, If you can prove that more than 75% of that's from farming, then you qualify for another $125,000 for like the corn, soybean, and so on. And then specialty crops, you actually qualify for $900,000 total. So a pretty good deal for those that, that have those higher value specialty crops. Now that more than 75%, that gets to be problematic for a lot of farmers because, you know, the 3-year average is '16, '17, and '18, and those weren't very good years. Especially if they have a spouse that lives in town or works in town.

Let's say they're a schoolteacher or something, might be a little tougher for them to qualify on a married tax return, married filing joint, but we think we're fairly certain that we can actually work up what their AGI would be if they filed separately. Doesn't mean they have to file separately, but if they filed separately, then a lot of those farmers may qualify for that extra payment amount.

Chris

Barron: So is this something that, you know, if people need to be more educated on it, are some of the crop insurance agents pretty up to date with this stuff? FSA office, where do you, you know?

Paul

Neiffer: I, I think the FSA is going to get updated next week. I, I think right now, you know, our blog, you know, the farmcpatoday.com blog, I've got two different posts on there. I've gone through quite a bit of the details. Also, the American Farm Bureau today— we're speaking May 19th, Thursday— they released a report today. It's about a 10-12 page report with a pretty good exhibit for a corn grower. Can't even remember was, but somewhere in the Midwest, a good corn grower give you a pretty good idea. I think bottom line, you know, if you receive crop insurance in 2020 or 2021, you're probably likely going to qualify for anywhere from on the low side 25% of what you received in crop insurance up to maybe potentially 80% plus your premium. But then again, you multiply those totals by 75% and you're limited to that $125,000.

So if you got— if you're a sole proprietor or a corporation and you receive $400,000 or $500,000 or $600,000 of crop insurance, you're going to max out that $125,000 pretty quickly.

Chris

Barron: Mm-hmm. And then that $125,000, again, for clarity, that is essentially per entity.

Paul

Neiffer: Per entity.

Chris

Barron: That meets the qualification.

Paul

Neiffer: If you're a general partnership, if you're a general partnership or a husband and wife Schedule F, then that would be per person. But even per entity, you know, let's say, hey, I have a corporation and 100% of the income is from farming. Therefore, I'm going to qualify for the $250,000. You then have to look at each owner, because that's right in the regulations that came out today. You got to look at each owner of that corporation, and each owner has to have farming AGI greater than 75%, and, and that can be difficult. Now, the wages that they receive from the farm operation, that is farm income. Rental income from farming, you know, acres that they own, that's also farm income. So if that's all the income they have, they're probably going to be okay, but I, I, I'm, I'm not sure it's going to be difficult for a lot of farmers to qualify for that 75%, easily, I should say.

Chris

Barron: So if you got, say, 3 brothers that farm together, one brother's got off-farm income that exceeds what number, 250, you said?

Paul

Neiffer: Am I getting that? No, no, exceeds more than 25% of gross income, adjusted gross income. But if the off-farm income is from their spouse, they may still qualify, but they have to get a CPA or an attorney to draw up a letter saying that they qualify. So there might be an extra hoop they have to go through. And, and then one thing that you and I discussed a little bit offline that I, I really don't know the answer to, and that's, you know, a lot of farmers in the Midwest collected hail insurance either in 2020 or 2021. You know, the listing of weather events they don't specifically mention hail, but then they mention other related events. And to me, hail, that's obviously that's a weather event. So I think that should qualify, but you would, you know, I didn't write the rule.

Chris

Barron: Well, you would think it would because, you know, a lot of guys buy wind insurance, they buy hail insurance, they buy, you know, you know, and the wind has a direct effect on the, um, let's say on your, your RP or just your regular revenue protection if your yield's way off base, but it was paid on the on the wind or the hail or one of those other riders, you know, that's, that's what will be nice to get that dialed in.

Paul

Neiffer: Yeah. And if you got insurance payment for fire, you know, out in our area, you know, fire and weed especially can wipe out 100 or 500 or 1,000 acres pretty quickly. I'm not sure if that's going to be phase one because a lot of that fire payment that you get isn't through crop insurance, you know, through your property and casualty insurance. That may be a Phase 2 type payment that you would get some compensation for.

Chris

Barron: Yeah, so on Phase 1, that's $6 billion you said at the beginning of the conversation here, so that leaves $4 billion if I do my math right. I think, uh, 10 minus 6 is 4, so that's Phase 2 then, is that right, or what?

Paul

Neiffer: Yeah, could be a little bit less because the Livestock Forage Program, essentially that program— that $10 billion that we had last year, there was some of that that went toward that. So let's say it's $3.5 billion, $3 billion, $3.5 billion, something like that. So there's still quite a bit of money in that Phase 2 that's available. Mm-hmm. And what they indicated was that's the reason they're using 75% here. If Phase 2— let's say Phase 2 has $3 billion left and they only use $1 billion and there's $2 billion left over, they may then go back to Phase 1 and just recalculate the payment and send another check to all the farmers.

Chris

Barron: Okay, so back to another thing, just for clarity, the drought will, you know, there's, there's counties listed. So if the county is listed and it's quote unquote drought, and, you know, I think of a bunch of our friends in North Dakota that we work with and, and out west that did and were significantly affected by drought. I can think of one good friend client of ours that is, uh, that really got nailed with drought. And so probably extremely likely he'll max out pretty easily just because of the extreme conditions.

Paul

Neiffer: Yeah, yeah, yeah, extreme conditions and the payment limits. So I think that's, you know, like I say, if you have any farm operation that received $400,000, $500,000, $600,000 of crop insurance, and I have several of those last year because of the drought out here, that easily got that amount of money. They're probably going to max out on the $125,000, maybe the $250,000 might get them a full payment, but you know, it's not going to quite, you know, make everybody whole, but it's certainly more money than everybody's expecting. Again, The American Farm Bureau actually broke down the expected payments by state and just give you an idea. North Dakota, $915 billion. Iowa, $395 million— or excuse me, $915 million. You know, $915 billion, that'd be a pretty big number even for the government. $915 million. Iowa, $395 million. South Dakota, $455 million. Minnesota, $418 million.

Nebraska $230,000, Illinois only $158,000, Wisconsin $66,000, Indiana $66,000, Ohio $63,000. Texas was second at $726,000. Out in our area, Montana is about $240,000, my state of Washington $191,000, Oregon $47,000, Idaho $67,000. So yeah, gives you an idea as to how much might be paid out.

Chris

Barron: Yeah, it's a function of two different things: the amount of acres and the severity of the conditions.

Paul

Neiffer: Yep, yep, yep. Like I say, for us last year, you know, the— like I was just talking to some of my clients, their APH on wheat was 120, and they were lucky to get 60 or 70 last year. So it's a pretty good size payment.

Chris

Barron: Yeah. For those that would be listening to this that are maybe like non-farmers or whatever, that we're starting to get quite a bit more of that too, listeners, and Those were funds that were already allocated, it just wasn't approved, is that right? Those funds were already part of the picture.

Paul

Neiffer: Right, it was allocated, right, it was allocated, but FSA had not gotten, you know, it was, the law was signed into law on September 30th, and it's May 16th when they finally came out with the rule. So how many months after that went into law 7, 7 and 7 and a half months later. Yeah, 7 and a half months later, they finally came out with the rule.

Chris

Barron: And government does a lot of screwy things, but it looks to me like based on what you're telling me, you know, just knowing the clients that we had last year that were severely impacted, this helps them the most. And that's, that's good.

Paul

Neiffer: Yep. Yeah. Or you go back to 2020, like in your neck of the woods, the DeRochio that came through That's definitely going to provide additional money for them.

Chris

Barron: Mm-hmm. Yeah. And a lot of those derecho, those who were affected by that are probably going to max out as well pretty easily.

Paul

Neiffer: Correct.

Chris

Barron: Correct.

Paul

Neiffer: So especially if they, especially if they had a huge loss. Yeah, that's a lot of them. That payment limit is going to kick in. Yeah. And that payment limit is going to kick in pretty quickly.

Chris

Barron: Mm-hmm. Yeah. And that's just for clarity. That's on crop loss only though, right?

Paul

Neiffer: Right. And we have to understand there's likely going to be some milk income loss. So maybe $1 billion of that $10 billion might go for that. They haven't come out with any details on that. You know, there's, there's just— and, and there's a program for like bees and, and some others. I think it's ELAP. If you qualify for ELAP, you're not going to get anything under ERP because ELAP took care of you supposedly. So there's, there's always some details, but the FSA has a good website. It's called their Emergency Relief Program. You know, I'm going to call their site. They got some frequently asked questions on there. They go through how the— they have a fact sheet. They also list the counties for both 2020 and 2021. Or again, as I mentioned, I think earlier, you can go to our, our blog farmcpatoday.com, and I posted on Monday and then I posted this morning on some updates though.

Chris

Barron: Okay, yeah, and we'll count on you keeping us updated on this end too as things develop and as we get— start to see some of the math being realistic and the numbers going out. Um, might have you back again just for an update.

Paul

Neiffer: Yeah, yeah, I always worry about I'm going to run out of things to post on the blog and something always comes up.

Chris

Barron: Yeah, there's never a shortage of news, is there?

Paul

Neiffer: So no, there's not.

Chris

Barron: Yeah, yeah, that's for sure. Well, hey Paul, I think this was great. Any other news or anything else that farmers need to be paying attention to? That, that was the ERP. Any other things or just keep an eye out?

Paul

Neiffer: No, I think, I, I think that's the key thing right now is that's the big one on the horizon. Again, you don't need to call the local office and get an application or anything. They will directly send this to you, whether it's mail or email or however they're going to send it. You then take a look at it. If everything looks fine, you just sign it off and send it back to the office, and then they'll go ahead and cut the check to you.

Chris

Barron: If you don't receive anything, there's the— my final question. I'll have one of those. Uh, if you don't receive anything and you feel like or think you should have, who do you contact?

Paul

Neiffer: I would contact the local FSA office. So if you did receive crop insurance in 2020 or 2021 and you haven't gotten anything, now give them a couple weeks, right? I mean, it's going to take a little bit of time, but if you haven't gotten something by the middle of June, then definitely be contacting your FSA office.

Chris

Barron: Okay, perfect. Hey, Paul, thank you very much. As always, you're full of information and, and, uh, really helps us all a lot as producers. Thanks a lot again.

Paul

Neiffer: You're welcome. Thanks, Chris.

Chris

Barron: You bet. And thanks everybody for listening, and we will catch you again Next time on The Interview Bench.

Narrator: Hang on, help is on its way. I'll be there as fast as I can.