[Federal Register Volume 61, Number 45 (Wednesday, March 6, 1996)]
[Rules and Regulations]
[Pages 8851-8858]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-5383]
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Rules and Regulations
Federal Register
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having general applicability and legal effect, most of which are keyed
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Federal Register / Vol. 61, No. 45 / Wednesday, March 6, 1996 /
Rules and Regulations
[[Page 8851]]
DEPARTMENT OF AGRICULTURE
Federal Crop Insurance Corporation
7 CFR Part 457
RIN 0563-AB24
Common Crop Insurance Regulations; Malting Barley Price and
Quality Endorsement Crop Insurance Provisions
AGENCY: Federal Crop Insurance Corporation, USDA.
ACTION: Final rule.
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SUMMARY: The Federal Crop Insurance Corporation (``FCIC'') hereby
issues additional regulations for provisions to insure malting barley.
This action will add a second endorsement, the Malting Barley Price and
Quality Endorsement, under which malting barley may be insured. The
current malting barley endorsement will remain in effect for the 1996
crop only and, effective with the 1997 crop year, will be replaced by
the new Malting Barley Price and Quality Endorsement. The intended
effect of this rule is to improve the insurance coverage now available
for producers who grow malting barley under contract and provide a new
option that will allow producers without contracts (open market
producers) to obtain insurance for their malting barley.
EFFECTIVE DATE: March 4, 1996.
ADDRESSES: For information concerning submission of comments on
information collection, see SUPPLEMENTARY INFORMATION.
FOR FURTHER INFORMATION CONTACT: For further information and a copy of
the Cost-Benefit Analysis to the Malting Barley Price and Quality
Endorsement Crop Insurance provisions, contact Diana Moslak, United
States Department of Agriculture, Federal Crop Insurance Corporation,
Washington, D.C. 20250. Telephone (202) 720-0713.
SUPPLEMENTARY INFORMATION:
Executive Order 12866 and Departmental Regulation 1512-1
This action has been reviewed under United States Department of
Agriculture (``USDA'') procedures established by Executive Order 12866
and Departmental Regulation 1512-1. This action constitutes a review as
to the need, currency, clarity, and effectiveness of these regulations
under those procedures. The sunset review date established for these
regulations is July 1, 2000.
This rule has been determined to be ``significant'' for the
purposes of Executive Order 12866 and, therefore, has been reviewed by
the Office of Management and Budget (``OMB'').
Cost-Benefit Analysis
A Cost-Benefit Analysis has been completed and is available to
interested persons at the address listed above. In summary, the
analysis finds that the expected benefits of this action outweigh the
costs. The new Malting Barley Price and Quality Endorsement will
simplify program operations, benefit FCIC and reinsured companies, and
enhance the insurance coverage for malting barley producers.
Paperwork Reduction Act of 1995
Following publication of the proposed rule, the public was afforded
60 days to submit written comments, data, and opinions on information
collection requirements previously approved by OMB under OMB control
number 0563-0003 through September 30, 1998. No public comments were
received.
Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandate Reform Act of 1995 (UMRA), Pub. L.
104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector. Under section 202 of the UMRA, FCIC
generally must prepare a written statement, including a cost-benefit
analysis, for proposed and final rules with ``Federal mandates'' that
may result in expenditures to State, local, or tribal governments, in
the aggregate, or to the private sector, of $100 million or more in any
one year. When such a statement is needed for a rule, section 205 of
the UMRA generally requires FCIC to identify and consider a reasonable
number of regulatory alternatives and adopt the least costly, more
cost-effective or least burdensome alternative that achieves the
objectives of the rule.
This rule contains no Federal mandates (under the regulatory
provisions of Title II of the UMRA) for State, local, and tribal
governments or the private sector. Thus, this rule is not subject to
the requirements of sections 202 and 205 of the UMRA.
Executive Order 12612
It has been determined under section 6(a) of Executive Order 12612,
Federalism, that this rule does not have sufficient federalism
implications to warrant the preparation of a Federalism Assessment. The
provisions contained in this rule will not have a substantial direct
effect on states or their political subdivisions, or on the
distribution of power and responsibilities among the various levels of
government.
Regulatory Flexibility Act
This regulation will not have a significant impact on a substantial
number of small entities. The impact of obtaining or delivering these
policies will not vary significantly from that required to obtain or
deliver the present policy. Therefore, this action is determined to be
exempt from the provisions of the Regulatory Flexibility Act (5 U.S.C.
Sec. 605 ) and no Regulatory Flexibility Analysis was prepared.
Federal Assistance Program
This program is listed in the Catalog of Federal Domestic
Assistance under No. 10.450.
Executive Order 12372
This program is not subject to the provisions of Executive Order
12372 which require intergovernmental consultation with state and local
officials. See the Notice related to 7 CFR part 3015, subpart V,
published at 48 FR 29115, June 24, 1983.
Executive Order 12778
The Office of the General Counsel has determined that these
regulations meet the applicable standards provided in subsections 2(a)
and 2(b)(2) of Executive Order 12778. The provisions of this rule will
preempt state and local laws to the extent such state and local laws
are inconsistent herewith. The
[[Page 8852]]
administrative appeal provisions at 7 CFR part 11, must be exhausted
before action for judicial review may be brought.
Environmental Evaluation
This action is not expected to have any significant impact on the
quality of the human environment, health, and safety. Therefore,
neither an Environmental Assessment nor an Environmental Impact
Statement is needed.
National Performance Review
This regulatory action is being taken as part of the National
Performance Review program to eliminate unnecessary or duplicative
regulations and improve those that remain in force.
Background
On Monday, December 11, 1995, FCIC published a proposed rule in the
Federal Register at 60 FR 63457 to amend the Common Crop Insurance
Regulations (7 CFR part 457) by revising 7 CFR 457.103, Malting Barley
Option Provisions, effective for the 1996 and succeeding crop years.
However, the December 31, 1995, date by which contract changes must be
made for the 1996 crop year passed before the provisions could be
published as a final rule. Therefore, for the 1996 crop year only, FCIC
will make both the current Malting Barley Endorsement (Sec. 457.103)
and this new Malting Barley Price and Quality Endorsement
(Sec. 457.118) available. The new endorsement will make insurance
coverage available to malting barley producers who do not hold a
production contract with a malting or brewing company, and to improve
coverage for those producers who do have such a contract. Beginning
with the 1997 crop year, the Malting Barley Price and Quality
Endorsement will replace the current Malting Barley Endorsement.
Following publication of the proposed rule, the public was afforded
15 days to submit written comments, data, and opinions. FCIC received
33 comments. The comments received and FCIC responses are as follows:
Comment: One comment received from a State Commissioner of
Agriculture recommended adding the following to the supplementary
information in the preamble: ``FCIC must offer producers the right to
mediation as required under Pub. L. No. 103-354, as part of the
informal administrative appeal process.''
Response: FCIC agrees that mediation may be required in some
instances but that requirement is contained in the appeal regulations.
Comment: Three comments were received regarding the length of the
comment period for the proposed rule. One received from the legal
counsel of a reinsured company stated that FCIC's proposed rulemaking
is in violation of the Administrative Procedure Act. Two comments, one
from the insurance industry and one from a State Commissioner of
Agriculture, indicated that the comment period was too short.
Response: FCIC published its proposed regulation with a shortened
comment period in order to allow sufficient time to consider all
comments and publish the final rule with sufficient time before the
sales closing date to permit the sale of the insurance policies and
training of insurance providers. Further, interested parties were kept
apprised of the proposed changes to the malting barley program, and the
date of its publication, in order to facilitate their ability to
provide meaningful comments within the short time period. No violation
of the Administrative Procedure Act has occurred.
Comment: One comment received from the insurance industry
recommended that implementation of this rule be delayed until the 1997
crop year. The comment indicated that it is too late to implement the
proposed program changes for the 1996 crop year because: (1) The
Standard Reinsurance Agreement (SRA) is already in place and approved;
(2) Agent training is completed in many areas, and procedures for 1996
are in place; and (3) Little time for training and marketing will be
available. The comment states that changing the endorsement for the
1996 crop year will require FCIC to allow companies to make changes to
the SRA fund and percentage elections; and that reimbursement of
company costs associated with marketing, training, and reissuance of
procedures will need to be addressed under the 1996 SRA.
Response: There is nothing in the SRA that precludes FCIC from
changing the terms of an insurance contract prior to the contract
change date or offering new insurance products after implementation of
the current years' SRA. FCIC is offering the new Malting Barley Price
and Quality Endorsement as a new insurance product to be sold in
conjunction with the currently available malting barley endorsement.
Nothing requires any company to sell the endorsement. The Company may
do so if it believes that making the option available is good business.
Comment: One comment received from a barley industry organization
indicated that the new endorsement will offer an important option to
many North Dakota open-market barley producers. The comment further
stated that these producers now will be afforded the opportunity to
insure against quality losses at representative prices.
Response: FCIC agrees.
Comment: One comment received from the Farm Service Agency (FSA)
asked if the endorsement will be available in all counties that
currently have a feed barley insurance program or only in counties that
currently have malting barley insurance.
Response: The new endorsement will initially be available only in
counties that currently have a malting barley insurance program in
place.
Comment: One comment received from the insurance industry indicated
it would be advantageous for producers to elect Option A or B on a
yearly basis rather than the initial selection being continuous. The
comment stated that insureds with Option B will think they have an
endorsement in effect even if they fail to execute a malting barley
contract.
Response: This recommendation would result in unnecessary
additional paperwork and administrative expense each crop year. The
endorsement is clear that there is no coverage when the producer fails
to obtain a malting barley contract. Further, a producer can cancel an
Option and select another, provided it is done prior to the sales
closing date. Also, there are large malt barley growing areas in which
there is very little, if any, contracted production. Requiring
producers to affirmatively select option A each year is unnecessary in
these areas. No changes in the proposed provisions have been made.
Comment: One comment received from a State Commissioner of
Agriculture suggested adding the following language to section 2 of the
endorsement: ``Producers who sign up for coverage Option A at the time
of the sales closing date, and subsequently enter into a contract with
some or all of their malting barley production will retain the Option A
malting barley coverage. The malting barley production guarantee for
the producer then will be the same as the coverage guaranteed under the
Option A insurance contract.'' The comment indicated that malting
barley contracts can be entered into in the late spring and that
growers with Option A coverage should not forego their insurance
coverage if they do enter into such a contract.
Response: FCIC agrees with the comment. Section 2 and language in
the heading of Option A have been amended accordingly.
Comment: Two comments were received, one from FSA and one from
[[Page 8853]]
the insurance industry, that recommended clarifying whether the
additional value price election percentage can vary from that selected
for feed barley or if the percentages must be the same.
Response: It is intended that producers be allowed to select a
price election percentage for malting barley that varies from that
selected for feed barley. FCIC agrees that clarification is needed and
has amended the provisions in section 3 accordingly.
Comment: One comment received from the insurance industry indicated
that the provision requiring a producer to select an additional value
price election at the time of application would work the first year of
insurance, but would be a problem in succeeding years. The comment also
asked what procedure would be followed to change price elections from
year to year.
Response: Under any crop insurance policy, the producer is required
to select a price election. There is greater uncertainty under Option B
because the price upon which the election is based is not established
prior to the sales closing date. However, there is too great a risk of
adverse selection associated with permitting producers to select their
price elections after their prices have been established by contract.
The maximum price election is stated in Option B. Procedures to change
price elections from year to year will be the same as those in effect
for other crops. No change has been made to the proposed provision.
Comment: One comment received from a State Commissioner of
Agriculture recommended providing prevented planting coverage under the
terms of the endorsement.
Response: Determining a producer's intentions would make prevented
planting difficult to administer. Under other insurance products, all
terms of the contract are known on or before the sales closing date.
However, under this endorsement, a producer may not know if the malting
barley will be under contract, the number of acres insurable under the
endorsement or the price until the acreage reporting date. This
uncertainty makes it difficult to establish an actuarially sound
premium rate. Therefore, FCIC finds it appropriate to provide prevented
planting coverage on the basis of the feed barley production guarantee
and price election. If reliable methods to administer a prevented
planting program can be devised, then the endorsement can later be
amended. No change to the proposed provision has been made.
Comment: One comment received from a producer organization
indicated that the proposed ``cap'' of 200% of the maximum additional
value price election shown on the Special Provisions is too low to
cover the contract prices received for malting barley. The comment
suggested ``capping'' the additional value price election under Option
B at $2.00 per bushel.
Response: FCIC agrees and has revised the provisions as
recommended.
Comment: One comment received from the insurance industry
recommended changing the time by which a producer must submit a claim
for indemnity to the earlier of the date of final disposition of all
production or May 31 of the calendar year following the year the crop
is normally harvested.
Response: FCIC agrees that the time of disposition of all
production should be considered and has amended the provisions in
section 7 accordingly.
Comment: Two comments received from the insurance industry
indicated concern regarding the extended date for settling claims. One
comment stated that keeping claims open until May 31 places the
insurance provider well into the following crop year when early losses
are being worked, and increases the likelihood of errors. This comment
also recommended using a system of discount factors to allow claims to
be worked at harvest time. The other comment indicated that the
settlement date will delay needed benefits to producers and complicate
settlement under the Standard Reinsurance Agreement.
Response: Losses will have initially been adjusted as soon as
possible after the notice of loss. It is only when there is production
that fails to meet the quality criteria that the claim remains open. If
the claim remains open, adjustment only occurs if, and when, the
producer is able to sell such production. If such production is later
sold, there is little or no economic loss to producers. Even though
settlement of claims may be delayed, the use of discount factors or
settlement of claims at harvest time is not actuarially sound since it
will allow the producer to receive payments to which he may not be
entitled. Further, since the May 31 deadline still falls under the same
Standard Reinsurance Agreement, settlement should not be complicated by
this delay. Therefore, no change has been made to the proposed
provisions.
Comment: One comment received from the insurance industry indicated
that some producers may contract the production from some acreage but
also grow additional acreage for open-market sales. The comment
indicated that it would be difficult to track the acreage separately
and that the problem might be rectified by allowing the uncontracted
acreage to be insured under Option A.
Response: The endorsement already requires producers who grow both
contracted and non-contracted production within the same crop year to
insure such production under Option A. As indicated in the comment, it
is difficult to track the specific acreage from which malting barley
production is harvested. Therefore, no change is required.
Comment: Two comments received from the insurance industry
recommended using the same Actual Production History (APH) database for
both feed and malting barley. One of the comments recommended using a
temporary yield in the malting barley APH database to avoid a one year
difference in the databases between malting and feed barley. This
comment also recommended making reference to the APH crop year in
section 1 of Option A to avoid confusion.
Response: FCIC considered using temporary yields in malting barley
databases but elected not to do so because of the extra paperwork and
administrative expense involved with replacing the temporary yields
each year. FCIC agrees that adding a reference to APH in section 1 of
Option A may help clarify record requirements and has amended the
section accordingly.
Comment: One comment received from the insurance industry
recommended that the malting barley APH database reflect only acreage
from which malting barley was actually sold. The comment indicated that
a guarantee based on the total acreage planted to malting varieties and
the production sold for malting purposes would misrepresent potential
production.
Response: Since all acreage planted to approved malting varieties
is insured and the production available for sale, it must be considered
in the database. Otherwise, FCIC would be providing insurance for
changes in the market, which is not an insured cause of loss. No
changes have been made to the proposed provisions.
Comment: One comment received from a State Commissioner of
Agriculture recommended changing the number of yearly records of sale
of malting barley that are required from at least four years to three
out of the previous five years. The comment further recommended that
``acceptable records'' be defined.
Response: Allowing the producer to select the years for which
production
[[Page 8854]]
records are provided might result in the poorest production years not
being reflected in the data base. This would result in excessive
production guarantees, losses, and loss ratios. Specific production
record requirements are statutory and will be contained in procedural
handbooks. No change has been made to the proposed provision.
Comment: One comment received from a State Commissioner of
Agriculture recommended removing provisions that limit the malting
barley production guarantee to that determined for feed barley. The
comment recommends using only the malting barley records to determine
coverage under Option A, and only the contracted amount of production
to determine coverage under Option B.
Response: The production guarantee is intended to determine that
portion of the expected production that will be insured. Producers
should not receive a guarantee in excess of what the acreage could
reasonably be expected to produce. Under Option A, the best indicator
of the expected production is using the APH for feed barley because it
takes into consideration all the actual production from the insured
acreage, whether or not sold as malting barley. Under Option B, the
producer's insurance is limited to contracted acreage or production.
However, the contracted amount may differ from the actual production of
the acreage. Therefore, the actual production must be taken into
consideration. No change has been made to the proposed provisions.
Comment: One comment received from the insurance industry
recommended changing the date by which a producer must submit a copy of
the malting barley contract from the acreage reporting date to the
sales closing date. The comment stated that adverse selection would be
reduced by changing this requirement to an earlier date.
Response: In many cases, malting barley contracts are not completed
until April or May. Changing the contract submission date to the March
15 sales closing date would cause many growers who normally complete
contracts after this date to be ineligible for coverage under Option B.
No change has been made in the proposed provisions.
Comment: One comment received from the insurance industry stated
that the insurance guarantee under Option B would be underestimated
when a grower plants more acreage to approved malting varieties than
the number of acres grown under contract.
Response: Option B is not available to producers who grow more
acreage of malting barley than is under contract. Option A should be
used by producers who grow all open-market production or a combination
of contracted and open-market production.
Comment: One comment received from the insurance industry asked if
an additional data base would have to be established for malting
barley.
Response: Separate production data bases will be required for any
acreage planted to approved malting barley varieties and acreage
planted for feed barley.
Comment: One comment received from the FSA recommended expanding
the premium computation contained in Option B, section 3(b)
(redesignated as 3(c) in the final rule) to include the factors to be
applied, whether or not a separate liability is to be calculated, and
the applicable premium rate (feed barley or a separate rate).
Response: The comment misinterprets the term ``premium'' in this
subsection. As used in Option B, section 3(c), the term refers to an
additional dollar amount (above the base) paid to the producer for
barley production meeting contractual requirements rather than the
premium amount charged for insurance. The provision has been clarified
by using the term ``premium price per bushel.''
Comment: One comment received from the FSA recommended that the
definition of unit be clarified to indicate that units by share will be
available. The comment stated that the proposed provisions indicate
that basic units will not be available.
Response: All acreage of malting barley is insurable under a single
unit; basic units are not available. All insurable shares in the
malting barley will be designated on the acreage report for the single
unit. No changes have been made in the proposed provisions.
Comment: One comment received from a State Commissioner of
Agriculture recommended that producers have the option of designating,
on an acre by acre basis, either feed barley insurance coverage or
malting barley insurance coverage. The comment further suggested that
producers have the option of designating separate insurance units.
Response: To prevent selecting against the insurance provider, all
acreage planted to approved malting varieties must be insured as
malting barley. Allowing malting barley insurance only on acreage
selected by the producers would allow them to designate malting barley
insurance only on acreage where they have had difficulty producing
barley meeting malting barley standards and, thus, receiving a larger
indemnity than would be available for feed barley. Allowing units would
create situations in which growers could deliver 100 percent or more of
the malting barley guarantee and still receive an indemnity for a
malting barley loss on one or more units. This not only violates an
accepted principle of insurance that the insured should not profit by a
loss, it also makes it difficult to develop an adequate premium rate
for the coverage. No changes in the provisions have been made.
Comment: One comment received from a State Commissioner of
Agriculture recommended removing the requirement that potential
unharvested production be counted against the insurance guarantee. The
comment indicated that the intent of provisions in section 4(a)(2) of
Option B is unclear.
Response: This section may be unclear because of a drafting error.
Section 4(a)(2) of Option B should not begin with the word ``either.''
This correction has been made. This section is intended to require that
all harvested production and all production that is not harvested be
considered when determining the amount of production to count against
the production guarantee.
Comment: One comment received from the FSA pointed out a
typographical error in the second sentence of section 7 (redesignated
as section 6 in this final rule) in Option B. The sentence should read
as follows: Assume that each unit contains....
Response: The correction has been made.
Comment: One comment received from the insurance industry asked for
clarification of the 2,100 bushel guarantee reference in section 7
(redesignated as section 6 in this final rule) of Option B.
Response: This provision has been revised to clarify how an
indemnity will be paid.
Comment: One comment received from the crop insurance industry
indicated that the producer's share needs to be added to the provisions
regarding calculation of the claim amount.
Response: FCIC agrees and has amended the provisions as
recommended.
In addition to the changes indicated above, FCIC has determined
that it is necessary to:
(1) Modify the definition of ``Malting barley contract'' for the
purpose of clarification;
(2) Add provisions in section 9 to indicate that production of
approved malting varieties and any production of
[[Page 8855]]
feed barley varieties must not be commingled prior to the insurance
provider making all necessary determinations for the purposes of this
coverage; Failure to keep production separate may result in denial of
indemnity under the endorsement;
(3) Delete the definition of ``Value per bushel.'' This definition
was used to describe how production not meeting quality standards
contained in the endorsement was to be valued if such production was
ultimately sold as malting barley. The definition is unnecessary
because the value of such production will simply be the sale price per
bushel of the damaged production;
(4) Add provisions in section 4(b) of both Options A and B to allow
conditioning costs to be subtracted from the value of production that
could not be sold for malting purposes without conditioning; and
(5) Relocate provisions regarding delayed settlement of claims from
section 5 of both Options to section 7 of the provisions that apply to
both Options. These provisions were identical in the proposed rule and
should not be duplicated. Provisions 6 and 7 of both Options have been
redesignated as sections 5 and 6, respectively.
Good cause is shown to make this rule effective upon publication in
the Federal Register and without the 30-day period required by the
Administrative Procedure Act. This rule substantially improves the
malting barley insurance coverage. Public interest requires the agency
to act immediately to make this endorsement available for the 1996 crop
year. The rule expands coverage availability to producers who do not
hold a production contract with a malting or brewing company and
improves coverage for those producers who do have such a contract,
Therefore, good cause is shown to make this final rule effective in
less than 30 days after publication.
List of Subjects in 7 CFR Part 457
Crop insurance, Malting Barley Price and Quality Endorsement Crop
Provisions.
Final Rule
Pursuant to the authority contained in the Federal Crop Insurance
Act, as amended (7 U.S.C. Sec. 1501 et seq.), the Federal Crop
Insurance Corporation hereby amends the Common Crop Insurance
Regulations (7 CFR part 457) by adding a new Sec. 457.118, effective
for the 1996 and succeeding crop years, to read as follows:
PART 457--[AMENDED]
1. The authority citation for 7 CFR part 457 continues to read as
follows:
Authority: 7 U.S.C. 1506(1), 1506(p).
2. 7 CFR part 457 is amended by adding a new Sec. 457.118 to read
as follows:
Sec. 457.118 Malting Barley Crop Insurance.
The malting barley crop insurance provisions for the 1996 and
succeeding crop years are as follows:
United States Department of Agriculture Federal Crop Insurance
Corporation Small Grains Crop Insurance Malting Barley Price and
Quality Endorsement
(This is a continuous endorsement. Refer to section 2 of the Common
Crop Insurance Policy.)
In return for your payment of premium for the coverage contained
herein, this endorsement will be attached to and made part of the
Common Crop Insurance Policy (Sec. 457.8) and Small Grains Crop
Provisions (Sec. 457.101), subject to the terms and conditions
described herein.
1. You must have the Common Crop Insurance Policy (Sec. 457.8)
and the Small Grains Crop Insurance Provisions (Sec. 457.101) in
force to elect to insure malting barley under this endorsement.
2. You must select either Option A or Option B on or before the
sales closing date. Failure to select either Option A or Option B,
or if you elect Option B but fail to have a malting barley contract
in effect by the acreage reporting date, will result in no coverage
under this endorsement for the applicable crop year. If you elect
coverage under Option A, and subsequently enter into a malting
barley contract, your coverage will continue under the terms of
Option A. Your selection (Option A or B) will continue from year to
year unless you cancel or change your selection on or before the
sales closing date.
3. You must select either an additional value price election or
a percentage of the maximum additional value price election on or
before the sales closing date. The percentage of the maximum
additional value price election you select does not have to be the
same as that selected under the Small Grains Crop Provisions for
feed barley. In the event that you choose a percentage of the
maximum additional value price election, we will multiply that
percentage by the maximum additional value price election specified
in Option A or B to determine the additional value price election
that pertains to your contract.
4. The additional premium amount for this coverage will be
determined by multiplying your malting barley production guarantee
per acre by your selected additional value price election, times the
premium rate stated in the Actuarial Table, times the acreage
planted to approved malting barley varieties, times your share at
the time coverage begins.
5. In addition to the reporting requirements contained in
section 6 of the Common Crop Insurance Policy (Sec. 457.8), you must
provide the information required by the Option you select.
6. In lieu of the provisions regarding units and unit division
in the Common Crop Insurance Policy (Sec. 457.8) and the Small
Grains Crop Provisions (Sec. 457.101), all barley acreage in the
county that is planted to malting varieties that is insurable under
the Small Grains Crop Provisions for feed barley and your selected
Option must be insured under this endorsement and will be considered
as one unit regardless of whether such acreage is owned, rented for
cash, or rented for a share of the crop. The producer's shares in
the malting barley acreage to be insured under this endorsement must
be designated on the acreage report.
7. In lieu of the provisions in the Common Crop Insurance Policy
(Sec. 457.8) that requires us to pay your loss within 30 days after
we reach agreement with you, whenever any production fails one or
more of the quality criteria specified herein, the claim may not be
settled until the earlier of:
(a) The date you sell, feed, donate, or otherwise utilize such
production for any purpose; or
(b) May 31 of the calendar year immediately following the
calendar year in which the insured malting barley is normally
harvested.
If the production meets all quality criteria contained herein or
grades U.S. No. 4 or lower in accordance with the grades and grade
requirements for the subclasses Six-rowed and Two-rowed barley, and
for the class Barley in accordance with the Official United States
Standards for Grain, the claim will be settled within 30 days in
accordance with the Common Crop Insurance Policy (Sec. 457.8).
8. This endorsement does not provide additional prevented
planting coverage. Such coverage is only provided in accordance with
the provisions of the Small Grain Crop Provisions for feed barley.
9. Production from all acreage insured under this endorsement
and any production of feed barley varieties must not be commingled
prior to our making all determinations necessary for the purposes of
this insurance. Failure to keep production separate may result in
denial of your claim for indemnity.
10. Definitions:
(a) APH--Actual production history as determined in accordance
with 7 CFR part 400, subpart G.
(b) Approved malting variety--A variety of barley specified as
such in the Special Provisions.
(c) Brewery--A facility where malt beverages are commercially
produced for human consumption.
(d) Contracted production--A quantity of barley the producer
agrees to grow and deliver, and the buyer agrees to accept, under
the terms of the malting barley contract.
(e) Licensed grain grader--A person authorized by the U.S.
Department of Agriculture to inspect and grade barley under the U.S.
Standards for malt barley.
(f) Malting barley contract--An agreement in writing between the
producer and a brewery or a business enterprise that produces or
sells malt or processed mash to a brewery, or a business enterprise
owned by such brewery or business, that contains the
[[Page 8856]]
amount of contracted production, the purchase price, or a method to
determine such price, and other such terms that establish the
obligations of each party to the agreement.
(g) Objective test--A determination made by a qualified person
using standardized equipment that is widely used in the malting
industry, and following a procedure approved by the American Society
of Brewing Chemists when determining percent germination or protein
content; grading performed by following a procedure approved by the
Federal Grain Inspection Service when determining quality factors
other than percent germination or protein content; or by the Food
and Drug Administration when determining concentrations of
mycotoxins or other substances or conditions that are identified as
being injurious to human or animal health.
(h) Subjective test--A determination made by a person using
olfactory, visual, touch or feel, masticatory, or other senses
unless performed by a licensed grain grader; or that uses non-
standardized equipment; or that does not follow a procedure approved
by the American Society of Brewing Chemists, the Federal Grain
Inspection Service, or the Food and Drug Administration.
(i) Unit--All insurable acreage of approved malting varieties in
the county on the date coverage begins for the crop year.
Option A--(Available for Producers of Production Contracted After the
Sales Closing Date, Non-Contracted Production, or a Combination of
Contracted and Non-Contracted Production)
This option provides coverage for malting barley production and
quality losses at a price per bushel greater than that offered under
the Small Grains Crop Provisions.
1. To be eligible for coverage under this option, you must
provide us acceptable records of your sales of malting barley and
the number of acres planted to malting varieties for at least the
four crop years in your APH database prior to the crop year
immediately preceding the current crop year. For example, to
determine your production guarantee for the 1996 crop year, records
must be provided for the 1991 through the 1994 crop years, if
malting barley varieties were planted in each of those crop years.
Failure to provide acceptable records or reports as required herein
will make you ineligible for coverage under this endorsement. You
must provide these records to us no later than the production
reporting date specified in the Common Crop Insurance Policy
(Sec. 457.8).
2. Your malting barley production guarantee per acre will be the
lesser of:
(a) The production guarantee for feed barley for acreage planted
to approved malting varieties calculated in accordance with the
Small Grains Crop Provisions and APH regulations; or
(b) A production guarantee calculated in accordance with APH
procedures using the malting barley sales and acreage records
provided by you.
3. The additional value price per bushel elected cannot exceed
the maximum price designated in the Special Provisions.
4. The amount of production to count against your malting barley
production guarantee will be determined as follows:
(a) Production to count will include all:
(1) Appraised production determined in accordance with sections
11(c)(1) (i) and (ii) of the Small Grains Crop Provisions;
(2) Harvested production and potential unharvested production
that meets, or would meet if properly handled;
(i) Tolerances established by the Food and Drug Administration
or other public health organization of the United States for
substances or conditions, including mycotoxins, that are identified
as being injurious to human health; and
(ii) The following quality standards, as applicable:
------------------------------------------------------------------------
Six-rowed malting Two-rowed malting
barley (percent) barley (percent)
------------------------------------------------------------------------
Protein (dry basis)............. 14.0 maximum...... 14.0 maximum
Plump kernels................... 65.0 minimum...... 75.0 minimum
Thin kernels.................... 10.0 maximum...... 10.0 maximum
Germination..................... 95.0 minimum...... 95.0 minimum
Blight damaged.................. 4.0 maximum....... 4.0 maximum
Injured by mold................. 5.0 maximum....... 5.0 maximum
Mold damaged.................... 0.4 maximum....... 0.4 maximum
Sprout damaged.................. 1.0 maximum....... 1.0 maximum
Injured by frost................ 5.0 maximum....... 5.0 maximum
Frost damaged................... 0.4 maximum....... 0.4 maximum
------------------------------------------------------------------------
(3) Harvested production that does not meet the quality
standards contained in section 4(a)(2) of this Option, but is
accepted by a buyer for malting purposes. For such production, the
production to count may be reduced or the price used to settle the
claim may be adjusted in accordance with sections 4 (b), (c), and
(d) of this Option.
(b) The quantity of production that initially fails any quality
standard contained in section 4(a)(2), but is sold as malting barley
(except production included in section 4(c)), may be reduced as
described in this subsection, provided the failure of such
production to meet these standards is due to insurable causes. The
production to count of production sold under section 4(a)(3) will be
determined by:
(1) Adding the maximum barley price election under the Small
Grains Crop Provisions and the maximum additional value price;
(2) Dividing the result of paragraph (1) by the price per bushel
received for the damaged production; and
(3) Multiplying the result of paragraph (2) (not to exceed
1.000) by the number of bushels of damaged production.
(c) The production to count for production that initially fails
any quality standard contained in section 4 (a)(2), sold as malting
barley, but is conditioned before the sale will not be reduced under
section 4(b). Such production will be considered separately from all
other production to count. (See section 5(d).)
(d) The additional value price election per bushel used to
determine the value of the production to count for production that
initially fails any quality standard contained in section 4(a)(2),
but is sold as malting barley, may be reduced by the cost incurred
for any conditioning required to improve the quality of production
so that it is marketable as malting barley, provided the failure of
such production to meet these standards is due to insurable causes.
(e) No reduction in the production to count or the additional
value price election will be allowed for moisture content, damage
due to uninsured causes; costs or reduced value associated with
drying, handling, processing, or quality factors other than those
contained in section 4(a)(2) of this Option; or any other costs
associated with normal handling and marketing of malting barely.
(f) All grade and quality determinations must be based on the
results of objective tests. No indemnity will be paid for any loss
established by subjective tests. We may obtain one or more samples
of the insured crop and have tests performed at an official grain
inspection location established under the U.S. Grain Standards Act
or laboratory of our choice to verify the results of any test. In
the event of a conflict in the test results, our results will
determine the amount of production to count.
5. In the event of loss or damage covered by this policy, we
will settle your claim by:
(a) Multiplying the insured acreage times your malting barley
production guarantee per acre;
(b) Multiplying the result in subsection (a) of this section
times your additional value price election per bushel;
(c) Multiplying the number of bushels of production to count
determined in accordance with sections 4(a) and (b) of this Option
times your elected additional value price per bushel;
(d) Multiplying the production to count determined under section
4(c) of this Option times the additional value price per bushel
determined in section 4(d) of the Option;
(e) Adding the results of subsections (c) and (d) of this
section;
(f) Subtracting the result of subsection (e) of this section
from the result in subsection (b); and
(g) Multiplying the result of subsection (f) of this section
times your share.
6. For example, assume you insure two units of barley under the
Small Grains Crop Provisions in which you have a 100% share and that
are planted to approved malting varieties. Assume the following:
(a) Each unit contains 40 acres;
(b) You have sold an average of 20 bushels per acre of malting
barley for each of the last 6 years;
(c) You have selected the 70 percent coverage level;
(d) Your production guarantee under the Small Grains Crop
Provisions and the APH regulations for feed barley is 30 bushels per
acre;
(e) Your total production from all units under the Small Grains
Crop Provisions is
[[Page 8857]]
1,000 bushels, all of which fails to meet the quality standards
specified by this Option. Two hundred bushels are sold for malting
purposes after conditioning. Conditioning costs are $0.05 per
bushel; and
(f) Your additional value price election is $0.40 per bushel.
Your malting barley production guarantee is 1120.0 bushels (the
lesser of 20 or 30 x 70 percent coverage level x 80 acres). The
value of your production guarantee is $448.00 (1120 bushels x $0.40
per bushel). Your production to count is 200 bushels. The value of
your production to count is $70.00 (200 bushels x $0.35 ($0.40--
$0.05)). Your indemnity for the malting barley unit is $378.00
(($448.00--$70.00) x 100 percent share). Any remaining loss is paid
under the Small Grains Crop Provisions for feed barley.
Option B--(Available for Producers of Contracted Production Only)
This option provides coverage for malting barley production and
quality losses at a price per bushel greater than that offered under
the Small Grains Crop Provisions provided you have a malting barley
contract.
1. If you elect this option you must provide us a copy of your
malting barley contract on or before the acreage reporting date. All
terms and conditions of the contract, including the contract price
or futures contract premium price, must be specified in the contract
and be effective on or before the acreage reporting date. If you
fail to timely provide the contract, or any terms are omitted, we
may elect to determine the relevant information necessary for
insurance under this Option (B), or deny liability. Only contracted
production or acreage is covered by this Option (B).
2. Your malting barley guarantee per acre will be the lesser of:
(a) The production guarantee for feed barley for acreage planted
to approved malting barley varieties calculated in accordance with
the Small Grains Crop Provisions and APH regulations; or
(b) The number of bushels obtained by:
(1) Dividing the number of bushels of contracted production by
the number of acres planted to approved malting varieties in the
current crop year; and
(2) Multiplying the result by the percentage for the coverage
level you elected under the Small Grains Crop Provisions.
3. The additional value price election per bushel will be the
lesser of, as applicable:
(a) The guaranteed sale price per bushel established in the
malting barley contract (without regard to discounts or incentives
that may apply) minus the maximum price election for feed barley; or
(b) The premium price per bushel (without regard to discounts or
incentives) if the sale price is based on a future market price as
specified in the malting barley contract.
Under no circumstances will the additional value price election
per bushel exceed $2.00 per bushel.
4. The amount of production to count against your malting barley
production guarantee will be determined as follows:
(a) Production to count will include all:
(1) Appraised production determined in accordance with sections
11(c)(1) (i) and (ii) of the Small Grains Crop Provisions;
(2) Harvested production and potential unharvested production
that meets, or would meet if properly handled, the minimum
acceptance standards contained in the malting barley contract for
protein, plump kernels, thin kernels, germination, blight damage,
mold injury or damage, sprout damage, frost injury or damage, and
mycotoxins or other substances or conditions identified by the Food
and Drug Administration or other public health organization of the
United States as being injurious to human health, or the following
quality standards as applicable:
------------------------------------------------------------------------
Six-rowed malting Two-rowed malting
barley barley
---------------------------------------
(percent) (percent)
------------------------------------------------------------------------
Protein (dry basis)............. 14.0 maximum...... 14.0 maximum
Plump kernels................... 65.0 minimum...... 75.0 minimum
Thin kernels.................... 10.0 maximum...... 10.0 maximum
Germination..................... 95.0 minimum...... 95.0 minimum
Blight damaged.................. 4.0 maximum....... 4.0 maximum
Injured by mold................. 5.0 maximum....... 5.0 maximum
Mold damaged.................... 0.4 maximum....... 0.4 maximum
Sprout damaged.................. 1.0 maximum....... 1.0 maximum
Injured by frost................ 5.0 maximum....... 5.0 maximum
Frost damaged................... 0.4 maximum....... 0.4 maximum
------------------------------------------------------------------------
(3) Harvested production that does not meet the quality
standards contained in section 4(a)(2) of this Option, but is
accepted by a buyer for malting purposes. For such production, the
production to count may be reduced or the price used to settle the
claim may be adjusted in accordance with sections 4 (b), (c), and
(d) of this Option.
(b) The quantity of production that initially fails any quality
standard contained in section 4(a)(2), but is sold as malting barley
(except production included in section 4(c)), may be reduced as
described in this subsection, provided the failure of such
production to meet these standards is due to insurable causes. The
production to count of production sold under section 4(a)(3) will be
determined by:
(1) Adding the maximum barley price election under the Small
Grains Crop Provisions and the maximum additional value price;
(2) Dividing the result of paragraph (1) by the price per bushel
received for the damaged production; and
(3i) Multiplying the result of paragraph (2) (not to exceed
1.000) by the number of bushels of damaged production.
(c) The production to count for production that initially fails
any quality standard contained in section 4(a)(2), sold as malting
barley, but is conditioned before the sale will not be reduced under
section 4(b). Such production will be considered separately from all
other production to count. (See section 5(d).)
(d) The additional value price election per bushel used to
determine the value of the production to count for production that
initially fails any quality standard contained in section 4(a)(2),
but is sold as malting barley, may be reduced by the cost incurred
for any conditioning required to improve the quality of production
so that it is marketable as malting barley, provided the failure of
such production to meet these standards is due to insurable causes.
(e) No reduction in the production to count or the additional
value price election will be allowed for moisture content, damage
due to uninsured causes; costs or reduced value associated with
drying, handling, processing, or quality factors other than those
contained in section 4(a)(2) of this Option; or any other costs
associated with normal handling and marketing of malting barely.
(f) All grade and quality determinations must be based on the
results of objective tests. No indemnity will be paid for any loss
established by subjective tests. We may obtain one or more samples
of the insured crop and have tests performed at an official grain
inspection location established under the U.S. Grain Standards Act
or laboratory of our choice to verify the results of any test. In
the event of a conflict in the test results, our results will
determine the amount of production to count.
5. In the event of loss or damage covered by this policy, we
will settle your claim by:
(a) Multiplying the insured acreage times your malting barley
production guarantee per acre;
(b) Multiplying the result in subsection (a) of this section
times your additional value price election per bushel;
(c) Multiplying the number of bushels of production to count
determined in accordance with sections 4 (a) and (b) of this Option
times your elected additional value price per bushel;
(d) Multiplying the production to count determined under section
4(c) of this Option times the additional value price per bushel
determined in section 4(d) of the Option;
(e) Adding the results of subsections (c) and (d) of this
section;
(f) Subtracting the result of subsection (e) of this section
from the result in subsection (b); and
(g) Multiplying the result of subsection (f) of this section
times your share.
6. For example, assume you insure two units of barley under the
Small Grains Crop Provisions in which you have a 100% share and that
are planted to approved malting varieties. Assume the following:
(a) Each unit contains 40 acres;
(b) You have a contract for the sale of 2500 bushels of malting
barley;
(c) You have selected the 70 percent coverage level;
(d) Your production guarantee under the Small Grains Crop
Provisions and the APH regulations for feed barley is 35 bushels per
acre;
(e) Your total production from all units under the Small Grains
Crop Provisions is 1,000 bushels, all of which fails to meet the
quality standards specified by this Option.
[[Page 8858]]
Two hundred bushels are sold for malting purposes after conditioning.
Conditioning cost $0.05 per bushel; and
(f) Your additional value price election is $0.60 per bushel.
Your malting barley production guarantee is 1750.0 bushels (the
lesser of 35 or 21.875 (2500 contracted bushels 80 acres x
70 percent coverage) x 80 acres). The value of your production
guarantee is $1050.00 (1750 bushels x $0.60 per bushel). Your
production to count is 200 bushels. The value of your production to
count is $110.00 (200 bushels x $0.55 ($0.60--$0.05)). Your
indemnity for the malting barley unit is $940.00 (($1050.00--
$110.00) x 100 percent share). Any remaining loss is paid under the
Small Grains Crop Provisions for feed barley.
Done in Washington, D.C., on March 1, 1996.
Kenneth D. Ackerman,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 96-5383 Filed 3-4-96; 1:01 pm]
BILLING CODE 3410-FA-P
