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Aid Is a Bumper Crop for Farmers

By Gilbert M. Gaul, Dan Morgan and Sarah Cohen
Washington Post Staff Writers
Sunday, October 15, 2006

In the spring of 2000, Congress decided to do something about its costly and politically driven practice of giving farmers a disaster payment each time a storm damaged their crops.

The lawmakers voted to use $8 billion in new taxpayer subsidies to help farmers buy crop insurance to protect them against losses. The insurance would replace the disaster payments and reduce government costs.

But shortly after passing the Agricultural Risk Protection Act, Congress lost its fiscal will. One week before the presidential election, it passed a new $1.8 billion disaster bill to assist farmers hurt by bad weather. Two others followed in subsequent years, totaling more than $6 billion. Today, after a searing drought in the Plains, farm-state legislators are pushing for billions more in aid.

The result is that farmers often get paid twice by the government for the same disaster, once in subsidized insurance and then again in disaster assistance, a legal but controversial form of double-dipping, a Washington Post investigation found. Together, the programs have cost taxpayers nearly $24 billion since 2000.

The government pays billions to help farmers buy cheap federal insurance, billions more to private insurance companies to help run the program and billions more to cover the riskiest claims. And on top of all that, it spends billions on disaster payments.

"It should be one or the other," said Mark Orebaugh, a flinty 52-year-old who has suffered several years of bad crops in southwestern Kansas. "There should be a permanent disaster program or crop insurance that is enough to cover my losses."

Instead, there are essentially both.

"Everybody says the money is free, but we're all paying," said Charles Fisher, a central California farmer who helped oversee government disaster payments in his area for a dozen years. "Washington unbundles the money, opens the window and turns on the fan."

The money is blown all over the country, from New York to Nebraska to California, usually at election time, fanned by farm-state legislators.

A major share of the money goes to parched and flood-prone areas where farming is tenuous at best and "disasters" seem to happen every year, a review of thousands of records and interviews with dozens of farmers, economists, insurers and government regulators have found.

Farmers in Gaines County, a parched stretch of West Texas, collected nearly $66 million in the past five disaster bills. Cavalier County farmers in North Dakota, soaked by rain and floods, got $67 million. The money was in addition to $116 million that farmers in those two counties got in crop insurance payments.

Just four states forming a narrow swath in the middle of the country -- Texas, Kansas, South Dakota and North Dakota -- collected nearly four of every 10 dollars of the disaster aid handed out in the past decade, $3.8 billion in all, records show. Farmers in those states also collected $5.6 billion from crop insurance.

Those farmers have come to depend on both crop insurance and disaster payments, which together allow for covering up to 95 percent of the value of their crops. "Taxpayers are funding something good, the rural life," said Terry Aronson, a farmer in the flood-prone Devil's Lake area of North Dakota, who has received nearly $300,000 in disaster aid the past decade.

"No one wants to appear they are being chintzy with farmers," said Bruce L. Gardner, an agricultural economist at the University of Maryland and a former top USDA official. "In spite of all of these increases in subsidies, crop insurance really hasn't made a dent in the disaster payments."

A Continuous Cycle

In the past 25 years, Congress has passed three major "reforms" of the federal crop insurance program in an effort to sign up more farmers and reduce their dependence on disaster aid. Instead, the result has been a continuous cycle in which Congress expands crop insurance only to turn around and hand out more disaster payments.

In 2000, then-House Agriculture Committee Chairman Larry Combest, a Republican representing West Texas, was instrumental in getting the most recent reform bill passed, which included the $8 billion in new premium subsidies. He cited the "countless billions" in disaster payments that were undermining crop insurance. In the Senate, Pat Roberts (R-Kan. ) argued that expanded insurance would result in "less need" for disaster aid.

The government would now pick up an average of 60 percent of the cost of farmers' premiums. Farmers jumped at the cheaper insurance. Today, about 80 percent of all eligible cropland -- 240 million acres -- is insured at some level.

Yet only four months after the bill was passed, Congress authorized $1.8 billion in disaster aid. That was followed by $3.1 billion for 2001 and 2002 crop losses, and $3.5 billion covering 2003 and 2004. Still another $250 million was set aside after the 2005 hurricanes.

"In farm states, legislators have to appear they are doing something," said Art Barnaby, an agricultural economist at Kansas State University and an expert on crop insurance. "It can hurt them politically if they don't."

Combest, now a lobbyist representing agricultural interests, including crop insurance agents, declined to be interviewed. "I think I'll take a pass," he said. Roberts did not respond to requests for comment.

Disaster payments to farmers are a public record but, by law, the USDA keeps the names of recipients of crop insurance confidential. Thus there is no way to count how many farmers have collected both and in what amount. However, interviews with farmers and government officials indicate that farmers who get insurance payments also get most of the disaster money.

The USDA calculates how much to pay farmers in disaster money by first looking at how much they have received in crop insurance for losses. Farmers must show that they have lost at least 35 percent of their crop to qualify for a disaster payment. The maximum is $80,000. The total of their insurance payments, disaster aid and sales revenue from remaining crops is capped at 95 percent of what they would have earned if they had harvested and sold a full crop.

Bountiful Harvests and Aid, Too

Tulare County in California is an example of a farming region where the use of crop insurance is extensive but farmers still draw millions in disaster relief. The county is part of the lush San Joaquin Valley, one of the largest and most productive agricultural regions in the world. The largely irrigated fields produce a bountiful harvest of oranges, lemons, olives, cotton and 150 other crops.

For 12 years, Charles Fisher, 73, helped to police the distribution of disaster payments to Tulare's farmers.

It wasn't the easiest task for Fisher, who chaired the local farmers' committee that approves disaster payments on behalf of the Tulare County branch of the federal Farm Service Agency. In one case, a nectarine grower sought help for weather damage after he had pulled down his own trees. Other farmers claimed to have suffered disasters when the weather was normal.

Fisher said he doesn't begrudge growers who have collected disaster aid, despite the cost to taxpayers. His own farm has gotten some. "Whether it's right or wrong, if they are offering it, you're foolish to turn it down," he said.

Tulare farmers have received a total of nearly $77 million in disaster payments since 1998. They have also netted $51.1 million in crop insurance. Yet the county harvest has been bountiful in most years, with agricultural sales reaching an all-time high of $4 billion in 2005.

The county hasn't suffered a true weather disaster since Christmas 1998, when it was hit with a freeze and torrential rains, according to local weather consultants and some farmers.

"Katrina is a disaster," said Tom Gruber, a local orange grower. "A hurricane in Florida is a disaster."

But very few Tulare farmers are rejected when they apply for disaster aid, records show. Of the 732 applications by orange growers for assistance in the past two disaster bills, only 33 were ruled ineligible -- less than 5 percent.

Don Laux, 78, of Porterville, is one of dozens of citrus growers who have gotten help.

Some of the orange trees on his 500-plus acres were planted in 1911 and have survived Tulare County weather for nearly a century. As do most citrus growers, Laux and his son Gary use wind machines, automatic irrigation systems, computerized weather stations and a private weather consultant to minimize their risks. They also take out crop insurance, which has paid them for losses. Still, Laux Land Co. has received $215,000 in disaster payments since 1998, according to USDA records.

"I think anyone could get along without it, but it would be a lot harder," Don Laux said. "Any little bit helps."

Last year, the Lauxes received $73,000 in disaster payments for losses on a portion of their 2004 crop of navels and Valencias. They based their claim on a warm spell that "hit the blooms" and caused some oranges to fall prematurely.

Most of their orchards came through okay, but when Don Laux checked with the packaging house that handled their oranges, he learned that yields per acre had fallen by up to 40 percent in some of their orchards. Armed with the records, the Lauxes filed for aid.

"We're not farming for the government, we're farming for ourselves," Gary Laux said. "We truly would like to make money growing crops. But there are a lot of influences out there we have no control over. It's nice to have a safety net."

Minutes of monthly Farm Service Agency meetings, obtained under the Freedom of Information Act, show that some Tulare growers have pushed the disaster program to the limit. In March 2004, for example, a grower sought a payment on 27.6 acres of nectarines he said he had grown three years earlier. After a field inspection and aerial photographs, the committee concluded that "there was no evidence of nectarines. The slides distinctly show pulled trees in bunches on the 27.6 acres."

A catfish farmer who put in a claim for fish lost because of heat "was unable to substantiate the viability of the operation." A field inspection found "a lack of evidence of fish or fish bones in the dried up ponds."

Both applications were rejected.

'Everything but the Kitchen Sink'

Congressional sponsors of disaster legislation offer a variety of reasons for their bills. They say federally subsidized insurance doesn't cover all of a farmer's losses, and disaster aid fills the gaps. It helps to stabilize rural economies, which don't have many other options. And it offsets rising fuel and production costs while securing cheap food for Americans.

"Any suggestion that things are good in ag country does not meet the reality test," Rep. Jerry Moran (R-Kan.), chairman of a key House Agriculture subcommittee, observed in a floor speech last year. His office recently helped to coordinate a day of lobbying by farmers and agriculture groups pressing for billions in aid for the 2005 and 2006 crop years.

To get those costly disaster packages passed, their sponsors spread the money around. Recent disaster bills include millions for cottonseed producers and pecan and sugar beet growers; set-asides for farmers in Virginia and North Carolina; and $7.2 million for a transportation project benefiting a sugar grower's co-op in Hawaii. Since 1990, legislators have muscled through eight major disaster packages and several smaller provisions covering every year except the past two, including money for clams, oysters, shellfish, hay, sod, shrimp and lobster.

Many of the recent disaster packages have been shoehorned into large appropriations bills, including a military construction bill in 2004. That means legislators do not even get an opportunity to vote directly on the subsidies.

"The problem with ad hoc disaster programs is that in order to get them passed, they throw in everything but the kitchen sink," said Tom Buis, president of the National Farmers Union. The industry group favors overhauling the present system to make it more rigorous while still targeting farmers in need. "There's a lot of ways we can do this better. We need to start looking at the underlying cause of the problem, not just the symptoms."

Buis added that farmers don't expect to have all of their losses covered by disaster payments. "They're not being made whole now," he said. "What we have is a horrible public policy that needs to be fixed so we help farmers who truly have a need."

Among the ideas being considered by Buis and others is guaranteeing a portion of a farmer's income.

In recent months, lawmakers from the Plains states have pressed for billions more in disaster aid to cover the past two crop years, contending that farmers have been devastated by drought and rising costs. The Bush administration opposes the additional aid, noting that crops were at "record or near record" levels in 2005 and that millions would go to farmers who do not really need the money.

In a letter to Agriculture Secretary Mike Johanns, Sen. Kent Conrad (D-N.D.) wrote that not all farmers have "had the good fortune to produce above average crops," adding that the $4 billion wouldn't "come close to making farmers whole."

A Perennial Safety Net

Conrad's home state highlights how disaster aid has become a kind of perennial safety net for risk-prone farmers. North Dakota ranks second, behind only Texas, in total disaster aid, with almost $1 billion in the past decade. Its farmers have suffered floods and droughts, with many getting payments over and over.

Federal agricultural disasters have been declared five out of the past six years in Cavalier County, where farmers grow wheat and barley on flat, wind-blown fields in the northeastern corner of the state. None of the farmers' applications for aid for their 2003-2004 crops was turned down, records show. "There was no reason to turn any down," said Michele Schommer, who heads the local office of the Farm Service Agency. "The whole county was bad."

Although accounting for 2 percent of all farms in North Dakota, Cavalier County has received more than 7 percent of the state's disaster payments in the past decade. The average total of $113,000 per farm was more than double the state average and nearly 20 times the national average.

At 6,300 acres, Dettler Farms is among the biggest in Cavalier County. It has collected disaster payments each time they were available in the past decade -- $450,000 all together. The farm has also received insurance payments nearly every year, said Steve Dettler.

Last year "was the worst year ever," Dettler said. Rains came during the planting season in June. "You couldn't get into the fields."

Dettler and other farmers are counting on more help. In late August, Conrad staged a rally of 400 farmers in Bismarck supporting a multibillion-dollar aid package to help farmers and ranchers in the western part of the state, which has been beset by drought. He was joined by Gov. John Hoeven (R).

The drought has actually helped Cavalier County by drying out fields that had been flooded; farmers there are harvesting one of their best crops in a decade. But Dettler said he hopes there is a disaster program to cover his 2005 losses.

"We depend on it being there every other year," he said. "It's an election year, and everyone's involved this time."

Conrad said that "it's a key and legitimate question" to ask how much aid farmers should get. But he added, "We're in something extraordinary. Go to the Gulf Coast, they have 100 years' experience with hurricanes. We don't say, 'Enough' to Florida, or to California and earthquakes, wildfires and mudslides. As a matter of national policy, we help out areas that have natural disasters."

How Much Risk to Bear?

How much risk should taxpayers expect American farmers to bear on their own?

Mark Orebaugh struggles with that question while sitting at the kitchen table in his modest home northwest of Dodge City, Kan. He has received hundreds of thousands of dollars in federal crop insurance in the last four years. An additional $116,000 has arrived in disaster payments.

Finally, after a long pause, he answers that he could tolerate up to a "20 percent" crop loss. "I don't think 20 percent is a disaster," he said. "I could probably handle that if you average out the good and bad years."

But Orebaugh is uncertain and looks to his banker, Leon Flax, for help. Flax, tall and dressed in blue jeans, has worked with Orebaugh and other farmers for years. "I don't know," he says, shaking his head. "Not this year. I don't think you could handle anything this year."

A late freeze hit some of Orebaugh's crops. Then the temperature soared to 100 degrees in June and remained there for weeks, baking his wheat, corn and grain sorghum. The claims adjuster has already been by once, and Orebaugh expects him back soon. He hopes to collect about $200,000 in crop insurance.

Like most Kansas farmers, Orebaugh is heavily insured. With the help of government subsidies, he has covered up to 75 percent of the yields on the 6,000 acres he owns or leases.

Orebaugh said the insurance alone is not enough. To begin with, it does not cover all of a farmer's losses. In addition, if a farmer suffers poor harvests in back-to-back years, his insurance policy, which is based on his average yield over four years, covers less. This is a major sore point in areas such as Kansas, which has been hard hit by droughts.

"I'm not sure what more we can do," said Rebecca Davies, a regional director for the crop insurance program in Topeka, Kan. "We have coverage [plans] of up to 85 percent. What more could you ask for? They still pass disaster programs."

Kansas farmers have received $421 million in disaster payments since 2001, among the highest payouts nationally. That is in addition to $1.3 billion in insurance payments to farmers and $680 million in federal subsides to help farmers pay their premiums.

For Orebaugh and most Kansas farmers, the federal insurance is "a good deal." In the past four years, he has paid $81,730 in premiums but collected $295,796 in claims-- or $3.62 for every $1 he put in. That's higher than the state average, but Orebaugh farms on the western side of Kansas where water is scarce and much of the farmland isn't irrigated.

"There's just no water," he said. "We probably should never have developed those [fields] when we did 30 years ago because the water table was declining."

Orebaugh's grandfather immigrated from Germany in 1901. "He crossed two of the most fertile valleys in the country, the Missouri and the Mississippi, and settled in western Kansas," Orebaugh said. "Why he ever landed in this godforsaken valley I don't know."

A drought has plagued much of western Kansas, including Ford County, where Orebaugh farms, since 2000. Orebaugh has had two good crop years out of the last six. "This year is going to be a wipeout," he said.

The good years help to average out the bad. "I use the money to pay back my loans," Orebaugh said. But he quickly adds that he rarely gets ahead. "That's why we need disaster assistance. It's the only way we can pay back our loans."

This year, Orebaugh took on an additional 1,000 acres in his operation and has higher costs and a bigger bank loan, about $230,000. "Talk about a case of bad timing," he said. Now, he is "praying" for another disaster bill.

"We don't like it any more than the taxpayers do. With disaster assistance, we're at the whims of the politicians," he said. "But we need something. I don't care what you name it.

"It's feast or famine here. Economically, does it make sense? Probably not. Philosophically, I don't know. Americans want cheap food, and they want it when they want it."

Research editor Alice Crites contributed to this report.

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