A coalition of Senators is questioning if several new rules of the Livestock Indemnity Program will actually help farmers and ranchers if their herds incur losses from harsh weather.
The Senators wrote to Secretary of Agriculture Tom Vilsack about the critical assistance that the Livestock Indemnity Program can provide to support the livestock industry during a difficult time. They specifically wrote about the need to come up with a more precise methodology to calculate death losses for non-adult beef animals and the necessity to set a payment rate utilizing monthly or quarterly price points to more accurately determine fair market value payment rates for the lost animals.
The letter was sent by Senators Chuck Grassley, Tom Harkin, Mike Johanns, Ben Nelson, Pat Roberts, Sam Brownback, Tim Johnson and John Thune. A copy of the text of the letter is below.
July 28, 2009
The Honorable Tom Vilsack, Secretary
United States Department of Agriculture
1400 Independence Ave, SW
Washington, DC 20250
Dear Secretary Vilsack,
We write today to thank you for the U.S. Department of Agriculture’s (USDA) recent publication of the Livestock Indemnity Program (LIP) rules effective July 13, 2009. Livestock producers faced losses from harsh weather in 2008 and continue to face disasters in 2009. This assistance is critical to helping support the livestock industry during a very difficult economic time.
Section 15101 (and Section 12033) of the Food Conservation and Energy Act of 2008 (2008 Farm Bill) directed USDA to set payment rates under this program at “75 percent of the market value of the applicable livestock on the day before the date of death of the livestock, as determined by the Secretary.” In addition, the Federal Register notice 7 CFR Part 760 repeats this formula. However, Farm Service Agency (FSA) Handbook 1-LDAP, page 2-46 dictates the set payment rates for Kind, Type, and Weight Range of livestock.
Non adult beef animals are separated into weight ranges of “less than 400 pounds” and “400 pounds and more.” Many of the death losses this year have occurred from extreme heat which has killed heavy steers and heifers in feedlots. These cattle can weigh upwards of 1000-1300 pounds. However, the weight class of “400 pounds and more” would not come close to covering a 75 percent market value payment for livestock in these higher ranges which are close to market weight. We suggest that the USDA strive to come up with a methodology calculating more specific payments for each animal as was intended by Congress. We urge you to work with groups representing affected livestock producers to come up with this more precise methodology.
In addition, the rule sets out that the payment rate is calculated using “nationwide prices for the previous calendar year unless some other price is approved by the Deputy Administrator.” During years of price volatility, producers may not be satisfactorily compensated based on market conditions. Rather than the approach included in the rule, we suggest the USDA instead utilize monthly or quarterly price points to more precisely determine fair market value payment rates for the lost animals. This revised approach should be used to calculate the indemnity rates for all livestock species, not just cattle.
We appreciate your assistance in making the LIP more equitable for our nation’s livestock producers.