SDRP Shallow-loss Formula Understates Harvest-Time Losses

By Daniel Munch

As farmers begin to evaluate potential payments under the Supplemental Disaster Relief Program (SDRP) Stage 2, a common concern has emerged across farm country: in many cases, the program’s calculation of shallow-losses does not capture the change in revenue farmers experienced at harvest due to lower crop prices.

The issue stems from how Stage 2 values production, i.e., crop revenue, when determining whether a “shallow” or uncovered loss exists. USDA’s formula relies on spring crop insurance prices, even in years when market prices declined between planting and harvest. For example, in 2023, Stage 2 values corn production using a spring projected price of $5.91 per bushel, even though the harvest price fell to $4.88 a difference of $1.03 per bushel, or roughly 17%. For farmers whose yields or revenues were reduced by drought, flooding or other qualifying natural disasters, but not enough to trigger an insurance indemnity, this approach can shrink or eliminate the loss USDA recognizes for the purposes of administering the program.

In practical terms, that means that program payments for some farmers with clear disaster-related losses are either significantly smaller than expected, or completely eliminated, despite facing meaningful revenue declines when the crop was harvested. Understanding why this happens requires stepping back to look at how SDRP Stage 2 is structured and where shallow loss fits within the broader program.

Background: How SDRP Stage 2 Is Structured

USDA’s Supplemental Disaster Relief Program was created to deliver one-time assistance for agricultural losses tied to natural disasters in 2023 and 2024. To accomplish that, USDA divided SDRP into two stages, reflecting the different ways losses show up in the existing farm risk management tools.

Stage 1 focused on losses already captured in existing programs. It provided supplemental payments to producers who received a crop insurance or Noninsured Crop Disaster Assistance Program (NAP) indemnity for a qualifying disaster loss. Stage 1 requirements and calculations were described in an earlier analysis: USDA Launches 2023-2024 Crop Loss Disaster Assistance.

Stage 2 is broader and is intended to address the remaining gaps. It covers several categories of loss not fully addressed in Stage 1, including uninsured crops, certain quality and value losses, and situations where producers experienced revenue declines but did not receive an insurance indemnity or NAP payment. Stage 2 requirements and calculations were broadly described in an earlier two-part analysis: Understanding USDA’s New Natural Disaster Relief: Part 1 which covers quality loss and shallow loss coverage and Part 2 which covers uninsured crops, value-loss crops, trees/bushes/vines, on-farm storage losses and milk losses.

Within Stage 2, shallow loss is just one category. Shallow-loss assistance applies to insured or NAP-covered producers whose yields or revenues declined but remained inside the deductible space or above the level needed to generate an indemnity. For example, a producer insured at an 80% coverage level who experienced a 19% decline in revenue would not receive a crop insurance payment, even though nearly one-fifth of the value of the crop was lost.