§ 1945.163 - Determining qualifying losses, eligibility for EM loan(s) and the maximum amount of each.

Disaster losses will be reported by applicants on Form FmHA 1945-22,“Certification of Disaster Losses,” which states the physical and production losses suffered as a result of the declared/designated disaster. The applicant will report, on Form FmHA 1945-22, total acres and actual yields for all crops planted and/or grown in the disaster year, and the number of all animal units and production per animal unit being maintained at the time of the disaster. This information will come from the applicant's own records or from ASCS records of acres grown and proven actual yields in the disaster year. Applicants will also report their previous 5-year production levels as set forth in paragraph (a) of this section. This form will be completed and submitted to the County Office with the application, as soon as the losses and/or damages can be accurately assessed. The information provided by applicants on Form FmHA 1945-22 will be the primary basis for FmHA or its successor agency under Public Law 103-354's calculation of qualifying losses, eligibility for EM loan(s) based on production losses, and an applicant's maximum amount of EM loan eligibility. Therefore, applicants are required to certify, subject to penalties of law, that the accuracy and completeness of the information provided on Form FmHA 1945-22 can be supported by written records. Applicants will be asked to identify on that form any single farming enterprise they consider basic to the success of their total farming operation, and in which they have suffered a disaster loss. When an applicant's certified production loss claims seem unreasonable, they will be verified and the findings documented. Physical loss claims will be verified by requiring the applicant to furnish evidence of ownership and proof of the property loss or damage. Proof of ownership could be by deeds, mortgages, financial statements, insurance policies, and the like. Proof of the loss or damage could be by the applicant's own pictures, written certification by other persons or, when practical, by visual inspections by the Agency or its successor agency under Public Law 103-354 employees.

(a) Production losses. (1) The normal year's production will be established by eliminating the poorest year of the 5-year production history immediately preceding the disaster year and averaging the remaining 4 years' production. The applicant must select the year to be eliminated. The year selected to be eliminated must be the same year for all farm enterprises (i.e., all crops, livestock, and livestock products), which constituted a part of the applicant's farming operation during that year. Applicants will identify the production for each commodity that was produced on all farms operated by the applicant in the disaster year. Applicants must use the production record sources for each crop in the order of priority as follows:

(i) The applicant's actual reliable farm records. If actual yields are not available for all of the 5 crop years, the applicant will use a combination of actual records and other data as specified in paragraphs (a)(1) (ii) and (iii) of this section.

(ii) FSA Farm Programs (formerly ASCS) “actual yields.” When this production record source is used, the applicant must obtain the information and submit it with the application. The disaster year actual yield will be used as the yield for those years for which the applicant has no production records to determine the normal year's yields.

(iii) The county or State average yields. These average yields are located in the State supplement. However, these production figures can be substituted only when an applicant has insufficient records for certain commodities and years.

(iv) State Director determination. When an applicant's production loss is on new land being developed, or to young perennial crops such as fruits and nuts, which have not reached their mature production potential, the Agency will establish the normal yields to be used.

(2) FmHA or its successor agency under Public Law 103-354 loan official(s) will complete Form FmHA 1945-26, “Calculation of Actual Losses.”

(i) In calculating production losses, the same established unit prices will be used for the disaster year and the normal year in computing the dollar value of each enterprise. Unit prices will be established in accordance with paragraph (a)(2)(iv) of this section. In the production loss calculation, those crop production yields and production per animal unit records authorized in paragraphs (a)(1)(i), (ii) and (iii) of this section will be used.

(ii) [Reserved]

(iii) When the applicant's disaster loss is due to a reduction in quality with or without a quantity loss, rather than a reduction in quantity only, the applicant will be given credit for quality loss by adjusting the actual production yield downward. This will be accomplished by converting the dollar value of the quality loss to a yield reduction equal in value to the quality loss. When a quality adjustment is necessary, the basis used in making the adjustment will be the applicant's accurate records of production and sales receipts showing the actual price received and the grade of the commodity for the five years immediately preceding the disaster year. The normal year's quality will be established by eliminating the poorest of the five-year record. The applicant must select the year to be eliminated. The burden of providing this information rests with the applicant.

(iv) The gross dollar value of production losses will be computed for all crops and all livestock enterprises that suffered losses due to the disaster, by calculating the value of the disaster year's production and subtracting that amount from the calculated value of the normal production. Unit prices for all agricultural commodities produced commercially in each State will be established on a Statewide basis by all FmHA or its successor agency under Public Law 103-354 State Directors each year, and published in a State supplement to be issued not later than February 15 of each year. These commodity prices will be established by averaging the monthly market prices of each commodity for the 12-month period preceding the calendar year in which the disaster occurs. The monthly average market prices report, “Agricultural Prices,” prepared by the National Agricultural Statistics Service (NASS), formerly the Statistical Reporting Service (SRS), will be mailed to each State Office from the FmHA or its successor agency under Public Law 103-354 National Office the first week of each month for the previous month. This report provides the average monthly prices for all major agricultural commodities produced in each State. For major commodities not reported monthly by NASS, State Offices will also be sent the NASS publication, “Crop Values Summary.” This publication provides a 3-year history of seasonal average prices, by State and United States average, for all crops of any significance produced in the 48 contiguous States and Hawaii. Prices found in this annual publication, available by February 1 of the year succeeding the year being reported, are to be used as a guide only in establishing the annual price list of commodity prices only for those commodities for which the monthly average prices are not reported. State Directors will consult with other agricultural agency representatives and other agricultural lenders in the local area; and State Directors and Farmer Program Chiefs in adjoining States will consult each other for additional guidance before releasing their commodity price lists. Once established, these prices will not be changed for any EM loan processed under any disaster occurring on or after February 1 of that calendar year through January 31 of the next calendar year. These monthly and annual reports will be retained and used for reference each year when preparing the annual price lists of average commodity prices to be used Statewide for calculating actual production loss values, for all disasters that occur during the ensuing 12-month period.

(v) In determining eligibility, the amount of actual production loss will be calculated for the single enterprise, which is a basic part of the farming operation (see § 1945.154(a) of this subpart), by subtracting any costs not incurred as explained in paragraphs (a)(2)(xii) and (a)(2)(xiv) of this section from the gross dollar amount of production losses for that enterprise as determined in paragraph (a)(2)(iv) of this section.

(vi) Actual losses for tobacco, peanuts and other crops grown under acreage and/or poundage control will not be calculated differently than any other crop; i.e., the calculations must not include the dollar value of carry over surplus poundage from previous year's(s') production or underproduced pounds to be sold or produced in future years. The value of underproduced poundage allotments and quotas must not be subtracted from the loss. Production from all “controlled” crop acres planted in the disaster year, including acreage above the producer's allotments and quotas, will be considered even though the carry-over crop is not eligible for price supports until the next marketing year.

(vii) Actual losses for spring and fall annual crops of the same species will be treated as two separate crop losses and listed separately on Forms FmHA 1945-22 and 1945-26. The crop(s) not affected by the disaster will be considered as having produced a normal year's yield.

(viii) The dollar value of the actual production loss for the single enterprise which is a basic part of the farming operation as designated by the applicant in Item F, Form FmHA 1945-22, will be divided by the previously calculated normal year's gross income for that enterprise. The result should be rounded to the nearest whole number. To illustrate, if the calculation shows a 29.49 percent production loss, round it down to 29 percent. If the calculation shows a 29.50 percent loss round it up to 30 percent. This establishes the percentage reduction in production from normal for that enterprise. If the percentage loss in any single enterprise (see § 1945.154(a) of this subpart) which is a basic part of the farming operation equals or exceeds 30 percent, and the applicant is otherwise eligible, EM loan assistance will be considered.

(ix) Once eligibility is established, based on production losses, the total production loss sustained by the applicant, directly attributable to the disaster, is computed by adding the gross dollar amount of production losses of all single enterprises, whether or not they constitute a basic part of the farming operation, and subtracting from this total all financial assistance verified as having been received or to be received through any disaster relief program, and all compensation for disaster losses provided by any source for those enterprises.

(x) The maximum EM loan for production losses is limited to 80 percent of the total calculated actual production loss sustained by the applicant.

(xi) Production losses to hayland, pasture and rangeland used for grazing livestock owned by the applicant must be based on the production from only those acres which are utilized in the disaster year. Losses may be calculated by one of three methods when approved by the State Director. The State Director will decide which one of the following three methods will be used throughout the State to calculate losses to pasture and rangeland; and issue a State supplement to this subpart, setting forth the method(s) to be used Statewide.

(A) The price per acre method. The price per acre method is used to calculate pasture losses in the following manner:

(1) Determine the normal year's gross dollar value. To calculate this, multiply the number of acres available to be grazed for the disaster year by the established rental charge per acre per mongh (this figure is established by the State Director in accordance with paragraph (a)(2)(iv) of this section); by the average number of months grazed per year during the highest 4 out of the 5 preceding years.

(2) Determine the disaster year gross dollar value. To calculate this multiply the number of acres grazed during the disaster year by the established rental charge per acre per month (as determined in accordance with paragraph (a)(2)(xi)(A)(1) of this section); by the number of months the livestock were able to be grazed during the disaster year.

(3) Subtract the disaster year gross dollar value (see paragraph (a)(2)(xi)(A)(2) of this section) from the normal year gross dollar value (see paragraph (a)(2)(xi)(A)(1) of this section) to determine the value of pasture loss suffered during the disaster year.

(B) The charge per head or animal unit method. The charge per head or per animal unit method is used to calculate pasture losses in the following manner:

(1) Determine the normal year gross dollar value. To calculate this, multiply the number of animals or animal units grazed per month during the disaster year by the established rental charge per animal or per animal unit per month (this figure is established by the State Director in accordance with paragraph (a)(2)(iv) of this section); by the average number of months grazed per year during the highest 4 out of the preceding 5 years.

(2) Determine the disaster year gross dollar value. To calculate this, multiply the number of animals or animal units grazed per month during the disaster year by the established normal rental charge per animal or per animal unit per month (as determined in accordance with paragraph (a)(2)(xi)(B)(1) of this section); by the number of months grazed during the disaster year.

(3) Subtract the disaster year gross dollar value (see paragraph (a)(2)(xi)(B)(2) of this section) from the normal year gross dollar value (see paragraph (a)(2)(xi)(B)(1) of this section) to determine the value of pasture loss suffered during the disaster year.

(C) The forage equivalent method. The forage equivalent method is used to calculate pasture losses in the following manner:

(1) Determine the normal year gross dollar value. To calculate this, multiply the number of acres grazed during the disaster year by the established price per pound or ton (this figure is established by the State Director in accordance with paragraph (a)(2)(iv) of this section); by the average number of pounds or tons of forage equivalent produced per acre per year during the average of the highest 4 out of the preceding 5 years for forage of the type being used in this calculation. (The State Office will set forth the forage equivalent values to be used or the methodology to be used for deriving this value, in a State Supplement. This information may be set forth on a countywide or statewide basis. The State Director may contact the State's Extension Service or other knowledgeable sources to assist in establishing the forage equivalent determination.)

(2) Determine the disaster year gross dollar value. To calculate this, multiply the number of acres grazed during the disaster year by the established price per pound or ton (this figure is established by the State Director in accordance with paragraph (a)(2)(xi)(C)(1) of this section); by the number of pounds or tons of forage equivalent produced for forage of the type being used in this calculation produced in the disaster year. (See paragraph (a)(2)(xi)(C)(1) of this section for further information.)

(3) Subtract the disaster year gross dollar value (see paragraph (a)(2)(xi)(C)(2) of this section) from the normal year gross dollar value (see paragraph (a)(2)(xi)(C)(1) of this section) to determine the value of pasture loss during the disaster year.

(xii) When a crop cannot be planted, an applicant may treat the loss either as a production loss or as a physical loss (see paragraph (b) of this section). When a crop cannot be planted and the applicant chooses to treat the loss as a production loss, the loss will be calculated as set out in this paragraph as follows: Add all income that is derived from the enterprise to the variable costs which were not incurred because of the disaster. (The cost figures will be derived from current crop enterprise budgets prepared by State Agricultural Extension Service economists, based on normal farming conditions in the area.) Subtract this figure from the value of the normal year's production. The resulting figure is the gross dollar amount of production loss.

(xiii) When a crop can be only partially planted due to a disaster or when perennial crops (such as fruits or nuts) already growing cannot be produced or harvested due to a disaster, the loss will be considered a production loss. Such loss will be calculated as set out in paragraph (a)(2)(xii) of this section.

(xiv) When a crop is planted and completely destroyed by a disaster, a yield of “zero” may be shown on Form FmHA 1945-22 for the disaster year, but only if no part of the crop could be harvested and no substitute crop could be planted and harvested. When figuring the actual dollar amount of production losses, subtract the normal costs of harvesting and marketing which were not incurred for crops that were completely destroyed by a disaster. If a substitute crop is planted and harvested during the same crop year, a yield of “zero” should be shown for the original crop, and the actual yield for the substitute crop on Form FmHA 1945-22. On Form FmHA 1945-26, the dollar value of the substitute crop must be added to the dollar value of the disaster year's production and income.

(xv) Losses to feed crops will be established by determining the normal year's gross dollar value of those crops and substracting the disaster year's gross dollar value of feed crops. The difference establishes the disaster year's gross dollar loss for feed crops. The gross dollar value of feed crops produced is derived by multiplying the number of feed crop acres by the yield per acre by the unit price.

(xvi) When an applicant elects to sell feeder livestock at an earlier date than usual rather than purchase feed to replace that which was lost as a result of the disaster, that is a management decision; and the difference between what the sale weight would have been if the livestock had been fed for the normal period and the disaster year's lighter, premature sale weight may not be claimed as a loss.

(xvii) Calculation of production losses to livestock enterprises may be based either on loss of production in feed crops, including pasture, to be fed to the applicant's own livestock; or on loss (from normal) of weight gain of the livestock or livestock products produced, but not both. Normally, calculations of production losses to livestock enterprises will be based on feed crop(s) and pasture losses. In the case of foundation herds of breeding animals; however, the value of feed produced on native rangeland and pasture constitutes a small portion of the total input costs of maintaining a foundation herd of breeding animals and their offspring. Therefore, loan approval officials normally will calculate production losses to this type of livestock operation based on reductions in the natural increase in numbers and animal unit weight of such offspring. (Example available in any FmHA or its successor agency under Public Law 103-354 office.)

Example:

A rancher has accurate records indicating that the rancher's 200 head foundation breeding cow herd produced a normal calf crop average of 85 percent (170 calves) with an average weaned weight of 350 pounds per calf. As a result of a drought, the rancher found it necessary to cull the cow herd by 50 cows over the normal number culled.

The predisaster value of the cows was $600 per head. The rancher received 35 cents per pound for the cull cows, which had an average weight of 1100 pounds.

Additionally, the rancher's calf crop was only 70 calves with an average weight of 240 pounds in the disaster year (DY). Therefore, the rancher would have sustained a physical loss on the cow herd (see § 1945.163(b)(6)(i)(B) and a production loss on the calf crop.

The established price for calves is 60 cents per pound.

Calculations:

The rancher's normal year's (NY) calf crop was 85 percent. Since the rancher reduced the breeding herd by 50 cows, an adjustment must be made to determine the calf losses. The reduced herd size is now 150 cows.

150 cows × 85% = calves (NY calf crop from a herd of 150 cows)Normal year 128 × .60 × 350 = $26,880 NY incomeDisaster year 70 × .60 × 240 = $10,080 DY incomeLoss = $16,80016,800 / 26,880 = 63% production loss

Additionally, an EM loan may be made based on the physical loss of 50 cows. (See example in § 1945.163(b)(6)(i)(B).

(xviii) Any claims of production losses from the applicant will be verified by FmHA or its successor agency under Public Law 103-354 when the applicant's claim(s) appears to be unreasonable.

(xix) Claims of production losses for orchard crops (fruits or nuts) will be considered only for the crop loss directly attributable to the qualifying disaster and determined in accordance with paragraph (a)(2) of this section.

(xx) When an applicant's farming operation(s) is conducted in a designated county(ies) and nondesignated county(ies), eligibility will be established based on losses to a single enterprise as explained in paragraph (a)(2)(v) of this section, which constitutes a basic part of the total farming operation, without regard to whether the single enterprise is located in the designated county. The disaster year's actual yields, both in the designated and nondesignated county(ies) only, will be used to determine losses. Costs not incurred (if applicable) will be subtracted as explained in paragraphs (a)(2)(xii) and (a)(2)(xiv) of this section. The amount of the production loss loan, however, will be limited to the production loss sustained in the designated county(ies) only minus any compensatory payments received or to be received for that portion of the farming operation located in the designated county(ies).

(xxi) The County Supervisor will assign normal yields to all unplanted acreage covered by a Payment in Kind (PIK) contract, when calculating crop production losses on Form FmHA 1945-26.

(b) Physical losses. (1) In order to qualify for an EM loan(s) for physical losses, the damaged or destroyed physical property must be essential to the successful operation of the farm and if not repaired or replaced, the farmer would be unable to continue operations on a reasonably sound basis. The financing necessary to recover from the physical loss must be actually needed to permit the applicant to continue the operation.

(2) The claimed value of all physical losses due to disaster damage or destruction must be supported by written estimates for the necessary repair or replacement requested.

(3) Physical loss loan funds can be used to pay for only contracted or hired labor and materials and supplies purchased. Labor, machinery, equipment, and materials contributed by the applicant or borrower will not be chargeable to the cost of necessary repair and replacement.

(4) Damage to or destruction of nonessential buildings, structures or other items will not be repaired or replaced with EM physical loss loan funds. Any insurance compensation received or to be received for such losses will be considered as compensation for losses to essential farm buildings, structures and other items which need to be repaired or replaced.

(5) The maximum physical loss loan(s) will be determined by subtracting all financial assistance provided through any disaster relief program and all compensation for disaster losses provided by any source from the value of all actual physical losses caused by the disaster.

(6) The physical loss for the following items equals the market value at the time of the disaster for items lost, damaged or destroyed by or as a result of the disaster:

(i) Livestock.

(A) Death of an animal(s) caused by the disaster.

(B) Disaster related damage to an animal's(s') health, which has impaired or reduced its normal production capability and its market value. This includes forced reductions of foundation breeding stock caused by the disaster. Physical losses, under these conditions, would be calculated by establishing a dollar value per head, or unit, at the time the disaster occurred, and deducting the reduced dollar value received from the disaster-caused sale of the animals. The difference in the two values would be considered a physical loss. (THE ANIMALS SOLD MUST BE OVER AND ABOVE THE NUMBERS NORMALLY CULLED EACH YEAR).

Example:

A physical loss would be calculated as follows:

Predisaster market value—50 cows×$600/cow=$30,000Price received for cull cows—50 cows × 1100 lbs. × 35″ = $19,250.Physical loss = $10,750 ($30,000 − $19,250)

(ii) Livestock products on hand or stored.

(iii) Harvested crops on hand or stored.

(iv) Supplies on hand.

(v) Essential machinery and equipment.

(7) The actual physical loss for farm dwellings and essential household contents to be used by the operator and existing labor is the amount required to repair or replace the dwelling and/or household contents with a dwelling and/or contents of like standards, size and quality of that being replaced which will meet all applicable code requirements, and which will provide permanent, adequate, decent, safe, sanitary and modest living quarters.

(8) The actual physical loss for farm service buildings and farm real estate other than buildings is the amount required to repair the property or replace it with a building or property of like standards, size, quality and capacity of that being replaced which will meet all applicable code requirements and which will adequately meet the needs of the farming operation.

(9) The actual physical loss for income-producing trees (fruit or nuts) is the cost of removing the damaged or destroyed trees, cleaning debris and preparing the land for replanting, plus the cost of suitable replacement trees and other expenses necessary to reestablish income-producing trees. Losses will not be determined by establishing a value for the trees destroyed or damaged. Any salvage value will be deducted from the loss. The applicant may choose to replace the damaged or destroyed trees with a different enterprise and may use actual loss loan funds for that purpose. (See exhibit D of this subpart for physical loss loans to citrus growers.)

(10) The actual physical loss to trees (grown for timber) will be determined by establishing the value of trees, at the time of the disaster, less any salvage value. This estimate of value must be determined by a recognized forester who will cruise the timber and establish the value of the destroyed and damaged trees. The applicant may choose to replace the damaged tree enterprise with a different enterprise and use the actual loss loan funds for that purpose. Those applicants whose major farming enterprises are other than tree farming, but who have a wood lot that has been damaged, will have their tree losses considered as physical losses in the same manner as set forth for tree farms.

(11) The actual physical loss to growing crops or pasture is the cost of cleaning debris, preparing the land for replanting, seed, fertilizer, and other expenses necessary to reestablish the crop(s) or pasture. These costs can exceed the market value of the crop(s) or pasture at the time of the disaster.

(12) When a crop cannot be planted during the disaster year due to the disaster and the applicant chooses to treat the loss as a physical loss, the actual physical loss is limited to the cost of land preparation, other expenses incurred to the date of the disaster for crops that could not be planted, and a pro rata share of the total operation's fixed costs such as rent, taxes, and insurance. The applicant must provide an itemized list of all the claimed expenses incurred in the disaster year for those enterprises for which disaster losses are claimed. This list must be signed by the applicant. The amount of an EM loan cannot exceed the total itemized expenses listed by the applicant.

(13) EM loans will not be made to flood and mudslide victims to repair or replace damaged or destroyed farm dwellings or farm service buildings and their contents in areas where “National Flood Insurance” is available, except as authorized in § 1945.173(b) of this subpart.

(14) When an applicant has dwelling losses only, the applicant may apply for either an EM loan or SBA disaster housing loan to restore or replace the dwelling and personal household contents affected by the disaster.

(c) Personal household content losses (Subtitle B purposes). (1) In order to qualify for EM loan assistance for this purpose, the damaged or destroyed household property must be essential to the maintenance of the household; and if not repaired or replaced, the farmer would be unable to remain on the property and continue the farming operation on a reasonably sound basis.

(2) The claimed value of all household losses due to disaster damage or destruction must be supported by written estimates for the necessary repair or replacement.

(3) Labor, equipment, and materials contributed by the applicant or borrower will not be chargeable to the cost of necessary household repairs and replacements.

(4) Damage to or destruction of non-essential household items will not be replaced or repaired with EM loan funds. Any insurance compensation received or to be received for such losses will be considered as compensation for those losses.

(5) The maximum EM loan(s) for repair or replacement of personal household contents is $20,000.

(6) The EM loan(s) will be determined by subtracting all insurance claims and other compensation received or to be received for household losses from the cost of repairs or replacement value of the essential household items.

(d) Compensation for losses. All financial assistance provided through any disaster relief program and all compensation for disaster losses received from any source (i.e., crop insurance indemnity payments, ASCS disaster program payments, etc.) by an EM loan applicant will reduce the applicant's loss by the amount of such compensation. All such compensation will be considered in determining the maximum amount of loss loan entitlement. Disaster related assistance/compensation will not be considered in the EM eligibility calculation. The amount of any disaster program benefits received from ASCS, including the Emergency Feed Assistance Program (EFAP), Emergency Conservation Program (ECP), and Disaster Program payments will be considered as compensation for losses. (ASCS Deficiency Payments are not to be considered as compensation).

(e) EM loan limit. The loan will be limited to the amount necessary to restore the farm to its pre-disaster condition; however, this amount cannot exceed the lesser of the sum of the maximum production loss (paragraph (a)(2)(x) of this section) and the maximum physical loss (paragraph (b) of this section) or $500,000 total outstanding EM debt per borrower.