Making disaster aid work harder

Making disaster aid work harder

By: April Allen 01/21/2013 @ 4:07pm

Now that disaster designations have been determined, the USDA considers over 600 counties across the nation primary or contiguous natural disaster areas due to drought and heat. The Farm Service Agency (FSA) is administering low-interest emergency farm loans for the counties affected. And if you aren’t on that list of counties, then there are some other options to consider.

Hot, dry conditions last year sharply reduced crop, pasture, and hay production, leading to very high feed costs, said University of Missouri Extension agricultural economist Ron Plain. “For a lot of producers, this designation gives them the opportunity to get some low-interest financing so they can carry their herds through the winter.”

Areas that are in drought are considered primary areas, and contiguous areas are very near to drought, but both primary and contiguous areas are able to apply for the loan. The 15 states included are Alabama, Arkansas, Arizona, Colorado, Florida, Georgia, Hawaii, Kansas, Missouri, New Mexico, Nevada, Oklahoma, South Carolina, Texas, and Utah. There are numerous counties in each state, with Texas having the most counties.

To see if the county of your farm is on the list, go here.

Taking advantage of these loans is an option to consider if it will be used in order to advance a person's position financially, said Plain.

“Low-interest-rate loans can be very appealing, but farmers need to have a plan for what they will do with that money,” he said. “It needs to be something that will generate income so they can repay the loan. That loan needs to work for you to help cut costs or improve efficiency. Otherwise, borrowing that money is not going to make you better off.”

Plain predicts that cattle prices will be at record highs, so investing in cattle feed would be very beneficial compared to selling the cattle because of high feed prices due to the drought. Another suggestion for using a loan effectively is installing irrigation on the farm because it's a long-term investment.  

As of now, the interest rate on a loan is 2.15%. The maximum amount of the loan is $500,000. Many people in drought areas are in need of assistance, and that is why this emergency loan option is available now.

There is no need to have purchased federal crop insurance before applying for an emergency loan.

The FSA lists the uses for emergency loans:

  • Restore or replace essential property.

  • Pay all or part of production costs associated with the disaster year.

  • Pay essential family living expenses.

  • Reorganize the farming operation.

  • Refinance certain debts, excluding real estate.

There is a total of $30 million being utilized to support farmers who are affected by extreme drought conditions. The USDA is using $16 million for financial and technical needs of the drought programs and then $14 million is being transferred into the Emergency Conservation Program. “These funds can be used to assist in moving water to livestock in need, providing emergency forage for livestock, and rehabilitating lands severely impacted by the drought,” said the USDA.

Other programs the USDA funds for unexpected farming upsets are broken down into categories of farm land damage, crop losses, tree losses, livestock and grazing losses, and honeybees and farm-raised fish.

Another recommendation is using insurance, the main risk-management tool. There are many different options when it comes to purchasing crop insurance, ranging from policies that cover a certain planting of a crop to entire farm coverage.

“Producers should consider how a policy will work in conjunction with their other risk-management strategies to insure the best possible outcome each crop year,” the USDA said. The agency added that agriculture specialist and crop insurance agents can help in guiding and building a good management plan.

More information about risk management can be found at their website. For drought and emergency loan related topics, contact your local FSA office.