The Emergency Relief Program (ERP) has been in place since the 2020 crop. We got used to how it worked for 2020 and 2021 and assumed that the 2022 program which was appropriated for in December 2022 would be similar. It is not.
Let’s review the details for Track 1 first. Instead of calling it Phase 1, it is now Track 1. Just like the previous ERP Phase 1, it is based on receiving crop insurance. If you received an indemnity for your 2022 crop, Track 1 will recalculate the amount of indemnity based on a higher percentage based on the amount you originally elected as per this table:
These percentages are the same as Phase 1 for 2020 and 2021 ERP. However, this is about the only thing that is the same. ERP Phase 1 typically reimbursed the farmer for the crop insurance premiums paid in 2020 or 2021. 2022 Track 1 will reimburse only farmers who qualify as “underserved farmers” who have a Form CCC-860 on file with FSA or will file with the application.
Once the possible payment amount is calculated, FSA will then apply a “progressive” payment factor to your payment as per this table:
As you can see, if your calculated payment is $10,000 or more, you will only collect 10% of that excess number unlike 2020 and 2021 Phase 1 when you automatically collected 75% of the calculated amount plus reimbursement of your crop insurance premiums (which may also have been capped at 75%).
Now, if are not an underserved farmer and your total payment calculation is greater than $10,000, you will only collect 10% plus an extra $5,000 on the first $10,000 of claim. The first $10,000 of claim will receive $6,000 plus the excess will only be at the 10% level and then the final number will take a 25% discount. This is dramatically different from 2020 & 2021 Phase 1 and is not likely what Congress intended and may not even be the law.
Let’s look at some examples comparing 2020 & 2021 Phase 1 to 2022 Track 1.
Jim’s 2020 recalculated Phase 1 indemnity resulted in a total amount of $75,000 ($100,000 X 75%) plus he received crop insurance reimbursements of $20,000 for a total payment of $95,000. Under 2022 Track 1, his payment would be $11,250. $6,000 for the first $10,000 plus $9,000 for the next $90,000 or $15,000, then 75% of this number is $11,250.
The ABC general partnership has three equal partners. During 2021, they qualified for $300,000 ($400,000 X 75%) of extra indemnity plus a reimbursement of $75,000 for crop insurance premiums. Under 2022 Track 1, they would qualify for $6,000 on the first $10,000, plus $39,000 for the next $390,000 for a total of $49,000 then final payment is 75% of this number or final payment of $36,750.
Mary, an underserved farmer, received $60,000 of 2020 Phase 1 indemnity payments ($80,000 X 75%) plus $25,000 of reimbursed crop insurance premiums for a total payment of $85,000. Under 2022 Track 1, she would get $6,000 on the first $10,000, then $7,000 for the remainder or $13,000, then 75% of this number is $9,750 plus the $25,000 equals $34,750 total payment. The crop insurance premium reimbursement had already been reduced by 25% under 2020 Phase 1.
The bottom line is that 2022 Track 1 will substantially reduce equivalent calculated amounts under 2020 & 2021 Phase 1 and in almost all cases for production farmers, their final payment will likely be less than 10-15% of what they would receive under 2020 and 2021 ERP Phase 1.
Here is the Fact Sheet for 2022 ERP Track 1. We will discuss 2022 ERP Track 2 in a separate post.
