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American Relief Act of 2025: A Lifeline for Farmers and Ranchers

AInvestThursday, Jan 2, 2025 11:32 am ET
6min read
The American Relief Act of 2025, signed into law on Dec. 21, 2024, has brought much-needed relief to farmers and ranchers across the country. This legislation includes $31 billion in natural and economic disaster aid for farmers and ranchers, a second extension of the 2018 farm bill, and $2.5 billion in additional aid to be distributed through USDA. This article will break down the key provisions of this act and their implications for agriculture.

Farm Bill Extension

The 2018 farm bill expired for the second time on Sept. 30, 2024. If an extension had not been passed, markets would have gone over the "Dairy Cliff" on Jan. 1, 2025, with USDA required to purchase dairy products at about twice current market prices. Similarly high prices would have been offered for many crops in the 2025 crop year under so-called permanent law, which is suspended with every farm bill and every farm bill extension. The farm bill extension gives Congress until Sept. 30, 2025, to pass a new farm bill. However, it did not fund numerous programs without baseline funding, so-called "orphan programs," which range from the Feral Swine Eradication and Control Pilot Program to Emergency Citrus Disease Research funding.

Disaster Aid

The American Relief Act of 2025 allocates $21 billion in disaster aid for agriculture. This funding will be distributed by USDA to cover necessary expenses related to losses of revenue, quality, or production for crops, trees, bushes, and vines. Qualifying losses include those caused by natural disasters such as droughts, wildfires, hurricanes, floods, derechos, excessive heat, tornadoes, winter storms, freeze (including a polar vortex), smoke exposure, and excessive moisture. Of the $21 billion, up to $2 billion will be used to cover livestock losses related to drought, wildfires, and floods, and $3 million is mandated to be used to carry out regular testing for molasses imports at port of entry. USDA may provide the disaster assistance through block grants to eligible states and territories, including assistance in the form of compensation to producers for timber, citrus, pecan, and poultry (including infrastructure), and agricultural producers who have suffered losses due to the failure of Mexico to deliver water to the United States in accordance with the 1944 Water Treaty.

Producers who have insurance under the Federal Crop Insurance Program or coverage under the Noninsured Crop Disaster Assistance Program (NAP) for the applicable crop year are eligible to receive payments covering up to 90% of their disaster-related revenue losses, as determined by USDA. For producers without crop insurance or NAP coverage, payments are available but are capped at 70% of their disaster-related revenue losses as determined by USDA. If uninsured losses are determined to represent only a de minimis (insignificant) portion of a producer's overall revenue losses, USDA may allow payments covering up to 90% of total losses. However, USDA has significant discretion in defining terms like "de minimis" and setting program provisions, which will ultimately determine the amount of assistance farmers receive.

USDA is required to provide $220 million through block grants to eligible states with smaller agricultural footprints to provide compensation for crop, timber, and livestock losses, including on-farm infrastructure, for 2023 or 2024 weather events the state deems warrant relief. States eligible for this specific block grant must have a 2023 net farm income of less than $250 million, fewer than 8,000 farms, and an average farm size of less than 1,000 acres. Eight states meet all three criteria: Alaska, Connecticut, Hawaii, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont.

Economic Aid

Of the bill's $31 billion in direct payments for farmers and ranchers, $10 billion is specifically for economic aid in response to the perilous financial situation in farm country, particularly for row crop farmers. This economic aid must be distributed within 90 days of enactment through a one-time economic assistance payment for producers of eligible commodities in the 2024 crop year. Eligible commodities include all those covered by Title I of the farm bill, excluding temperate rice japonica. Payments per acre for each crop will be determined as the higher of the two formulas featured in the following graphic. The primary payment will be calculated by multiplying projected per-acre losses by a factor of 26%. For corn, soybeans, wheat, cotton, rice, sorghum, oats, and barley, the payments are to be calculated using the USDA-Economic Research Service's published national average cost-of-production forecasts. For all other crops, USDA is to calculate a comparable total estimated cost-of-production. The projected revenue per acre will be calculated using projected 2024/25 market year average prices set in the Dec. 10 World Agricultural Supply and Demand Estimates (WASDE) and a 10-year average of the national average harvested yield per acre.

A minimum per-acre payment will be calculated by multiplying 8% of a crop's statutory reference price by the national average payment yield. The payment yield is the yield used in calculating Price Loss Coverage (PLC) program payments. The farmer will then be paid on all acres planted to eligible commodities for harvest, grazing, haying, silage, or other similar purposes for the 2024 crop year. Additionally, farmers will be paid on 50% of all acreage that was prevented from planting during the 2024 crop year due to drought, flooding, other natural disaster, or other conditions beyond the control of the farmer as determined by the secretary of agriculture.



Additional Miscellaneous Agriculture-Related Funding

A hodgepodge of other disaster funding to be administered by USDA totals $2.5 billion, including several funding items closely aligned to a November White House request for emergency funding for USDA. Additional USDA funding includes:

* $7.5 million for the Office of the Inspector General for oversight of projects and activities carried out by funds given to USDA in the continuing resolution;

* $42.5 million for Agricultural Research Service's building and facilities;

* $356.535 million for Farm Service Agency's Emergency Forest Restoration Program;

* $828 million for the Farm Service Agency's Emergency Conservation Program;

* $920 million for the Natural Resources Conservation Service's Emergency Watershed Protection Program;

* $362.5 million for the Rural Development Program's Rural Development Disaster Assistance Fund; and

* $25 million for the Food and Nutrition Service's Commodity Assistance Program to support The Emergency Food Assistance Program (TEFAP) for infrastructure needs related to the consequences of major disaster declarations from 2023 and 2024.

Conclusion

The American Relief Act of 2025 will provide much-needed relief to farmers and ranchers across the country. A total of $31 billion of economic and disaster aid for farmers and an extension of the 2018 farm bill has certainly saved farms. However, an updated farm bill with a functioning safety net would have made much of this ad hoc aid unnecessary. The suspension of funding for the orphan programs also leaves a hole for some important priorities for agriculture. A new farm bill in 2025 could plug these holes and prevent the need for ad hoc economic aid in future years.
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