Cost-Benefit Assessment

DATE: March 21, 2014

CONTACT: Dale Leuck

Dairy and Sweeteners Analysis Group

Economic and Policy Analysis Staff

Phone: (202) 720-0114

I. Title

Supplemental Agricultural Disaster Assistance Programs, Payment Limitations, and Payment 

Eligibility, as provided for in Title I, Sections 1119, 1501, 1603, 1605, 2205, 2206, and 12305 of 

the Agricultural Act of 2014 (2014 Farm Bill)

II. Executive Summary

This final rule implements four disaster assistance programs, payment limitations, and payment 

eligibility changes authorized by the 2014 Farm Bill. The four disaster assistance programs are:

 The Livestock Indemnity Payments Program (LIP)—LIP pays livestock producers who 

suffer (1) livestock death losses in excess of normal mortality due to adverse weather 

during the calendar year as determined by the Secretary, including losses due to 

hurricanes, floods, blizzards, disease, wildfires, extreme heat, and extreme cold; or 

(2) livestock deaths in excess of normal mortality due to attacks by animals reintroduced 

into the wild by the Federal Government or protected by Federal law, including wolves 

and avian predators; 

 The Livestock Forage Disaster Program (LFP)—LFP pays livestock producers who 

suffer grazing losses due to drought, and to livestock producers on federally managed 

land that suffer grazing losses due to fire; 

 The Emergency Assistance for Livestock, Honey Bees, and Farm-Raised Fish Program 

(ELAP)—ELAP pays producers of livestock, honey bees, and farm-raised fish to aid in 

the reduction of losses due to disease, adverse weather, or other conditions such as 

blizzards, wildfires, or feed or water shortages, as determined by the Secretary, that are 

not covered under LIP and LFP; and 

 The Tree Assistance Program (TAP)—TAP pays orchardists and nursery tree growers 

who planted trees for commercial purposes, or who have a production history for 

commercial purposes, but lost the trees as a result of a natural disaster. 

These four programs are now permanent and funded through the Commodity Credit Corporation 

(CCC). Previously, funding was provided by the Agricultural Disaster Relief Trust Fund 

established under Section 902 of the Trade Act of 1974. They are also retroactive, covering 

losses that have occurred since October 1, 2011. In addition, new LFP drought designation 

categories increase the number of monthly payment levels. Payments for these four programs 

are expected to total $6.02 billion for 2012-2023, averaging $502 million annually. Of that, 84 

percent, or $5.06 billion, reflects expected LFP payments. Nearly 44 percent of those LFP 

payments are expected to cover forage losses in 2012 and 2013, 2 of the worst drought years in 
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recent history, with 49 percent of the LFP payments covering 2012-2014. With payments 

commencing in fiscal year 2014, the net present discounted values are expected to total $5.1 

billion with a 7 percent discount rate or $4.5 billion with a 3 percent discount rate.

The final rule also implements changes to eligibility criteria and payment limits mandated by the 

2014 Farm Bill for all Title I and some Title II programs. Since this is the first rulemaking 

following passage of the 2014 Farm Bill, it is necessary to also implement changes to eligibility

criteria and payment limits as mandated by the 2014 Farm Bill for all Title I and some Title II 

programs by amending 7 CFR Part 1400.

The average Adjusted Gross Income (AGI) criterion is simplified by using a single total income 

threshold of $900,000 instead of the 2008 Farm Bill’s multiple farm and nonfarm income 

thresholds. The payment limits for LFP, LIP, and ELAP are increased to $125,000 (across all 

three programs), potentially increasing outlays when producers face adverse conditions. TAP 

has an independent payment limit of $125,000. Separate from the disaster programs, Marketing 

Assistance Loan benefits -- loan deficiency payments (LDPs) and marketing loan gains (MLGs)

-- are now included in a $125,000 payment limit which also covers benefits from the Agriculture 

Risk Coverage (ARC) and Price Loss Coverage (PLC) programs. There is a separate $125,000 

payment limit for peanuts. USDA is projecting modest aggregate LDPs or MLGs over the next 

10 fiscal years, so including those benefits in the group $125,000 limit will not result in 

significant outlay reductions.

III. Program Provisions in More Detail (Focusing on Changes from the 2008 Farm Bill)

The 2014 Farm Bill makes five important changes to the disaster assistance provisions of this 

rule relative to those in place under the 2008 Farm Bill and FSA is making several discretionary

changes: 

 They are made permanent; hence they are not dependent upon future legislation for their 

funding. 

 Under LFP, the drought designation categories, discussed in more detail below, have 

been changed in such a way as to significantly increase benefits. 

 The Risk Management Purchase Requirement contained in the 2008 Farm Bill has been 

eliminated, possibly increasing LFP payments. 

 Compensation for water hauling is shifted from Emergency Conservation Program (ECP) 

discretionary funding to ELAP, this is not expected to significantly change the payments. 

(See table 4.)

 Total ELAP payments are reduced from $50 million annually to $20 million. 

 Discretionary changes to ELAP discussed below for fisheries may add an estimated $1 

million per year to cover losses in additional states.

 Increases in payment rates for hives for losses due to Colony Collapse Disorder (CCD), 

may increase payments by 5 percent in 2012, 10 percent in 2013, and 15 percent in 2014 

and going forward.

 Changes to estimated LIP payments were made with adjustments for cattle prices

(26 percent increase) and cow inventories (12 percent increase). (See table 4.)
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 Changes to LFP payments were made with increases for the tier levels established by the 

2014 Farm Bill, increases in the payment rates, and decreases in cow inventories. (See 

tables 1 and 4.)

 Decreases in the TAP payment rate may decrease payments approximately $0.1 million 

per year and adding payments for losses due to citrus greening may add approximately

$1.5 million per year. (See table 6.)

Additional, more detailed program-specific changes are noted below. 

Livestock Indemnity Program

The 2014 Farm Bill specifies the terms and provisions of LIP, and administration of the program 

is subject to little variation or flexibility from the statutory authority. The key statutory change 

from the 2008 Farm Bill involves inclusion of additional predators as a cause of loss. The key

administrative change provides producers with greater flexibility in documenting losses that 

occurred in late 2011, 2012, and 2013. 

LIP provides disaster relief to eligible producers of eligible livestock that have died, in excess of 

normal mortality, as a result of adverse weather, as determined by the Secretary, including 

hurricanes, floods, blizzards, disease (if exacerbated by an eligible adverse weather event), 

wildfires, extreme heat, and extreme cold. The 2014 Farm Bill expands eligibility to also cover 

livestock deaths in excess of normal mortality due to attacks by animals reintroduced into the 

wild by the Federal Government or protected by Federal law, including wolves and avian 

predators. 

Eligible livestock means only adult and non-adult beef cattle, dairy cattle, buffalo, beefalo, bison, 

equine, sheep, goats, deer, swine, poultry or other livestock as determined by the Secretary, that 

died as a direct result of an eligible adverse weather event or from attacks by animals 

reintroduced into the wild by the Federal Government or protected by Federal law, including 

wolves and avian predators. An eligible adverse weather event includes hurricanes, floods, 

blizzards, disease if exacerbated by an eligible adverse weather event, wildfires, extreme heat, 

and extreme cold. On the day they died, eligible animals must be:

 Owned by an eligible owner or in the possession of an eligible contract grower, and

 Maintained for commercial use as part of a farming operation.

“Commercial use” means used in the operation of a business activity engaged in as a means of 

livelihood for profit by the eligible producer. “Farming operation” means a business enterprise 

engaged in the production of agricultural products. 

Applicants must provide verifiable documentation of livestock deaths claimed, as specified in the 

implementing rule. For the late 2011 through 2013 program years, documentation requirements 

for livestock losses will be less restrictive in response to a recommendation in the 2014 Farm Bill 

Conference Report that “the Secretary take into consideration that the compilation of records by 

the producer can be extremely difficult or even impossible and to exercise flexibility when 

determining what constitutes an acceptable record.”
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Ineligible livestock include livestock that:

(1) Died for reasons other than as a direct result of an adverse weather event or the cause 

of death was not exacerbated by the adverse weather event;

(2) Were produced or maintained for reasons other than commercial use as part of a 

farming operation;

(3) Are wild or free roaming; or

(4) Were not owned or in the possession of an eligible owner or contract grower on the 

day they died.

Lost or reduced production, as in the case of milk or eggs, is not an eligible loss.

LIP does not require a county to have been named in a Secretarial or Presidential disaster 

declaration for a producer to be eligible for benefits, and specifies an indemnity rate of 

75 percent of the market value of the applicable livestock on the day before the date of their 

death, as determined by the Secretary. Both of these provisions are unchanged from the 2008 

Farm Bill. 

Eligible LIP recipients—as well as other disaster program recipients—were, in the past, required 

to obtain crop insurance or Non-insured Crop Disaster Assistance Program (NAP) coverage. 

Under the 2014 Farm Bill, they are no longer required to do so under any of the four disaster 

assistance programs. The elimination of this Risk Management Purchase Requirement is 

expected to encourage somewhat higher disaster program participation. 

Livestock Forage Disaster Program

LFP payments are issued to eligible livestock producers who suffer grazing losses in counties 

due to qualifying drought (rated by the U.S. Drought Monitor as severe, extreme, or 

exceptional), or fire. For LFP, the 2014 Farm Bill retains program language contained in the 

2008 Farm Bill. In certain cases, the payment amount is increased compared with LFP 

established in the 2008 Farm Bill. For example, an eligible livestock producer that owns or 

leases grazing land or pastureland that is physically located in a county that is rated as having at 

least a D3 (extreme drought) intensity in any area of the county at any time during the normal 

grazing period for the county is eligible to receive assistance equal to 3 monthly payments 

compared with 2 monthly payments under the 2008 Farm Bill.

As in the 2008 Farm Bill, LFP payments for grazing losses due to drought will be issued based 

on 60 percent of the smaller of:

(1) The monthly feed cost for the total number of covered livestock, or

(2) The monthly feed cost calculated by using the normal carrying capacity of the 

eligible grazing land.

Feed costs are calculated based on the cost of corn needed to sustain 1 animal unit, defined as 1 

adult beef animal, for 30 days based on 15.7 pounds of corn per day. Payments for other 

livestock (of different weights or ages) are based on their conversion into livestock units. 
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An eligible livestock producer may receive assistance under LFP for drought-induced grazing 

losses that occur on land that is native or improved pastureland with permanent vegetative cover 

or that is planted to a crop planted specifically for the purpose of providing grazing for covered 

livestock. An eligible livestock producer may not receive assistance for losses occurring on land 

used for haying or grazing under the Conservation Reserve Program (CRP). 

Covered livestock are livestock of an eligible producer (including contract growers) that, during 

the 60 days prior to the beginning date of a qualifying drought or fire condition, the eligible 

producer: owned; leased; purchased; entered into a contract to purchase; or sold or otherwise 

disposed of due to qualifying drought conditions. Covered livestock does not include those that 

were, or would have been, in a feedlot on the beginning date of the qualifying drought or fire 

condition as a part of the normal business operation of the eligible livestock producer, as 

determined by the Secretary.

LFP specifies the number of monthly feed compensation payments that producers are eligible to 

receive according to the severity of the drought, as designated by the U.S. Drought Monitor. 

Producers may receive 1, 3, 4, or 5 monthly payments depending upon the severity of drought 

conditions during the calendar year. The 2014 Farm Bill makes changes to the payment amount 

that an eligible producer may receive, as described in the table below.

Drought 

intensity

Drought length (during normal 

grazing period)

2008 Farm Bill —

amount equal to

2014 Farm Bill —

amount equal to

D2 8 consecutive weeks 1 monthly payment 1 monthly payment

D3 at any time 2 monthly payments 3 monthly payments

D3 4 consecutive weeks 3 monthly payments 4 monthly payments

D4 at any time 3 monthly payments 4 monthly payments

D4 4 consecutive weeks n/a 5 monthly payments

Total LFP payments to an eligible livestock producer in a calendar year for grazing losses 

because of a qualifying drought cannot exceed 5 monthly payments for the same livestock, 

increased from 3 monthly payments under the 2008 Farm Bill. Since the monthly payment is 

based on 60 percent of feed costs (except as noted below), the maximum payment a producer can 

receive under LFP in a calendar year cannot exceed 5 times the covered livestock’s monthly feed 

cost times 60 percent. LFP also contains a provision for grazing losses due to fire on publicly 

managed lands with a payment rate of 50 percent of the monthly feed cost and a time limit of 

180 days.

Elimination of the Risk Management Purchase Requirement contained in the 2008 Farm Bill--

which required that producers obtain a policy or plan of insurance on pasture or cropland in order 

to receive payments from disaster programs--has its most significant implication for LFP 

payments, since they are directly related to forage losses. (Programs prior to the 2008 Farm Bill 

did not include insurance or NAP purchase requirements in order for livestock producers to 

receive feed assistance.) The elimination of the 2008 Farm Bill requirement could encourage 

greater LFP participation. However, the 2014 Farm Bill does not contain language allowing 

producers to receive both LFP and benefits from NAP or crop insurance, a provision that had 
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been in the 2008 Farm Bill. Hence, a producer must elect to receive one benefit or the other, but 

not both, which could limit LFP participation.

Emergency Assistance for Livestock, Honey Bees, and Farm-Raised Fish

ELAP is designed to provide emergency assistance to producers of livestock, honey bees, and 

farm-raised fish to aid in the reduction of losses due to disease, adverse weather, or other 

conditions, such as blizzards and wildfires, as determined by the Secretary including CCD for 

honeybee producers. ELAP provides up to $20 million per year, a reduction from the 2008 Farm 

Bill funding level of $50 million per year, for such emergency assistance and allows funds that 

are not used in any particular year to be carried over into subsequent years for the same disaster 

for which funding became available. Funds made available under ELAP for losses in the year 

during which the losses were incurred are available until expended. While losses due to disease 

were covered under the regulations implementing the 2008 Farm Bill provisions, the 2014 Farm 

Bill explicitly provides that “disease” includes cattle tick fever.

In addition, FSA is making discretionary changes to ELAP in response to adjustments in the 

other disaster programs, given ELAP’s role of covering losses not covered by these other disaster 

programs (for example, covering up to 150 days of feed cost to be consistent with LFP or 

covering species or types of loss not covered by other programs). Additionally, certain changes 

to improve processes, be consistent with other FSA program policies, or improve program 

integrity are included in the rule (for example, adjusting farm-raised fish losses due to normal 

mortality).

As authorized by the 2014 Farm Bill, ELAP is to provide emergency relief, among other things, 

to eligible producers of livestock to aid in the reduction for losses due to adverse weather. Funds 

are to be used, among other things, to reduce losses caused by water shortages. Therefore, 

beginning with the 2014 program year, FSA will provide ELAP benefits to livestock producers 

with losses resulting from the additional cost of transporting water to livestock due to extreme 

drought. This is a discretionary change; FSA will require that to be eligible for benefits, 

livestock must be located in a county designated on the Drought Monitor as a D3 in any area of 

the county at any time during the normal grazing period for the county. Two other discretionary

changes are: increasing the payment rate to honeybee producers who have suffered CCD from 

60 percent to 75 percent; and and increasing the value of hives and feed on which these 

payments are based by 15 percent in three equal yearly increments, after which they remain 

stable at 2014 levels.

Although in the past some participants who have incurred expenses for water hauling have 

received compensation via the Emergency Conservation Program (ECP), USDA believes ELAP 

is better suited to compensate for these types of losses. Expenses incurred for unplanned but 

necessary water hauling to eligible livestock are more associated with expenses incurred during a 

livestock emergency than those associated with rebuilding conservation structures or debris 

removal. ELAP is not a “conservation” program and is not predicated on there being structural 

damage or debris removal. It is intended to help mitigate financial losses associated with a 

livestock emergency.
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Tree Assistance Program

TAP compensates orchardists and nursery tree growers for eligible tree, bush, and vine losses

and the program is now permanent and funded through the CCC. Compensation includes

payments for the cost of replanting or rehabilitating trees, bushes, or vines lost due to a natural 

disaster, in excess of natural mortality. After losses exceed 15 percent of normal mortality, TAP 

pays 65 percent of the cost of planting seedlings or cuttings (to replace lost trees, bushes, or 

vines), and 50 percent of the cost of pruning, removal, and other activities incurred to salvage 

damaged trees, bushes, or vines or, in the case of mortality, to prepare the land to replant trees, 

bushes, or vines. The 65 percent payment for planting and replacing lost trees is a reduction 

from the 70 percent payment rate specified in the 2008 Farm Bill.

TAP covers losses caused by natural disasters occurring on or after October 1, 2011—the same 

time frame as the other disaster programs. Eligible natural disasters include plant disease, insect 

infestation, drought, fire, freeze, flood, earthquake, lightning, or other natural occurrence of such 

magnitude or severity so as to be considered a disaster, as determined by the Deputy 

Administrator for Farm Programs.

Producers may not receive payment for losses on more than 500 acres per year, which is a 

change from the 2008 Farm Bill, when 500 acres were eligible for the duration of TAP as 

authorized by the 2008 Farm Bill. This change was made because the program is now 

permanent, and it is impossible to spread losses over an infinite horizon. Producers may not 

receive TAP payments exceeding $125,000 annually. 

AGI and Payment Limit Changes

Since this is the first rulemaking following passage of the 2014 Farm Bill, it is necessary to also 

implement changes to eligibility criteria and payment limits as mandated by the 2014 Farm Bill 

for all Title I and Title II programs by amending 7 CFR Part 1400. Regarding average AGI, the

eligibility criterion is simplified by using a single total income threshold of $900,000 instead of 

the multiple farm and nonfarm income thresholds mandated by the 2008 Farm Bill. 

Additionally, the $900,000 eligibility limit is higher than most of the previous limits and would 

not be expected to be binding for most producers. The single income limit—set at a relatively

high level—will likely increase outlays modestly. Producers made ineligible for conservation 

programs because of high AGIs could obtain waivers under the 2008 Farm Bill: those waivers 

are not available under the 2014 Farm Bill. 

The payment limits for LFP, LIP, and ELAP are increased to $125,000 (in total, across all three 

programs), potentially increasing outlays when producers face adverse conditions. TAP has a 

payment limit of $125,000, which is independent of the $125,000 combined limit for LFP, LIP, 

and ELAP. Separate from the disaster programs, Marketing Assistance Loan benefits -- LDPs

and MLGs -- are now included in a $125,000 payment limit, which also covers benefits from the 

Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs. There is a separate 

$125,000 payment limit for peanuts. USDA is projecting modest aggregate LDPs or MLGs over 

the next 10 fiscal years, so including LDPs and MLGs in the group $125,000 limit will not result 

in significant outlay reductions. Upland cotton is ineligible for the ARC and PLC programs. 
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IV. Need for Action

The rule is needed to implement the disaster assistance programs authorized by the 2014 Farm 

Bill. Further, the general payment limitation and payment eligibility requirements from the 2014 

Farm Bill must be implemented through rulemaking before any program payments can be made. 

Therefore, the provisions for the disaster programs, payment limitations, and payment eligibility

are combined into one rulemaking, as the first payments under the 2014 Farm Bill are associated 

with the disaster assistance programs.

Most program changes in the rule are required by the 2014 Farm Bill. CCC is also making some 

minor discretionary changes, such as providing flexible documentation requirements for losses 

that occurred before the 2014 Farm Bill was enacted.

Natural disasters have recently had a major impact on livelihoods--including the unprecedented 

cattle losses in South Dakota due to winter storm Atlas, and the extreme drought in the Great 

Plains in 2012 and in California in 2014. Due to the correlated nature of losses over broad areas, 

adequate private sources of insurance are often not available or very expensive. As a result, 

government assistance through these programs is important. The changes required by the 2014 

Farm Bill are largely mandatory with little room for discretionary decisions in the way in which 

they are implemented, as described above.

In addition, the 2014 Farm Bill expands LIP eligibility to also cover livestock deaths in excess of 

normal mortality due to attacks by animals reintroduced into the wild by the Federal Government 

or protected by Federal law, including wolves and avian predators. The Endangered Species Act 

of 1973 addresses the problem that various species of fish, wildlife, and plants in the United 

States have been rendered extinct as a consequence of economic growth and development 

untempered by adequate concern and conservation. As such, the United States has pledged itself 

to conserve to the extent practicable the various wildlife species facing extinction. Correcting 

for that market failure (that is, species extinction) has however created the unintended 

consequence (or negative externality) that some of those protected species are predatory animals 

that sometimes kill domestic livestock. Normal practices to prevent predation by predators are 

not allowed under the Endangered Species Act. Therefore, covering eligible losses, LIP will 

help mitigate the unintended consequences that negative externality, which resulted from the 

public benefit of protecting those species of wildlife.

V. Costs, Benefits, and Transfers

The costs to USDA of each of the four permanent disaster provisions of the 2014 Farm Bill are 

quantified as annual average expected payments. USDA baseline data, released in Feb 13, 2014 

(http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1192) was used 

in projections. With the exception of water-hauling and higher prices for honey bee hives under 

ELAP, discretionary changes were not specifically quantified because they are believed to not 

materially affect outlays.

Livestock Indemnity Program
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The annual average expected payments for LIP from 2012 to 2023 are calculated by first

adjusting actual historical LIP payments for the period 2008 to 2011 for the cattle prices that 

prevailed in 2011. The purpose of this adjustment is to put LIP payments for this period on the 

same 2011 base. The average of these 4-year adjusted LIP payments were then projected 

forward, adjusting for USDA baseline projections for beef cattle prices and beef cattle herd size, 

relative to their values in the 2011 base year. For example, the 2011 base year payments were 

increased by X percent to account for X percent higher cattle prices, and then increased by Y 

percent to account for Y percent more cattle, for each corresponding year in the projection 

period. Because the large majority of LIP payments are known to go to beef cattle producers, 

other eligible species were not considered. LIP payments varied from a high of $63.7 million in 

2009 to a low of $17.8 million in 2010 (Table 1), despite cattle prices 15 percent higher in 2010. 

While nominal LIP payments averaged $37 million over 2008-2011, adjusting to 2011 cattle 

prices for purposes of comparability increased that average 4-year estimate to $46 million. That 

$46 million 4-year adjusted LIP payment was then projected forward from 2012 through 2023 by 

further adjusting for beef cow inventories and the 5-City Choice Steer price, from the USDA 

baseline (http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1192).

The 5-city price forecast increases 26 percent from 2012 to 2023, while the cattle herd is 

projected to increase by 12 percent, in a long overdue expansion phase of the cattle cycle that has 

been delayed for several years by drought. The average annual LIP payment is projected to be 

$60.7 million over this 12-year period. 

Livestock Forage Disaster Program

Annual average expected LFP payments are calculated by also projecting annual payments 

forward, but from a 7-year Olympic average (an average during a 7-year period, dropping the 

highest and lowest values) of 2008-2014 payments, with each year first adjusted to the 2014 tier 

levels, payment rates, and 2014 cow inventory. While no actual payments yet exist for 2012 to 

2014 because the application process has not yet opened for those years, complete county-level 

drought designations exist for 2012 and 2013, and for 2014 through mid-February, allowing 

payment forecasts for these years. The monthly payment rate for grazing losses due to drought 

is:

(1) 60 percent of the lesser of: the monthly feed costs for all covered livestock, or

(2) the monthly feed cost calculated using the normal carrying capacity of the eligible 

grazing land for the producer.

Feed costs are based on the larger of the value of corn for either the 12 months prior to March 1 

of the disaster year, or the average of the previous 24 months prior to March 1 of the disaster 

year. 

2008-2011 Actual Payments Adjusted to 2014 Farm Bill Tier Levels, 2014 Payment Rates and 

2014 Cow Numbers, For Purposes of Comparability

Three important adjustments were made to actual 2008-2011 payments and two adjustments to 

the forecast payments for 2012-14, in order to provide a comparable basis from which to project 
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payments into 2015-2023. The first was to adjust 2008-2011 actual payments as if they had been 

made using the tier levels provided in the 2014 Farm Bill. In the past, producers received a onemonth payment (tier 1) if a D2 drought designation existed for 8 weeks or more. This condition 

remains. However, the old tier 2 level--which provided for a two-month payment if a D3 

designation were made at any time in the county--becomes tier 3 in the 2014 Farm Bill and 

provides a 3-month payment. Similarly, the old tier 3 is transformed into a tier 4, which is 

defined as a county where D3 exists for 4 weeks or longer or D4 exists at any time. 

Additionally, a tier 5 payment is introduced, whereby a 5-month payment is made when a D4 

designation has existed for 4 weeks or longer.

The tier-level adjustments were made by first calculating what LFP payments to counties with 

beef cow inventories, as documented by NASS (http://nass.usda.gov/Quick_Stats/), would have 

been under the old tier system, with expected payments under the new tier system. Rather than 

simply adjusting the actual county level payments, this method was chosen because operators 

often reside in a different county than the one affected by drought. Hence, it is possible for an 

operator residing in a severely affected drought county to receive zero LFP payments if the 

subject cattle are in an unaffected county. Moreover, not all county-level beef cow inventories 

are publicly available from NASS because of disclosure issues. In any event, those hypothetical 

county-level payments under the old and new tier systems were summed over all counties where 

available, and the actual state payments were then multiplied by the percentage difference 

between these hypothetical old- and new-tier payments.

As a simple example of the above, suppose that actual payments to a particular state were X and 

that all counties with NASS cow data had been in tier 3 status under the former program, but all 

shifted to tier 4 under the criteria in the 2014 Farm Bill (and none shifted into tier 5). In that 

case, the tier-level adjustment factor would have been 1.333 (4 monthly payments divided by 3 

monthly payments), and tier-adjusted payments would have been 1.333 multiplied by the X 

payments actually received by the state.

The adjustment of historical LFP expenditures to the new tier levels in the 2014 Farm Bill 

substantially increases expected payment levels. Actual LFP payments over 2008-2011 of $142 

million would have been $208 million had the new tier structure been used, nearly 50 percent 

higher (Table 1). These 2014 tier-adjusted payments were then further adjusted to 2014 LFP 

payment rates, adding an additional 55 percent to payments, bringing the 2008-11 average to 

$322 million. Finally, adjusting cow inventory to the 2014 level reduced the final adjusted 

average 2008-2011 LFP payments to $297 million, still well over twice the actual average.

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2012-2014 LFP Payment Forecasts and Adjustment to 2014 Base: Assumptions and 

Considerations

After the above adjustment of actual 2008-2011 payments to a 2014 basis, payment rates for 

2012-2014 were forecast based on cow numbers and tier-level payment designations. Forecasts 

for 2012-2014 are necessary because signup has not yet commenced. The beginning inventory

of beef cows was assumed to have an 88 percent calving rate, the U.S. average, so that payments 

could be aggregated over both adult and non-adult animals. While complete county-level tier 

data exist for both 2012 and 2013, data only through mid-February are available for 2014. Based 

on the current drought status of U.S. regions, all California counties are assumed eligible for tier5 payments for 2014 and counties in all other states are assumed eligible only for the tier-status 

available in mid-February. 

Finally, 1-month payment rates, equivalent to 60 percent of the feeding costs of maintaining 

1 adult cow for 1 month, were calculated from NASS corn prices according to the formula in the 

2014 Farm Bill, and were $31.09, $34.36 and $31.54, respectively, for 2012, 2013, and 2014. 

Non-adult payment rates were 75 percent of the adult rates.

Calculation of LFP payments in this manner represents the upper bound on possible payments, in 

the sense that payments are calculated, as of the first of the year, for every cow in inventory and 

a normal calving rate. Actual payments are expected to be substantially less for several reasons. 

First, payments are limited to $125,000, equivalent to a 484-cow beef herd in 2012 receiving 

tier-5 payments. According to NASS, nearly 17 percent of beef cows were located on operations 

exceeding 500 cows in 2012 (Table 2), with these operations receiving only the $125,000 

maximum. However, if the NASS data are adjusted by subtracting out the approximately

13 percent of cows that are not located in states that often suffer drought (Table 3), over 19 

percent of beef cows in the major drought-prone states were located on operations exceeding 500 

cows. Thus, a significant percentage of cows in drought-prone states are located on operations 

where payment limitations are likely to occur. The 4.028 million cows residing in the nondrought-prone states (Table 3) are assumed to be proportionately located on the three smallestsize category of operations.

Table 2. Beef Cows by Size of Operation, 2012, Original and adjusted for Nondrought States

Inventory

Actual Original Adjusted Adjusted

Size of Operation Percent Number Number Percent

1-49 27.7 8,354 7,014 26.8%

50-99 17.4 5,247 4,406 16.9%

100-499 38.2 11,520 9,673 37.0%

500-999 9.1 2,744 2,744 10.5%

1,000-1,999 4.3 1,297 1,297 5.0%

2,000-4,999 2.1 633 633 2.4%

5,000-plus 1.2 362 362 1.4%

 30,158 26,130 100%

Source: NASS Farms, Land in Farms, and Livestock Operations 2012 Summary (Feb. 2013)
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A second important factor reducing actual payments well below the maximum calculated 

involves the number of beef cow operators who do not sign up for LFP because they may be part 

time, hobby-type operations, or have outside income that pushes them past the average adjusted 

gross income limitation of $900,000, or those who simply may not have the time or desire to go 

through the application process for what may be a relatively small payment. These are difficult 

numbers to estimate, but a sense of the magnitude by which actual payments could fall short of 

the maximum possible payments for such groups can be inferred by noting that an adjusted 26.8 

percent of beef cows in 2012 were located on the smallest size operation of 1-49 cows in the 

drought-prone states.

A third factor reducing actual payments below the maximum calculated is the requirement that a 

producer must elect to receive payments from either insurance coverage or LFP, but not both. 

The availability of Pasture, Rangeland, and Forage (PRF) insurance, administered by the Risk 

Management Agency, provides cattle operators a means of protecting themselves against rainfall 

shortages that do not materialize into a drought classification. Election for this program is 

required in the fall preceding the grazing year.

Somewhat offsetting these three factors is the elimination of the Risk Management Purchase 

Requirement, which may encourage some who have not participated in LFP previously to do so. 

LFP had previously required insurance or, at a minimum, NAP coverage (with an associated 

$250 administration fee). Such an incentive is likely modest, however, as the $250 

administration fee would be recouped with tier-5 LFP payment rates from only 9 cows (and 

implied calves). That suggests that larger operators would have had, historically, significant 

incentive to participate in NAP. Elimination of the Risk Management Purchase Requirement 

could encourage smaller producers to participate in LFP, but some may face other disincentives, 

as discussed above. These are behavioral factors that are not possible to reliably quantify.

Forecast 2012-2014 LFP Payments: Uses 30 Percent of Maximum Possible 2011 Payments
13

In 2011, drought was relatively widespread and provided sufficient county-level payment data, 

cow numbers, and tier levels such that actual county payments could be compared to the 

calculated maximum possible payments. The percentages varied quite widely, from 0 to over 

100 percent, where actual payments represent payments for cattle located in counties other than 

that of the recipient. Actual LFP payments averaged over all counties where data were available 

in 2011 were 30 percent of calculated maximum possible payments.

As a mean estimate, we assume that future payments will be 30 percent of the calculated 

maximum possible based on the 2011 experience. (Arguments could be made that it should be 

either above or below this number.) The upper bound would be 100 percent of the maximum 

possible. A lower bound would be given by an assumption that all operations of less than 49 

head would not find it worthwhile to participate, while maintaining the 30 percent assumption 

for the remaining operations. 

With widespread publicity about elimination of the Risk Management Requirement making 

participation costless, participation could be high. Hence, the 30 percent might best be viewed as 

a mean expectation of actual payments relative to the calculated maximum potential payments, 

but with the distribution around that mean having a long tail on the high side (e.g. payments 

could be a lot higher). An example would be a small cattle rancher who has not participated in 

LFP in the past because the rancher viewed the $250 fee for a NAP grazing policy too high in 

comparison to any expected benefits, and did not purchase a NAP grazing policy. Without that 

requirement, the rancher might in the future participate in LFP. These are expected to be quite 

small producers with relatively few animals.

LFP Forecast Payments: 2012 to 2023

Forecasts for 2012-2014 are made based on NASS cow numbers, county-level tier ratings, and 

program year payment rates (adjusted to 60 percent of feed value). The forecasts are calculated 

based on 30 percent of the maximum possible payments, as discussed above. Forecast payments 

are $1.28 billion for 2012, $0.934 billion for 2013, and $0.245 billion for 2014, assuming normal 

weather for all the country--except California--from mid-February forward (Table 4).

Forecast payment rates for 2012 and 2013, as well as the tier-adjusted payment rates for 2008-

2011, are adjusted to 2014 payment rate levels and 2014 cow levels, in order to provide 7 years 

of comparable LFP payments. The Olympic average payment from these 7 years is calculated, 

that, in turn is used to provide a base from which to project LFP payments over 2015-2023. 

Average LFP payments for the 2008-2014 base period, using 2014 tier levels are $471 million 

and increase to $527 million at 2014 payment rates and then fall to $505 million when adjusted 

for lower cow numbers in 2014 (table 4). The 7-year Olympic average is $443 million, and 

excludes the record-high 2012 year and the record low 2010 year. In contrast, the straight 7-year 

average ($505 million) is about 14 percent higher than the Olympic average.

LFP forecasts for 2015 to 2023 are made by adjusting the $443 million base year Olympic 

average by the size of the USDA baseline cattle herd size, and projections of LFP payment rates 

as calculated from projections of corn prices provided in the USDA President’s Budget baseline. 
14

The 12-year forecast annual payments for LFP is $5.061 billion, of which $2.463 billion is from 

just the three years 2012-2014 (Table 4). Two of these years--2012 and 2013--were two of the

worst drought years in recent history, and unlikely to be repeated.

 

The annual average payment for LFP over each of the 12 years is $421.8 million (shown in Table 

1 above).

Emergency Assistance for Livestock, Honey Bees, and Farm-Raised Fish Program

Annual ELAP payments are forecast to average $12.8 million, significantly less than the 

$20 million authorized, but significantly more than the 2008-2011 average $10.05 million spent 

on the program under the 2008 Farm Bill, which made available up to $50 million per year. The 

average $10.05 million in program payments represents payments for the types of losses that 

have been covered in the past. As approximately one-half of payments to date have been made 

to compensate honey-bee producers for losses incurred as a result of CCD, the $10.05 million 

outlay estimate was adjusted upward to account for increases in payment rates for hives. In 

comparison to their 2008-2011 values, payments for hives were increased by 5 percent for 2012; 

10 percent for 2013; and 15 percent for 2014 onward. Since CCD accounted for about one-half 

of ELAP outlays, the $10.05 million in base period outlays was increased by 2.5 percent for 

2012; 5 percent for 2012; and 7.5 percent for 2014 onward, to account for higher hive costs. 

To these resulting outlay projections, an additional $2 million annually for 2015 to 2023 is added 

to cover the costs of hauling water that have been shifted from ECP discretionary funding to 

permanent ELAP funding. The $2 million in annual outlays for 2015-2023 is based on program 

payments for 2002-2013, which averaged $1.6 million annually for water hauling and were 

rounded to $2 million for this analysis. In addition, due to the serious drought prevailing in 

California in 2014, ELAP outlays are increased to $7 million for that one year. 

An upper bound estimate for average annual ELAP outlays would be the entire authorized $20 

million per year (see discussion below). This is because ELAP:

Table 4. Livestock Disaster Programs: 2012 to 2014, and Baseline Forecast Payment Levels, As Accrued on a Program Year Basis, Million Dollars

2012 2013 2014 2008-2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2012-2014 2015-2023 2012-2023

Average

ELAP 10.3 10.6 17.8 11.3 12.8 12.8 12.8 12.8 12.8 12.8 12.8 12.8 12.8 39 115 154

LIP 48.7 49.7 52.0 42.9 56.2 58.8 60.7 62.7 64.6 66.4 67.9 69.5 71.1 150 578 728

LFP:

 2014 tier levels 1,284 934 245 471

 2014 Payment rate 1,303 857 245 527

 Cow Adjusted 1,255 850 245 505

 7-Year Olympic average 443

LFP Forecast: 1,284 934 245 NA 292 252 246 266 281 296 308 321 337 2,463 2,598 5,061

Total Forecasts 1,343 994 315 NA 361 323 319 341 358 375 388 403 421 2,652 3,291 5,943

Total Forecasts Without:

 Higher Bee Hive Prices 1,343 994 314 NA 360 323 319 341 358 374 388 403 420 2,651 3,284 5,935

 Water Hauling 1,343 994 307 NA 358 321 317 339 356 372 386 401 418 2,644 3,266 5,910

 Tier Level Change 935 697 229 NA 266 241 238 254 266 278 288 299 311 1,861 2,441 4,303

Selected Data (2008-2023

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Prices:

Beef cattle (5-city price/cwt) 92.27 83.25 95.35 114.73 121.75 124.18 129.93 138.97 143.97 143.38 144.3 146.9 149.19 150.65 151.49 153.45

corn (farm price/bu) 4.20 4.06 3.55 5.18 6.22 6.89 4.50 3.65 3.30 3.25 3.45 3.60 3.75 3.85 3.95 4.10

Beef Cow herd (thou) 32,435 31,712 31,371 30,864 30,158 29,295 29,050 29,349 29,678 30,734 31,558 31,953 32,300 32,739 33,293 33,668

LFP Payment rate (adult)

 Adult beef cow ($/month) 17.97 24.02 21.22 20.74 31.09 34.36 31.54 20.56 17.54 16.53 17.41 18.17 18.92 19.43 19.93 20.69

Source: http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1192
15

(1) Makes permanent what had formerly been ad hoc disaster programs covering 

producers of aquaculture commodities;

(2) Covers losses beyond the forage-related losses caused specifically by drought or fire 

on Federally managed lands under LFP;

(3) Continues to provide disaster assistance to honeybee keepers, who have been 

suffering from colony collapse disorder since the fall of 2006 that continues to have 

unpredictable consequences; and

(4) Now covers water hauling costs. 

For perspective on payments to fisheries, the 2005 Aquaculture Grant Program (AGP) disbursed 

$25 million to six states to compensate for aquaculture (catfish and alligator) losses from 2005 

hurricanes (http://www.usda.gov/oig/rptsauditsfsa.htm). It seems reasonable to conclude that the 

$25 million distributed because of the 2005 hurricanes might occur every 5 years. That would 

put expected payments for assistance to southern fisheries at $5 million per year. There are 

aquaculture producers in other states, however, that could perhaps account for another $1 million 

annually. Thus, aquaculture could reasonably account for as much as $6 million in annual 

payments.

Potential payments to fisheries can be inferred from the $25 million disbursed (USDA, OIG: 

Audit Report, 5/30/2007; http://www.usda.gov/oig/rptsauditsfsa.htm) to compensate for 

aquaculture (catfish and alligator) losses from the 2005 hurricanes (Katrina, Wilma, and Rita) 

under the 2005 Aquaculture Grant Program (AGP). In 2005, the year of Hurricane Katrina, the 

U.S. economy experienced the second largest loss due to hurricanes since 1900, based on 

normalization of total economic damage by Pielke and others 

(http://www.nhc.noaa.gov/pdf/NormalizedHurricane2008.pdf), and therefore such inferences 

need historical perspective. Pielke and others calculate that the three 2005 hurricanes together 

accounted for approximately 11 percent of total $989 billion costs from the 50 East Coast and 

Gulf Coast hurricanes that made landfall in the 106 years from 1900 to 2005 (Pielke, and others, 

table 2, PLO5 damage). Moreover, out of these 50, the 5 worst accounted for 44 percent of all 

damage. The five were: Great Miami in 1926-$157 billion; Katrina in 2005-$81 billion; 

Galveston 1 in 1900-$78 billion; Galveston 2 in 1915-$61.7 billion; and Andrew in 1992-$57.7 

billion).

It is difficult to know the threshold of total economic damage at which damage to aquaculture 

would trigger ELAP payments, but each of the five worst hurricanes might appear to meet such 

criteria as the economic impact of the next highest Gulf Coast hurricane in 1944 was about 50 

percent lower, at $39 billion, than Hurricane Andrew in 1992. Therefore, one could conclude 

that five such hurricanes have occurred over the 114 years 1900 to 2013, including the 8 years 

after the Pielke analysis, in which none occurred, implying that one such threshold hurricane 

might occur every 22.8 years (114/5). This would suggest that over the next ten hurricane 

seasons, 2014 to 2023, that such a threshold hurricane would have a 44 percent probability of 

occurring. Such a high probability raises a significant possibility, albeit one that many would not 

consider a high probability, that ELAP payments to compensate for aquaculture losses in some 

particular but unknown year could reach the maximum $20 million. With such uncertainty, this 

possibility is not quantified into expected payments.
16

ELAP also provides coverage for losses that are not covered by LFP. LFP only covers grazing 

losses that occur due to drought that is quantifiable by the U.S. Drought Monitor’s drought 

severity index or grazing losses due to fire on federally managed lands. Past ad hoc disaster 

programs have covered feeding losses from disasters other than drought, such as blizzards and 

flooding, and have included feed losses other than grazed forage. ELAP is sufficiently general 

that it could allow coverage of non-forage or even non-feed-related losses. 

Disaster aid to honeybee keepers is potentially the most expensive part of ELAP. Honeybee 

keepers began to notice above normal depopulation in their hives in the fall of 2006, which was 

subsequently ascribed to a not-yet-completely understood phenomenon that has become known 

as CCD. According to the House subcommittee testimony of Agricultural Research Service 

Administrator Knipling (http://agriculture.house.gov/hearings/statements.html), bee colony 

losses to CCD were reported to be 31 percent in 2007, with surveys in 2008 indicating losses of 

about 36 percent, with the latter being about twice the percentage of losses sustained during a 

typical winter. In other words, hives suffer about 18 percent depopulation in a normal winter, 

but losses of twice that percentage have occurred since CCD was identified.

A North Carolina cucumber producer, testifying in the same House subcommittee hearing, noted 

that he was paying approximately $22 more per hive than three years prior to pollinate his crop, 

and that producers in California are paying a much greater premium. A February 2007 New 

York Times article quoted a California bee broker, who indicated that the rental price to pollinate 

almond trees had risen from $55 per hive in 2004 to $135 in 2007, an increase of $80 

(http://www.nytimes.com/2007/02/27/business/27bees.html?pagewanted=2&ei=5088&en=3aaa0

148837b8977&ex=13302324000). The December 18, 2013 edition of the National Honey

Report (USDA, AMS) indicates an average expected rental price of $170 per hive for almond 

tree pollination, while the sale price of a standard hive by Dadant, a major apiary supplier, has 

increased $40 from their catalogue price in 2009, according to recent posting on their website 

(http://www.dadant.com/catalog/product_info.php?products_id=938).

According to the most recent Census of Agriculture, there were 2.442 million honey-producing 

colonies in the United States in 2007, producing $153.2 million worth of honey. (In comparison, 

there were 2.393 million colonies in 2006, producing $160.5 million worth of honey.) Applying 

an additional cost of $115 per hive ($170 minus $55) to the approximately 2.4 million hives in 

the United States in 2007 to compensate for the costs potentially caused by CCD under a worst 

case scenario between 2004 and 2014 would be on the order of $276 million. Were only 5 

percent of hives to be effected by CCD, costs could amount to $13.8 million ($276 million 

multiplied by 5 percent). 

In summary, there are many good reasons why ELAP expenditures might exhaust the entire $20 

million provided. However, these reasons have existed since 2008 and actual ELAP 

expenditures only averaged $10.1 million, with CCD accounting for about one half of 

expenditures. This apparent decline in outlays is observable over the limited 4 year data (table 1, 

2008-2011), suggesting possible decline in CCD incidence. Moreover, it is worth noting that 

various issues of The National Honey Report suggest that CCD may not be as significant or 

widespread as earlier feared. Using the adjustments noted in the first paragraph in this section, 
17

out-year estimated outlays are $12.8 million annually.

The Effect of Mandatory and Discretionary Livestock Program Changes on Payment Forecasts

While all programs are subject to uncertainty, its most important influence is on the livestock 

programs because they are expected to comprise the largest outlays. Therefore, the three disaster 

assistance program payment forecasts were compared to what would have been had: the honey

bee hive value adjustment and payment rate increases not have been made in ELAP; water 

hauling costs not transferred to ELAP from the conservation program; and LFP payments made 

under the 2008 Farm Bill tier levels instead of the higher tier levels mandated by the 2014 Farm 

Bill. Only the first two adjustments are discretionary and they would have reduced the 12-year 

total payments only minimally, to $5.935 and $5.91 million, respectively, from the actual 

forecast $5.943 billion. Payments under the 2008 Farm Bill tier levels would have reduced LFP 

payments roughly 32 percent, and would have reduced total payments under the three programs 

an additional $1.61 billion. However, the tier payment levels are mandatory. The effect of other 

discretionary changes is not quantifiable.

The effects of one mandatory and the remaining discretionary changes cannot be quantified, and 

so are not projected explicitly, but are accounted for at the end of the CBA, where sensitivity

analysis is done by projecting potentially higher or lower estimates. The mandatory change that 

could bring about higher rather than lower outlays is elimination of the NAP grazing 

requirement, and the effect it might have on LFP. The main discretionary change that could 

affect all three programs is the potential for ELAP payments to be increased to the 80 percent 

level if the entire $20 million is not exhausted, a discretionary change provided for but which has 

not been put into effect, as has water hauling and higher honeybee hive prices and payment rates. 

Other discretionary changes may increase outlays are not considered to be significant.

Discretionary outlays that may add insignificantly to outlays are the following: Reduced 

documentation for losses from 2012 through 2014 may not have significant effect because 

documentation is still required and spot checks to reduce fraud are made, with false certifications 

having serious consequences, such as being eliminated from receiving current and future 

payments. Payments for the costs of gathering cattle to treat for cattle tick fever is added, but 

these are expected to occur only in a limited number of south Texas counties, and are payments 

only for gathering but not treating. Other aquatic species may also be eligible under ELAP, in 

addition to bait and game fish provided for payments under the 2008 Farm Bill. 

A final reason for asymmetry and uncertainty in payments is that weather events themselves tend 

to be distributed asymmetrically, as indicated by the 2012 and 2013 droughts and the 2005 

hurricanes. Asymmetry for all programs is accounted for by reviewing historical payment levels 

that suggest outlays could be 15 percent lower than expected, and doubling that percentage on 

the high side.

Tree Assistance Program

TAP payments are triggered by regionally regular but locally unpredictable disaster events such 

as plant disease, insect infestation, drought, fire, freeze, flood, earthquake, lightning, or other 
18

natural occurrences that damage crop-producing trees, bushes, and vines. Past payments under 

TAP are a reasonable first indicator of future TAP payments. To estimate future payments, 

adjustments need to be made for changes in the program and any new or emerging conditions 

that change the likelihood of TAP payments.

TAP payments made for fiscal years 2008 to 2011 (Table 5), ranging from $3.4 million to $6.6 

million, were used to estimate future payments. Average annual payments over this period were 

$5.1 million; Florida accounted for 50 percent of the total and California accounted for 17 

percent. Five states--Florida, California, Washington, Oregon, and Michigan—accounted for 84 

percent of TAP payments. 

Table 5. TAP Payments, 2008 - 2011: Total, and top 5 States

Year Total Paid CA FL OR WA MI

2008 6,614,664 3,248,107 1,861,012 8,326 238,606 203,605

2009 3,428,460 48,971 2,262,096 106,710 13,083 366,811

2010 5,979,534 23,330 4,949,864 77,974 84,903 172,445

2011 4,523,514 96,068 1,179,188 1,150,360 1,116,824 60,640

Total 20,546,172 3,416,476 10,252,160 1,343,370 1,453,416 803,501

Average 5,136,543 854,119 2,563,040 335,843 363,354 200,875

17% 50% 7% 7% 4%

Natural disasters can be quite variable. Ninety-five percent of payments for California losses 

between 2008 and 2011 were due to the 2007-2009 drought. In Washington and Oregon, 

payments made for damages from a deep early frost in 2011 accounted for 77 and 85 percent of 

the total payments during this period. Florida has a large orchard and nursery sector, and 

damage to that state’s crops can vary widely from year to year due to intermittent freezes, 

hurricanes, and insect and disease outbreaks.

The primary statutory change in TAP from the 2014 Farm Bill is the payment calculation for 

producers who replace lost trees. Orchard and nursery tree growers will now be paid at a rate of 

65 percent of the cost of lost trees rather than the 70 percent payment rate authorized under the 

2008 Farm Bill. Base estimates for TAP payments for fiscal years 2012 to 2023 were calculated 

by reducing the 2008-2011 mean annual payment to reflect the reduced payment for planting and 

replacing lost trees. To make this adjustment, TAP payments were partitioned between the cost 

of planting and replacing trees (25 percent) and the cost of removing and preparing the site for 

planting (75 percent). The payments were then adjusted by reducing payments for planting and 

replacing trees by 7.6 percent (65/70). These adjustments reduce the mean annual payment from 

$5.1 million to $5.0 million. 

Estimates of future TAP payments also need to account for ongoing changes that will affect the 

likelihood of tree mortality. There are two ongoing phenomena that need to be integrated into 

estimates of future TAP outlays: an extreme drought now affecting California and citrus 

greening disease (also known as Huanglongbing). 
19

Increased TAP payments expected as a result of the California drought are estimated by

assuming that the California TAP payment amount in 2008 (approximately $3.2 million)—a 

severe year for California, which accounted for 95 percent of total U.S. TAP payments in that 

year—will be the amount paid to California producers in 2015 (the year in which payments for 

the current California drought will be paid). The 2013-2014 drought is more severe than in 

2008; however, the extensive California irrigation system and the resistance of almond and 

pistachio trees to drought mortality makes this approach reasonable. Thus, the expected TAP 

payment amount for 2015 is the $5 million (from above), plus $3.2 million for the California 

drought, plus the $1.3 million for citrus greening (see below), for a total of $9.5 million in that 

year (see Table 6).

Adjusting future TAP payments for the damage from citrus greening disease is more difficult. 

Citrus greening disease has spread throughout Florida and has recently been detected in 

California and Texas. Damage to citrus production is high, no reliable control for the disease has 

been developed, and tree mortality can result (http://www.nytimes.com/2013/05/10/us/diseasethreatens-floridas-citrus-industry.html?pagewanted=1&_r=0, 

http://en.wikipedia.org/wiki/Huanglongbing). Orchard management practices are evolving, but

the cumulative damage to infected trees is likely to elevate tree mortality. Further, the costs 

associated with combating citrus greening disease are likely to reduce the economic productivity 

of infected orchards. Predicting the extent to which citrus greening disease will affect California 

and Texas is uncertain at best. 

To incorporate uncertainty associated with citrus greening, this analysis uses scenarios where 

TAP payments in Florida increase by 0, 50, 100, and 200 percent. The baseline uses the 0 

percent for no change due to citrus greening disease. The 50 percent increase in Florida TAP 

payments is considered the best estimate, as it allows for both increased mortality and the 

development of more effective disease management systems. The 50 percent estimate integrates 

information provided by APHIS in 2008—which documents citrus greening disease as rapidly

spreading, that hosts have no resistance, that management activities are largely ineffective, and 

that there is little likelihood of eradication 

(http://www.aphis.usda.gov/plant_health/plant_pest_info/citrus_greening/downloads/pdf_files/t

wg/HLB%20TWG%20Report%20Final%20NOLA%20080808.pdf)—and a report two years 

later by the National Academy of Science documenting a series of cost reducing strategies for 

addressing Greening disease 

(http://www.cdfa.ca.gov/citruscommittee/docs/12880_StrategicPlanning-FloridaCitrusGreening.pdf). These documents demonstrate that citrus greening disease is imposing 

costs on the industry, that strategies to limit damages involve culling diseased trees, and indicate 

that the rapid concerted response is effectively reducing the cost of citrus greening disease. They

contain a widely varying range of loss estimates; the 50 percent estimate used here is a midpoint, and results in an additional annual outlay of $1.3 million. (The base of $5 million, plus the 

$1.3 million derived for citrus greening, results in $6.3 million in outlays for 2016- 2023—see

Table 6.) 

After all adjustments, the estimated annual average TAP payment for FY 2012 to 2023 is $6.4

million (Table 6), and total expected outlays could be $76.5 million. Without those payments,

orchardists and nursery tree growers would face disasters that could reduce operation viability.
20

Table 6: Estimated Tree Assistance Program Payments: Fiscal Years 2012- 2023

Citrus 

Greening 2012 2013 2014 2015

2016-

2023 Total 

Mean 

Annual 

Cost

Million Dollars

Estimated TAP 

Payments 50%

 

5.045

 

5.045 

 

6.326

 

9.523

 

6.326

 

76.549 6.379

Alternative Scenarios

no increase 0% 5.045 5.045 5.045 8,241 5.045 63.734 5.311

damages double 100% 5.045 5.045 10.171 13.367 10.171 114.995 9.583

damages triple 200% 5.045 5.045 12.734 15.930 12.734 140.625 11.719

Program Impacts

This regulatory action is being taken to implement a major budgetary program required by the 

2014 Farm Bill. Consistent with OMB guidance, this type of action is considered a budgetary

transfer representing a payment from taxpayers to program beneficiaries unrelated to the 

provision of any goods or services in exchange for the payment. In other words, the benefits to 

those who receive such a transfer are matched by the costs borne by those who pay for it. 

Although these transfers create incentives that very likely cause changes in the way society uses 

its resources, we lack data with which to estimate the resulting social costs or benefits.

The estimated 12-year average annual outlays of LIP ($60.7 million), LFP ($421.8 million), 

ELAP ($12.8 million) and TAP ($6.4 million) sum to $502 million (Table 7) and can be viewed 

as targeted benefits to livestock producers who suffer losses from a disaster. These outlays are 

presented, by program year (or by year of payment for 2012 and 2013 eligibility), in nominal and 

real terms in Table 8, for the 10 years beginning in Fiscal Year 2014, when payments are 

expected to commence.1 Real values of the payments are calculated using the GDP deflator 

projections in the table for each year and presented in the far right of the table, using discount 

rates of 7 percent and 3 percent, resulting in present values of $5.127 billion and $4.533 billion, 

respectively. The corresponding annualized monetary values are $645 million and $601 million, 

respectively. A low estimate 15 percent below the mean expected outlays and a high estimate 30 

percent above the mean expected outlays are presented to account for the greater uncertainty that 

outlays could be higher than lower. This uncertainty relates mainly to the potential for greater 

participation in LFP as a result of removal of the risk purchase requirement and less so for the 

potential that various discretionary provisions might increase applications and/or payout 

amounts. The 15-percent lower uncertainty level is consistent with variation on the low side of 

the mean, observed from limited recent year comparable data.

 

1

The large majority of payments is expected to actually be made in the corresponding 

fiscal year, with small amount in the following year, related to when applications are filed and 

processing speed of the applications.
21

As an example, the average adjusted LFP payments for the 2008-2011 base period was $297 

million, while the average of the 2 years having the next lowest outlays—2008 and 2009—was 

$266 million, which is 11.4 percent smaller than the 4 year average of $297 million. A value of 

15% was chosen as the lower estimate parameter to account for the third lowest year, 2010 as not 

being entirely an outlier. Hence, subjectivity is involved in the choice of 15 percent, lower 

estimate parameter, given few observations, as is the choice of the upper estimate parameter of 

30 percent. These parameters are not to be thought of as end points of a range, but rather as 

inflection points of an asymmetric probability distribution having a relatively long tail.

Table 7. Annual average 12-Year Payment Levels

For Supplemental Agricultural Programs

Program Costs $Million

ELAP 12.8

LIP 60.7

LFP 421.8

TAP 6.4

Total Program costs 501.7
22

Animal deaths or feed losses resulting from a disaster are generally not spread uniformly among 

livestock producers but are concentrated in specific areas experiencing disasters. Thus, market 

prices do not respond in a manner that compensates those specific producers who have 

experienced losses. Without financial assistance, such disasters adversely affect the profitability, 

or even the viability, of farms and ranches located in disaster areas.

VI. Alternatives Considered

Disaster assistance programs are authorized by the 2014 Farm Bill and hence rulemaking is 

required. The 2014 Farm Bill prescribes eligibility, payment levels, and criteria for payments, 

and does not provide the discretion to alter programs in a material way for LIP, LFP, and TAP. 

Due to the proscriptive nature of the statute, only two alternatives were analyzed—both for 

ELAP—as discussed below.

Table 8. Federal Transfer Payments, Nominal and Discounted 2014 Present Value: All Programs

Primary

Estimate

Low 

Estimate

High 

Estimate

Year

Dollars Disc

Period 

Covered

Federal Transfers (Fiscal 2014 Dollars)

645.4 548.6 839.0 2014 7% FY 2012-

2023

601.0 510.9 781.3 2014 3% FY 2012-

2023

Number of years 

1 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 3% 7%

Transfers - - Million Dollars per Year - - Million Dollars

 --Federal Fiscal 2014

Nominal 2,668.6 370.5 329.7 325.6 347.6 364.6 381.3 394.8 409.7 427.3

Real 2,668.6 362.9 316.3 305.9 319.9 328.6 336.6 341.3 352.4 360.7 5,127.0 4,532.9

Nominal 2,268.3 314.9 280.2 276.8 295.5 309.9 324.1 335.6 348.2 363.2

Real 2,268.3 308.4 268.8 260.0 271.9 279.3 286.1 290.1 299.6 306.6 4,357.9 3,853.0

Nominal 3,469.2 481.7 428.6 423.3 451.9 474.0 495.7 513.2 532.6 555.5

Real 3,469.2 471.7 411.2 397.7 415.8 427.2 437.6 443.8 458.2 468.9 6,665.1 5,892.8

GDP 

deflator 1.00000 1.02100 1.04244 1.06433 1.08668 1.10950 1.13280 1.15659 1.16250 1.18459

Inputs

GDP Deflator: Yrs 1 - 5 2.10% (OMB )

Yrs 6 - 12 1.90% (Average Growth since 1993)

Total Annualized

ELAP Nominal 38.7 12.8 12.8 12.8 12.8 12.8 12.8 12.8 12.8 12.8 153.9 $15.4

Real 38.7 12.5 12.3 12.0 11.8 11.5 11.3 11.1 11.0 10.8 143.0

PV @ 3% 37.6 11.8 11.2 10.7 10.2 9.7 9.2 8.7 8.4 8.0 125.5 $14.7

PV @ 7% 36.2 11.0 10.0 9.2 8.4 7.7 7.0 6.4 6.0 5.5 107.4 $15.3

LIP Nominal 150.4 56.2 58.8 60.7 62.7 64.6 66.4 67.9 69.5 71.1 728.3 $72.8

Real 150.4 55.0 56.4 57.0 57.7 58.2 58.6 58.7 59.8 60.0 671.9

PV @ 3% 146.0 51.9 51.6 50.7 49.8 48.8 47.7 46.3 45.8 44.7 583.2 $68.4

PV @ 7% 140.6 48.1 46.0 43.5 41.1 38.8 36.5 34.2 32.5 30.5 491.8 $70.0

LFP Nominal 2,463.2 292.0 251.8 245.8 265.8 280.9 295.8 307.8 321.1 337.1 5,061.3 $506.1

Real 2,463.2 286.0 241.5 230.9 244.6 253.2 261.1 266.1 276.2 284.6 4,807.5

PV @ 3% 2,391.5 269.6 221.1 205.2 211.0 212.0 212.3 210.1 211.7 211.7 4,356.1 $510.7

PV @ 7% 2,302.1 249.8 197.2 176.2 174.4 168.7 162.6 154.9 150.2 144.7 3,880.7 $552.5

TAP Nominal 16.3 9.5 6.3 6.3 6.3 6.3 6.3 6.3 6.3 6.3 76.2 $7.6

Real 16.3 9.3 6.0 5.9 5.8 5.7 5.6 5.4 5.4 5.3 70.8

PV @ 3% 15.8 8.8 5.5 5.3 5.0 4.8 4.5 4.3 4.2 4.0 62.1 $7.3

PV @ 7% 15.2 8.1 4.9 4.5 4.1 3.8 3.5 3.2 2.9 2.7 53.0 $7.5

Total Nominal 2,668.6 370.5 329.7 325.6 347.6 364.6 381.3 394.8 409.7 427.3 6,019.7 $602.0

Real 2,668.6 362.9 316.3 305.9 319.9 328.6 336.6 341.3 352.4 360.7 5,693.3

PV @ 3% 2,590.9 342.0 289.4 271.8 275.9 275.2 273.7 269.5 270.1 268.4 5,127.0 $601.0

PV @ 7% 2,494.0 317.0 258.2 233.4 228.1 219.0 209.6 198.7 191.7 183.4 4,532.9 $645.4

Low Total Real 4,839.3

PV @ 3% 4,357.9

PV @ 7% 3,853.0

High Total Real 7,401.2

PV @ 3% 6,665.1

PV @ 7% 5,892.8

Category

Years

Present Values 

(See note below)

Annualized 

Monetized 

($millions/year)

Primary

Low

High
23

The two ELAP alternatives considered would reduce average outlays from the expected $12.8 

million to the 2008-2011 average of $10.1 million. These two alternatives are:

(1) Reducing project honey bee hive payment levels to the levels used under the 2008 

Farm Bill, and

(2) Eliminating water hauling costs from ELAP (in other words, still covering these costs 

under ECP).

While these actions would provide a significant reduction in expected ELAP outlays, overall

nominal program outlays of $502 million might only decline to $499 million, a reduction of only 

0.6 percent. Meanwhile, solid evidence suggests higher payment rates for honey bee hives and 

colonies are appropriate, and failure to provide such higher payments could adversely affect 

honey bee operators in material ways.