Livestock Forage Disaster Program (LFP)

Livestock Forage Disaster Program (LFP) James B. JohnsonEmeritus Professor MSU Department of Agricultural Economics and Economics Collaborating Partners: RMA Billings Regional Office Fort Peck Community College Billings, MT January 28, 2010 1

LFP Overview • The purpose of LFP is to provide compensation to eligible livestock producers who have suffered grazing losses because of qualifyingdrought or fire. • LFP is applicable when grazing losses that occur because of a qualifying drought during the normal grazing period for the county on land that is native or improved pastureland with permanent cover, or planted with a crop specifically for grazing livestock.

LFP Overview, con’d. • LFP is applicable when grazing losses due to wildfire are suffered on rangeland managed by a Federal agency because the producer is prohibited from grazing the normally permitted livestock on the managed rangeland because of fire. • LFP has a risk management purchase requirement for program benefit eligibility.

Risk Management Purchase Requirement • For purposes of meeting the LFP risk management purchase requirement, a Montana producer must purchase either rangeland insurance or pay for Non-insured Disaster Assistance Program (NAP) coverage for rangeland, or both. • The RMA-approved insurance program for pastureland and grazing land in Montana is Pasture, Rangeland and Forage Rainfall Insurance (PRF-RI). This is a pilot program and only covers losses due to drought (rainfall index shortfalls).

Risk Management Purchase Requirement, con’d. • Livestock producers are NOT required to purchase pilot program insurance to fulfill the risk management purchase requirement for LFP eligibility. • Because PRF-RI does not cover all perils, NAP is made available to producers for all pastureland and grazing land to cover multiple perils, including fire.

LFP Signup • A general signup period and ending date are not applicable for LFP. • A county FSA office will announce that producers may make application for LFP because the county has incurred a qualifying drought based on the U.S. Drought Monitor severity rating.

LFP Signup, con’d. • A producer impacted by grazing losses due to fire on Federally managed grazing land will be expected to notify the county Farm Service Agency office of the loss. Producers will communicate that they were notified by the Federal management agency that they are prohibited from grazing their normally permitted livestock and/or that their normal grazing days are reduced because of the fire.

Qualifying Droughts • Qualifying droughts are rated by the U.S. Drought Monitor as any of the following: • D2 (severe drought) in any area of the county for at least 8 consecutive weeks during the normal grazing period for the specific type of grazing land or pastureland for the county.

Qualifying Droughts, con’d. • D3 (extreme drought) intensity in any area of the county at anytime during the normal grazing period for a specific type of grazing land or pasture land in the county. • D3 (extreme drought) intensity in any area of the county for at least 4 weeks during the normal grazing period (not necessarily consecutive weeks) for the specific type of grazing land or pastureland for the county or D4 (exceptional drought) intensity in any area of the county at any time during the normal grazing period for the specific grazing land or pastureland for the county.

Qualifying Droughts, con’d. • The beginning date for each of the qualifying drought ratings is specified by the Farm Service Agency for each pasture/grazing land type. • The fourgrazing land/pasture types considered are: native pasture, improved pasture, small grains and forage sorghum (with the last two combined), are specified in each county. For each type the beginning and ending dates of the grazing period, grazing days and acres per animal unit are specified.

LFP Payments for Losses from a Qualifying Drought • An eligible livestock producer who owns or leases grazing land located in a county with a D2 (severe drought) during the normal grazing season will receive one month of payment, equal to the monthly feed cost. • An eligible livestock producer who owns or leases grazing land located in a county with a D3 (extreme drought) during the normal growing season will receive 2 months of payment, a payment equal to twice the monthly feed cost.

LFP Payments for Losses from a Qualifying Drought, con’d. • An eligible producer who owns or leases grazing land located in a county with a D3 (extremedrought) for at least four weeks during the normal growing season or a D4 (exceptional drought) during the normal growing season will receive 3 months of payment, a payment equal to three times the monthly feed cost.

LFP Payments for Losses from a Qualifying Drought, con’d. • The LFP Payment Rate for losses because of a qualifying drought is 60 percent of the smaller of: • Monthly payment rate for a particular kind, type and weight of livestock, as specified by FSA, or • Grazing land acres divided by normal carrying capacity, then multiplied by 30 days and multiplied again by daily feed cost per animal unit.

Example: A Drought-Impacted Ranch in Carter County • A Carter County ranch has 500 cows, 20 mature range bulls and 75 un-bred heifers and 6 saddle horses at the beginning a 215 grazing period that lasts May 1 to December 1. A drought of D2 intensity begins July 15th and lasts until September 28th. This livestock is grazed on 15,000 acres of non-irrigated native range, which the rancher has NAP coverage for drought and other covered perils.

Example: A Drought-Impacted Ranch in Carter County • The rancher will receive the lesser of the following two calculations of monthly feed costs:

Example: A Drought-Impacted Ranch in Carter County • 520 Beef, Adult Cows and Bulls at $40.04 per head = $20,821 • 75 Beef, Non-Adult animals at 500 pounds or more $30.03 per head = $2,252 • 6 Horses, All at $29.63 per head = $178 • TOTAL = $23,251 • 60% of Total = $13,951

Example: A Drought-Impacted Ranch in Carter County Montana Grazing Periods, Grazing Days, and Acres/Animal Unit By Eligible Grazing Types

Example: A Drought-Impacted Ranch in Carter County • Consider the native pasture lost: 15,000 acres/21.0 acres per AU = 714.29 AU x $40.04 per AU = $28,600 • The potential payment is therefore: 60% of Total = $17,160 • On this ranch, the one month financial assistance will be $13,951, the smaller of the two estimates.

Qualifying Fire • LFP assistance may be available for a qualifying fire only if: • The grazing loss occurred on rangeland managed by a Federal agency; and • The eligible livestock producer is prohibited by the Federal agency from grazing normally permitted livestock on the managed rangeland because of fire.

Qualifying Fire, con’d. • Grazing loses must occur in the calendar year that the benefits are requested. • The Farm Service Agency will confer with the Federal management agency to determine on what date permitted livestock were first prohibited from grazing.

LFP Signup Procedures for a Qualifying Fire • An impacted producer will notify the local Farm Service Agency office of a grazing loss on Federally managed rangeland do to fire. • The Farm Service Agency will confer with the land management agency to substantiate that a qualifying fire has occurred, to identify the location of the fire, to establish the date the fire started, and whether the livestock producers were prohibited from their normal permitted grazing and/or grazing days were reduced because of fire.

Payment Calculations for a Loss Due to Fire • Payments begin on the first day that the permitted livestock are prohibited from grazing the eligible rangeland and ends on the earlier of either the last day of the Federal lease for the livestock producer or the day that would make the period a 180 calendar day period. • The payment rate is 50 percent of the monthly feed cost for the number of days the producer is prohibited from grazing the managed rangeland because of fire, not to exceed 180 days.

Payment Calculations for a Loss Due to Fire, con’d. • To determine the payment for a grazing loss due to fire, the smaller of two calculations is selected: • [Permitted AUs x normal grazing days x AU daily rate] x 50 percent = Maximum payment amount. • [Reduced AUs x reduced grazing days x AU daily rate] x 50 percent = Value of Grazing Reduction due to fire • The animal unit daily rate is the AUM rate, as specified by the Farm Service Agency, divided by 30 days.

Example: A Fire-Impacted Ranch in Carter County • A second ranch in Carter County grazes cattle in the Custer National Forest. • This ranch has 500 animal units (AUs) of permitted grazing for a maximum of 180 permitted days. A forest fire started by lightning occurred about a third of the way through the permitted grazing period and 350 of 500 animal units are restricted from the permitted grazing for the remaining 120 days of the grazing period

Example: A Fire-Impacted Ranch in Carter County, con’d. • To determine the LFP payment for the grazing loss due to fire, the smaller of two calculations is selected: • 500 permitted animal units x 180 permitted days = 90,000 animal unit days x $1.3345 animal unit day payment rate = $120,105. (0.50) x $120,105 = $60,053

Example: A Fire-Impacted Ranch in Carter County, con’d. • 350 lost animal units x 120 lost grazing days from permit = 42,000 total reduced animal unit days x $1.3345 animal unit day payment rate = $56,049. 50% of $56,049 = $28,025 • On this ranch, the LFP financial assistance for grazing loss due to fire on federally managed land would be $28,025.

Summary • LFP provides eligible livestock producers with compensation for grazing losses because of qualifying drought or fire. • LFP has a risk management requirement for program benefit eligibility. In Montana a producer may purchase PRF-RI insurance or pay for NAP coverage, or both.

Summary, con’d. • Qualifying droughts, as rated by the U.S. Drought Monitor, are: • D2 (severe drought), 1 month of payment • D3 (extreme drought), 2 months of payment • D3 (for at least 4 weeks) or D4 (exceptional drought), 3 months of payment

Summary, con’d. • The payment rate is 60 percent on smaller of the monthly feed cost x the number of head or 60 percent of the maximum animal unit months x the animal unit monthly feed cost. • LFP also provides compensation fro grazing losses due to wildfire on Federally managed rangelands. The compensation rate is 50 percent of the monthly feed cost for the number of days a producer is prohibited from grazing the land subsequent to a fire.

QUESTIONS?

Livestock Forage Disaster Program (LFP)