General Crop Insurance Regulations; Small Grains Crop Insurance Provisions

DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Part 457

General Crop Insurance Regulations; Small Grains Crop Insurance

Provisions

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Federal Crop Insurance Corporation (FCIC) hereby adopts

regulations for specific crop provisions to insure Small Grains (wheat,

barley, flax, oats, and rye), and options for increased coverage on

Winter Wheat and Malting Barley. This rule consolidates the provisions

for insuring small grains into one policy and provides for late

planting, prevented planting, and wheat winter coverage.

EFFECTIVE DATE: March 30, 1994.

FOR FURTHER INFORMATION CONTACT:

Mari L. Dunleavy, Regulatory and Procedural Development, Federal Crop

Insurance Corporation, U.S. Department of Agriculture, Washington, DC

20250, telephone (202) 254-8314.

SUPPLEMENTARY INFORMATION: This action has been reviewed under USDA

procedures established by 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, 1998.

Kenneth D. Ackerman, Manager, FCIC, has determined that this action

is in conformance with Executive Order 12866 and is not a ``significant

regulatory action.'' Based on information compiled by the Department,

it has been determined that this final rule: (1) Would not adversely

affect in a material way the economy, a sector of the economy,

productivity, competition, jobs, the environment, public health or

safety, or state, local, or tribal governments or communities; (2)

would not create a serious inconsistency or otherwise interfere with an

action taken or planned by another agency; (3) would not alter the

budgetary impact of entitlement, grants, user fees or loan programs or

rights and obligations of recipients thereof; and (4) would not raise

novel legal or policy issues arising out of legal mandates, the

President's priorities, or principles set forth in Executive Order

12866.

In accordance with the Paperwork Reduction Act of 1980 (44 U.S.C.

3501 et seq.), the information collection or record-keeping

requirements included in this final rule have been submitted for

approval to the Office of Management and Budget.

This action will not have a significant impact on a substantial

number of small businesses. The insurance companies delivering these

policies will not increase the amount of work required over the

previous policy delivery. In fact, the combination of a number of

previously independent policies into one policy should reduce confusion

and increase efficiency. Therefore, this action is determined to be

exempt from the provisions of the Regulatory Flexibility Act and no

Regulatory Flexibility Analysis was prepared.

This program is listed in the Catalog of Federal Domestic

Assistance under No. 10.450.

This program is not subject to the provisions of Executive Order

12372 which requires 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.

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.

The small grains crop provisions were developed to provide one

policy form for insuring wheat, barley, flax, oats, and rye. Using one

policy for these five crops will: (1) Substantially reduce paperwork by

issuing one policy form rather than the five separate policies

previously used; (2) substantially reduce the number of crop handbooks

and administrative procedures because separate handbooks and procedures

will no longer be required for each of the small grain crops; (3)

reduce the time involved to amend or revise the Provisions by

eliminating repetitious review processes; and (4) continue to allow

insureds the flexibility to elect any of the five small grain crops

they wish to insure.

By separate rule, FCIC will remove and reserve the present sections

for these crop endorsements.

On Thursday, June 10, 1993, FCIC published a notice of proposed

rulemaking in the Federal Register at 58 FR 32458 proposing to revise

the Common Crop Insurance Regulations by adding new provisions for

oats, wheat, winter wheat, flax, barley, malting barley, and rye crop

insurance.

Following publication of the proposed rule, the public was afforded

30 days to submit written comments, data, and opinions. Comments were

received from various representatives of farm and commodity groups, the

crop insurance industry, and FCIC. The comments received and FCIC

responses are as follows:

Comment: Six comments suggested that the Crop Provisions should be

delayed until after the 1994 crop year because:

(1) Timeliness--Implementation of this program for the 1994 crop

would cause confusion and disruption because companies had insufficient

time for training and marketing of the program to agents and insureds;

(2) Program Integrity--The effect upon the overall public

acceptance and program integrity will be negative as a result of the

inevitable service problems associated with ``rushing'' a program of

such national scale; and

(3) Changes--To a large degree, most of the proposed provisions are

positive and will improve the program; however, by delaying

implementation until the 1985 crop year specific provisions can be

studied.

Response: FCIC delayed implementation until the 1995 crop year.

Comment: Two comments suggested the proposed Small Grains Crop

Provisions undergo a pilot test in two to three county groupings

located in (1) a predominantly spring wheat only area, (2) a winter

wheat only area, and (3) an area having significant acreage of both

winter and spring wheat. The comments stated that this approach would

avoid undue risk of adverse effects to a wheat program currently

working well for thousands of policyholders. An additional comment

recommended that the proposal be tabled for further study and

discussion to give all parties sufficient time to adequately assess the

effects of the proposed changes.

Response: The Small Grains Crop Provisions permit farmers to choose

the same or nearly the same coverage as currently offered. FCIC does

not anticipate significant problems with the proposed provisions, and

sees no need to create a pilot program to test effectiveness.

Comment: Two comments recommended that the term ``initially

planted'' be defined for the purposes of unit division. Current farming

practices are such that more than one use/interpretation of this term

is possible. Another comment recommended that ``initially planted'' be

defined as ``the first occurrence of planting the crop to the acreage

for the crop year''.

Response: FCIC agrees that the term ``initially planted'' should be

defined and has done so.

Comment: One comment stated that the definition of ``practical to

replant'' contained in the Common Crop Insurance Policy conflicts with

the Small Grains Crop Provisions. The Common Crop Insurance Policy

indicates it is practical to replant until 20 days after the final

planting date. The Small Grains Crop Provisions indicate that any

acreage of the insured crop damaged before the final planting date must

be replanted unless FCIC agrees that replanting is not practical. It

was recommended that a definition of ``practical to replant'' be added

to the Small Grains Crop Provisions that will override the definition

contained in the Common Crop Insurance Policy.

Response: The comment misapplies the definition of ``practical to

replant'' in the Common Policy. That policy does not indicate that it

is practical to replant until 20 days after the final planting date

but, to the contrary, states that it is not practical to replant after

that date. The provisions do not conflict. A new definition has not

been added due to this comment. However, a new definition has been

added that is compatible with the new 25 day late planting period.

Comment: One comment noted that the definition of ``swathed''

indicates that a wheat crop that has been cut but not placed in

windrows is considered ``swathed.'' The comment suggested rewording the

definition to require that the crop be placed in a windrow.

Response: FCIC agrees with the comment and has appropriately

modified the definition.

Comment: One comment stated that the wording in the unit division

section has significantly changed as has the unit division wording in

the ``draft'' 1994 Crop Insurance Handbook (CIH). The comment

recommended corresponding policy language with that in the CIH.

Response: Language contained in the Crop Insurance Handbook is

interpretive and procedural in nature. The Crop Insurance Handbook

details unit division for various crops, and is intended for use by

insurers and their agents to interpret the crop provisions. In the

event of conflict the provisions control. The Small Grains Crop

Provisions outline the unit structure for small grains in a concise

manner and are controlling.

Comment: One comment disagreed with requiring insureds to furnish

records for each optional unit for at least the last crop year the unit

was planted. According to current procedure, ``in order for optional

units to apply, the insured must have provided production reports for

the most recent year in the base period which support the optional

units proposed by the insured.'' The comment asserts that unless all

optional units are planted every year, the new policy could require an

insured to furnish records for several years to qualify for optional

units. This places an increased burden on all producers, particularly

on those practicing crop rotation. The comment recommended revising the

provision to ``You must have verifiable records of production for at

least the last crop year used to determine your production guarantee.''

Response: FCIC agrees with the comment and has modified the

provision with language similar to that recommended.

Comment: A comment inquired if the process of raising the planter

for a few feet and then resuming planting, or leaving a space unplanted

is sufficient for a ``clear and discernible break in the planting

pattern''. The comment suggested further clarification of the term,

``clear and discernible break in the planting pattern''.

Response: Requirements for separate units have been met if the

break in the planting pattern is adequate to allow measurement of

individual insurance units, and allow separate harvest of the units.

The terms are self explanatory. Whether a break exists depends on

whether these functions can occur. No changes in policy language are

needed to clarify boundary requirements.

Comment: Four comments supported initially planted spring wheat

being treated as a separate unit. Each comment also indicated that

there should not be a mandatory replant provision for damaged winter

wheat. One of the four comments indicated that any premium increase

caused by the separate optional units for spring and winter wheat

should be minimal.

Response: Separate optional units for initially planted winter and

spring wheat are allowed by this regulation, although farmers who elect

this choice will forgo the premium discount for maintaining a single

unit. These terms are consistent with those terms given to a producer

who elects to plant spring and winter wheat into separate sections.

The Wheat Winter Coverage Endorsement provides optional coverage

for those growers who may not wish to replant damaged winter wheat.

However, the Basic Policy requires that crops damaged prior to the

final planting date be replanted when practical. This requirement helps

FCIC maintain lower premium rates.

Comment: Some comments were in disagreement with the provision

allowing insureds to select optional units for initially planted winter

wheat and initially planted spring wheat for the following reasons:

a. Currently, production from winter wheat acreage often off-sets

losses on spring wheat acreage. Allowing optional units by type can

only increase the loss ratio in those areas where both winter and

spring types wheat are planted and insured. To increase risk exposure

by allowing winter and spring wheat units when other changes are

concurrently being implemented in the program to decrease the loss

ratio seems to create a conflict.

b. There is no appreciable difference in harvesting and marketing

the soft white winter wheat and the soft white spring wheat grown in

the northwest. Although a yield difference does exist between the two

types of wheat, yield differences also exist for many other crop

practices and types not allowed separate optional units.

c. If optional units are allowed by type, a significant increase in

losses could result. According to information from some member

companies who have analyzed prior year losses by type, loss ratios for

wheat would have been substantially higher if winter and spring wheat

could have been insured as a separate optional units.

d. One organization had not received any requests for optional

units by type from companies, agents, or insureds, and therefore did

not see the need for the provision.

Other comments provided the following observations and inquiries:

a. Will the cost of the options in provisions governing Unit

Division be prohibitive?

b. Production of spring wheat and winter wheat is commingled more

often than not.

c. Allowing winter and spring optional units may significantly

increase risk. FCIC should analyze winter and spring statistics to

determine if an additional rate should be charged.

d. The provision allowing optional units for initially planted

Winter Wheat and initially planted Spring Wheat will permit growers who

have insufficient acreage to plant in separate sections and declare

separate optional units. Large producers will also be able to declare

separate optional units, and the net effect will increase the number of

wheat units. This may have a negative effect on FCIC's loss ratio. The

provision will also increase the paperwork burden of the already

overburdened claims adjuster.

e. Changes or adjustments to the program should be sensitive to

rating adequacy and reduction of excess of loss ratios. Some of the

provisions of the program contradict these goals. For instance,

analyses by companies and industry trade associations do not support

the notion that no additional rate is required for optional units by

type. As proposed, optional units by type can only be justified as a

marketing tool in some areas of the country.

Response: Separate units for winter and spring wheat have been

requested by grower groups in Washington, Idaho, and Oregon. FCIC

agrees that farmers should have the opportunity to designate initially

planted spring and winter wheat as separate optional units because they

are planted several months apart and are normally harvested separately.

FCIC also agrees that soft white wheat types may be marketed together.

However, there are substantial price penalties for commingling

production of spring and winter wheat of other types.

FCIC has analyzed types of wheat reported by unit for the states in

which both winter and spring types are insured. An average of only 7

percent of all units in these states reported both winter and spring

types within the same unit. The majority, or 93 percent of all units,

reported only a single type within the unit. These results suggest that

most farmers already manage their land in a manner that permits them to

put the winter and spring types into separate optional units. This is

accomplished by planting the types within different legally defined

sections of land. Thus, FCIC believes that the potential for increases

in the number of optional units is not substantial. Most farmers who

have enough land and who wish to designate separate optional units

already do so.

Farmers who designate separate optional units by type within the

same section will forgo the premium discount that is currently allowed

if a basic unit is not separated into optional units. Thus, farmers who

elect to designate units by type of wheat within the section will pay

more premium than a farmer who elects to retain all acreage within a

basic unit.

The comments concerning additional paperwork are overstated.

Farmers already are required to report separately any acreage planted

to the spring and winter types within section because different premium

rates, insurance guarantees, or both, apply to such acreage. The only

difference in the acreage report under the new provision is that two

distinct unit numbers will be used by the insurer rather than one as at

present. Farmers will be required to report the production of the two

types separately, which they already may do in many cases. FCIC cannot

estimate the number of cases in which a new report may be required. The

former wheat endorsement required only that insured persons report the

total production of all the insurable crop produced on the unit. If a

farmer elects to report only total production under the present

arrangements, the accuracy of the guarantees for the types is reduced

because the insurer must allocate the production in some manner to

establish a guarantee by type. If farmers who now report the combined

production of the two types within section do designate separate

optional units, the change may enhance the precision of guarantees for

the separate types, thereby benefiting the insurer. If the farmer

already reports production of the two types separately, there will be

no change in the paperwork required.

Insured persons who wish to take advantage of the opportunity to

designate separate optional units within a section must comply with all

other requirements for unit division. Thus, if a producer commingles

production of the winter and spring types, separate optional units may

not be elected. If a producer plants spring wheat into a failed winter

stand, separate optional units may not be elected. If planting patterns

do not permit separate identification of the acreage, optional units

may not be elected. If a producer wishes to reduce the premium paid for

the insurance, he or she can elect to retain all the acreage in a basic

unit. The new provisions do not mandate separate optional units.

Finally, much of the research about units referenced in the

comments relates to size of acreage, not specifically to unit division.

Results of such research suggests that small farmers should pay higher

premiums than large farmers because small acreage may have higher

losses on average. Although the issues is related, FCIC believes that

the issues should be treated separately. If it is ultimately

demonstrated that small acreage should be subject to a surcharge due to

actuarial considerations, the surcharge should be assessed against

small acreage regardless of whether these result from small farming

operations or from unit division.

In summary, FCIC does not find these comments persuasive.

Comment: One comment took issue with winter wheat vs. spring wheat

Transitional Yields (T-yields) and factors in many Pacific Northwest

counties. The comment suggested that the uncoupling of winter wheat and

spring wheat into separate units be preceded by a major rework of T-

yield factors to prevent potential over-payments on spring wheat units.

Response: FCIC agrees that T-yields should reflect any significant

differences in yields. Evaluations will be performed and any necessary

changes will be made as soon as practicable. However, those changes

will not require a change in this rule.

Comment: The last paragraph under section 2. (Unit Division)

indicates that optional units not in compliance with the provisions of

the section will be combined into the basic unit from which they were

formed. A comment suggested that this language be clarified to separate

this combination from that which occurs at loss time if production is

commingled between optional units. The comment recommended the

following language: ``If you do not comply fully with these conditions,

we will combine all optional units which are not established in

compliance with this section into the basic unit from which they were

formed.''

Response: FCIC agrees with the comment and has modified the

provision as recommended.

Comment: One comment suggested that Harding and Perkins counties,

South Dakota, be added to the list of wheat counties that have an April

15 cancellation and termination date. Statistics indicate that over 80

percent of the wheat in these counties is initially planted spring

wheat. In order to maintain the line of counties which separates the

April 15 counties from counties with earlier dates, Harding and Perkins

counties should be listed with the other South Dakota counties with the

April 15 date.

Response: FCIC agrees with the comment and has modified the

provision as recommended.

Comment: Four comments agreed with changing the wheat sales closing

and cancellation dates for Idaho, Oregon, and Washington from October

31, to September 30. However, they recommended the dates not be changed

until the 1995 crop year due to the late publication of the proposed

rule. One of the four comments indicated the change would cause the

production reporting date to occur at an earlier date. In some areas of

the Northwest, harvest may not be completed by that new production

reporting date.

Response: The effective date of these regulations has been

postponed until the 1995 crop year, therefore, the wheat sales closing

and cancellation dates for Idaho, Oregon, and Washington from October

31 to September 30 has been postponed to 1995. FCIC will take action to

change the production reporting date if problems occur.

Comment: One comment stated that the change of the wheat sales

closing and cancellation dates from October 31 to September 30 for

Idaho, Oregon, and Washington is favorable and inquired as to the

reason that Nevada and Utah remain at the 10/31 date.

Response: FCIC changed the sales closing and cancellation in Idaho,

Oregon, and Washington due to an allegation that the previous dates

posed a potential for adverse selection. FCIC has not received any

comments or recommendations regarding the dates in Nevada or Utah. It

is FCIC's intent to allow the maximum sales period possible as long as

program integrity is not compromised. FCIC will not change the proposed

rule.

Comment: A comment recommended that the cancellation and

termination dates be changed from April 15 to February 28 for barley

and oats in all Pacific Northwest states.

Response: FCIC plans an overall assessment of program dates for all

crops. The recommendation will be considered in that review.

Comment: A comment recommended moving the cancellation and

termination dates from the Crop Provisions to the Special Provisions.

The comment suggested that any information specific to a state, county

or group of counties be located in the Special Provisions where the

appropriate parties have access to it.

Response: These dates must remain in the Common Crop Insurance

Policy due to the requirements of Sec. 457.8. However, FCIC will

consider also placing them in the Special Provisions.

Comment: One comment stated that as proposed, policy language in

subsection 6.(a) could lead the reader to believe that the insured has

the option of insuring only a portion of their insurable acreage.

Response: FCIC agrees that this language should be clarified. The

provision has been modified to indicate the crop insured is each small

grain the producer elects to insure, that is grown in the county on

insurable acreage, and for which premium rates are provided by the

actuarial table.

Comment: One comment recommended requiring that requests for

written agreements be received by FCIC within 15 days of the acreage

reporting date and that the requirement be added to section 6. Insured

Crop.

Response: The Crop Insurance Handbook now indicates that these

types of written agreements must be sent to FCIC, and be postmarked no

later than 15 days after the acreage reporting date. Since reinsured

insurance contracts are between the reinsured company and the insured,

the contract should not contain obligations that exist between FCIC and

the reinsured company. Therefore, language indicating that requests

must be received by FCIC within 15 days of the acreage reporting date

will not be included in the crop provisions.

Comment: Three comments were received regarding the provision that

allows the insured to designate wheat acreage that will be destroyed

before harvest as uninsurable acreage, or acreage eligible for a

reduced premium rate. The comments suggested that applicability of the

provisions not be limited to wheat, and that the reduced premium rate

should only be provided in counties where early destruction of crops

has been a problem.

Response: FCIC agrees that applicability of the provisions should

not be limited to wheat. Only acreage intended to be harvested for

grain qualifies as an insurable crop. Therefore, if it is known at the

acreage reporting date that the acreage will be destroyed, it is not

insurable. The provision that allows an insured to designate only wheat

acreage as uninsurable acreage has been changed to apply to all covered

crops. The provision that provides for a reduced premium rate if

acreage is destroyed by a certain date, has been changed so that it

applies only in those counties for which such a reduced rate is

included on the actuarial table. This change will allow FCIC to provide

a ``short rate'' only in areas where small grain crops are most

commonly used for multiple purposes, e.g., grazing and harvest for

grain.

Comment: One comment questioned the benefit of using the under-

reported premium factor as opposed to current procedure whereby

production from unreported acreage is counted against the guarantee for

reported acreage, or the acreage report is revised if acreage is over-

reported.

Response: Current procedure is not altered if under-reported

acreage is the only problem. The under-reported premium factor reduces

the guarantee when share, practice, type, or other material information

is under-reported.

Comment: One comment noted that it is extremely important that

shifting liability procedure be reinstated. Acreage is reported by unit

and the insurance company requires the insured to indicate on the

acreage report the acreage he plans to destroy, however, insureds often

do not know at acreage report time exactly which acres will be

destroyed. Therefore, the company is asking for information that is

often unknown at the time the acreage report is filed. Shifting

liability procedure is an equitable method of addressing the situation.

Response: If an insured indicates that acreage will be destroyed

and then does not destroy the acreage, the unit will be subject to the

under-reporting provisions of subsection 6.(f) of the Common Crop

Insurance Policy (Sec. 457.8).

Comment: Two comments indicated that the wheat provision will allow

any insured producer whose wheat sustains early damage to destroy any

remaining wheat, pay a reduced premium rate, and receive a full

indemnity. The comments suggested that the provision should be changed

to prohibit this practice, and to require the insured to notify the

insurer prior to destroying any insured wheat.

Response: FCIC agrees that the reduced premium should apply only

when there is no insurable damage. FCIC also agrees that the insured

should notify the insurer prior to and after destruction of any acreage

of the insured crop. This notification will allow the insurer to make

any necessary inspections and adjustments to the Acreage Report. The

provision has been revised accordingly.

Comment: Two comments indicated that the provisions for destroyed

acreage are difficult to assess without seeing the proposed prorata

premium charges, or the deadlines which will be designated in the

Special Provisions. The comments asked if the expense reimbursement to

reinsured companies for acreage destroyed by the deadline in the

Special Provisions would be calculated using the total premium or the

reduced premium.

Response: Premium rates for destroyed acreage will vary in

accordance with the probability of loss in individual geographic areas.

If insurable damage occurs prior to the crop being destroyed by the

grower, the loss will be processed in the normal manner and 100 percent

of the premium will be due. Expense reimbursement will also be

calculated on this basis. If the insured destroys the acreage by the

date designated in the Special Provisions and does not claim insurable

damage on such acreage, the reduced rate will be used to determine the

premium and the reduced premium will be used to determine the expense

reimbursement.

Comment: One comment recommended that if the terms of the Late

Planting Agreement Option are added to the Small Grains Policy, an

option should be allowed for insureds to decline this coverage. The

comment supported giving insureds the opportunity to make a management

decision on whether their late planted acreage has coverage.

Response: Provisions for late planting coverage have been added to

these provisions in order to provide more complete coverage for

insureds. If insureds are allowed to opt out of the coverage it may

result in adverse selection against the insurer. When agronomic

conditions are good many insureds would tend to opt out of the

coverage, but if growing conditions are poor, insureds would tend to

keep the coverage.

Comment: One comment inquired about the lack of availability of the

late planting option for late planted winter wheat. The comment pointed

out that the option is available for both fall and spring planted

barley, and suggested that it be available for winter wheat.

Response: FCIC has received comments indicating that the wheat

final planting dates are now set as late as it is normally practical to

plant. The additional planting period allowed by the Late Planting

Agreement Option (LPAO) permits planting too late in the year to expect

production equal to or in excess of the insurance guarantee provided by

the Option. Although coverage similar to that provided by the current

LPAO will no longer be available, coverage for winter wheat planted

after the final planting date will be available under the prevented

planting provisions (section 12). FCIC received no comments opposed to

removing the LPAO for winter wheat.

Comment: One comment recommended changing the wording in subsection

6.(d) to: ``If you do not select one of the options for alternate

coverage, you agree that in counties for which the special provisions

designate both a fall final planting date and a spring final planting

date, any damage to fall planted wheat which occurs between the fall

final planting date and the spring final planting date due to any cause

is not insured.''

Response: Subsection 6.(d) (renumbered as 6.(c) in this final rule)

is intended solely to inform the insured of the availability of the

Wheat Winter Coverage Endorsement. Section 7 (Insurance Period) clearly

indicates the coverage limitations for fall planted wheat in counties

with both fall and spring final planting dates. Additional language in

subsection 6.(d) is not necessary.

Comment: A comment suggested that FCIC provide a deadline for

selecting Option A or B under the Winter Coverage Option.

Response: The sales closing date will be the last date an insured

can select either Option A or B under the Winter Coverage Option. FCIC

agrees that the Option should indicate this date and has revised it

accordingly.

Comment: One comment stated that if wheat insurance attaches at

different times depending on which style of insurance a grower has

purchased, it will lead to administrative problems. The comment

suggested that insurance on wheat attach on the day the acreage is

planted or the date the application is accepted--whichever is later.

Response: The insurance provisions attach on the later of the date

the application is accepted or the date the crop is planted. This does

not vary based on the insurance options chosen by the insured.

Comment: One comment indicated concern that the replant provision

could be interpreted to mean that a crop that had sustained 1% damage

before the final planting date must be replanted. The comment

recommended ``damage'' be defined to mean damaged to the extent that

the crop will not be further cared for, will not be harvested, or will

be abandoned.

Response: FCIC agrees that the amount of damage should be

clarified. Language has been added clarifying that any acreage damaged

to the extent that growers in the area would not further care for the

crop must be replanted unless replanting is not practical. The same

change has been made to similar provisions for barley and wheat acreage

(subparagraphs 7.(a)(2)(ii), 7.(a)(2)(iii), and 7.(a)(2)(iv)).

Comment: One comment stated that clarification is needed regarding

the definition of ``practical to replant.''

Response: FCIC agrees with the comment and has clarified the

definition. The new definition clarifies that it is practical to

replant if it is ``our determination, after loss or damage to the

insured crop, based on factors, including but not limited to moisture

availability, condition of the field, time to crop maturity, etc., that

a replanting of the insured crop will attain maturity in the remainder

of the crop year.''

Comment: A comment inquired as to the practicality of replanting

wheat before the fall planting date.

Response: Replanting wheat before the fall final planting date is

considered practical if certain conditions are met.

Comment: Three comments suggested that coverage limitations

applicable to winter wheat also apply to winter barley. One of the

comments also inquired if the requirement that a written request be

made to insure fall planted wheat in counties with only a spring final

planting date would result in extra paperwork.

Response: FCIC agrees that the limitations that apply to wheat

should also apply to barley. The provisions have been modified

accordingly. A written request to insure the fall planted acreage will

serve to notify the insurer that a crop inspection is necessary in the

spring to determine whether or not an adequate stand exists in the

spring.

Comment: One comment noted that the provisions of section 7

specifically state that spring wheat damaged prior to the spring final

planting date must be reseeded. The comment recommended that specific

wording be added to state that damaged fall wheat must be reseeded

prior to the fall final planting date and that no replanting payment

applies.

Response: FCIC agrees that this clarification should be made. The

provisions have been modified to state that any acreage damaged prior

to the fall final planting date must be replanted to winter wheat

unless FCIC agrees it is not practical. Paragraph 9.(a)(4) clearly

indicates that a replanting payment for damage occurring prior to the

fall final planting date is not allowed. Therefore, language regarding

replanting payments was not added.

Comment: The following questions regarding winter wheat were

submitted:

a. When winter wheat is planted in a county that has only a spring

final planting date, will the winter wheat be insured using the spring

wheat yield or will the RSO set a winter wheat yield on the written

agreement?

b. Will the winter wheat production be considered spring wheat for

APH purposes or must winter wheat APH yield be established?

c. What production guarantee is used to determine if the winter

wheat has an adequate stand?

Response: The provision that applies to these questions is

unchanged from the present wheat endorsement. Actuarial tables for the

counties in question do not designate a wheat type. When a type is not

designated, the guarantee is based on wheat production without regard

to the type. This guarantee is used for APH purposes and is also used

to determine whether or not an adequate stand exists.

Comment: For winter wheat in counties that only have a spring final

planting date, the policy states that insurance will attach on the

earlier of the spring final planting date or the date the insurer

agrees to accept the acreage. The policy also requires insureds

planting winter wheat in these counties to request insurance for winter

planted wheat. One comment suggested that because the insurer must

inspect the crop to determine if an adequate stand exists, insurance

should attach when the insurer agrees to accept liability (not on the

spring final planting date). The comment suggested that the applicable

sentence in subparagraph 7.(a)(2)(v) should be revised to read as

follows: ``* * * Insurance will attach to acreage having an adequate

stand on the date we agree to accept the acreage for insurance.''

Response: The policy language was written to set a specific date by

which the insurer must accept liability. The language requires insurers

to inspect acreage in a timely manner so that the insured can be

advised about the coverage level prior to the spring final planting

date. No changes have been made in the provisions.

Comment: Under the winter coverage endorsement, FCIC is giving

producers two additional coverage options for losses on winter wheat

that is damaged prior to the spring final planting date. A Montana

producer expressed concern that the new provisions may change the

current basic winter wheat coverage and premium levels.

Response: The basic coverage under the wheat provisions is similar

to the existing wheat endorsement. The changes (primarily replanting

payments in certain instances) may have a small impact on the rate

charged for the base coverage. The new basic policy (without the Wheat

Winter Coverage Endorsement) clearly states that winter wheat damaged

prior to the spring final planting date must be replanted in counties

with both winter and spring final planting dates.

Comment: One comment recommended that the calendar dates for the

end of the insurance period be moved to the Special Provisions. The

comment also indicated that it is incorrect to state that the end of

the insurance period is ``October 31 following planting in all other

states'' because, in many states, the crop is planted prior to October

31.

Response: FCIC agrees that language regarding the end of the

insurance period is incorrect and has made appropriate corrections. The

Common Crop Insurance Policy (Sec. 457.8), to which the Small Grains

Crop Provisions attaches, requires that the calendar date for the end

of the insurance period be indicated in the crop provisions. FCIC will

consider placing this date in the Special Provisions at a later date.

Comment: One comment expressed concern that the provisions

pertaining to sufficient or improper application of insect or disease

control measures could lead FCIC towards micro-management. The comment

also indicated that an over-zealous appraiser could unjustly claim that

a producer did not use the right timing, kind of pesticide, or the

equipment for application.

Response: Language indicates that crop damage caused by insects or

disease is covered unless the damage is due to insufficient or improper

application of control measures. It has always been the loss adjustor's

responsibility to determine if good farming practices are carried out

by the producer. This responsibility includes determining if cultural

practices necessary to control insects and disease are followed. The

new language does not change current loss adjustment procedures, or

give loss adjustors the latitude to require unreasonable control

measures. The language is intended to clearly advise insureds that they

are expected to take control measures that typically would be used in

the area.

Comment: One comment recommended adding the following language

under failure of water supply as an insured cause of loss: ``(water

source and means for supplying irrigation water, without regard to

equipment or facilities). This includes the water source, dams, canals,

ditches, pipelines, etc., necessary to supply water for movement from

the source to the acreage but does not include any irrigation equipment

or facilities.''

Response: Failure of the irrigation water supply during the

insurance period is a covered cause of loss. The ``supply'' includes

several items not included in the recommendation, e.g., aquifers,

precipitation, etc. Also covered are off-farm irrigation facilities and

equipment used by water regulators and suppliers. The recommended

language would not provide coverage when such facilities failed.

Language in the proposed rule will remain unchanged.

Comment: One comment inquired if the provision concerning wheat

replant payments includes replant payments for winter wheat as well as

spring wheat.

Response: The provisions provide a replant payment for winter wheat

in counties with both a fall and spring final planting date, only if

the winter wheat is damaged after the fall final planting date. A

replant payment is also provided to replant spring wheat in counties

with a spring final planting date.

Comment: Five comments were received opposing paying replant

payments for wheat. The comments stated that: (a) Insureds have not

requested replant payments for spring wheat; (b) insureds are currently

replanting or ``sweetening'' stands at their own minimal expense; (c)

replant payments for spring wheat will not reduce indemnity payments

because insureds already replant at their own expense; (d) the cost of

replanting wheat is much less than other spring crops; (e) unnecessary

increased loss adjustment expense will result; (f) if FCIC persists

with implementation of this proposal, provisions addressing these

increased expenses should be made; (g) without a commensurate increase

in rates, adding a replant payment has the net effect of increasing the

loss ratio; (h) this provision will tremendously impact the loss

adjustment expense; (i) the replant provisions are extremely hard to

react to on a timely basis and very expensive to administer; and (j)

replants on row crops are normally confined to smaller areas with fewer

miles to travel. The same is not applicable to other small grains.

Response: The intended effects of replanting payments are to: (1)

Provide coverage requested by wheat growers; (2) provide reimbursement

to insureds for replanting expenses; (3) reduce indemnities by

encouraging replacement of damaged or destroyed crops; and (4) provide

equity among the various crops. FCIC understands that administrative

costs will be associated with this coverage, however, replant payments

are a loss control mechanism and may outweigh any additional

administrative costs. Comments received did not establish findings that

all damaged acreage is presently replanted in the absence of a payment.

Comment: One comment recommended revising language concerning wheat

replant payments to specify that damage must be due to an insurable

cause of loss in order for a replay payment to be made.

Response: FCIC agrees with the comment and has revised the language

accordingly.

Comment: The provisions require that wheat be damaged to the extent

that the remaining stand will not produce at least 90 percent of the

production guarantee for the unit to qualify for a replant payment. One

comment stated that these provisions conflict with the winter coverage

options because the options indicate a replant payment can be made on a

portion of a unit. The comment recommended changing the language to

allow a replant payment if the remaining stand will not produce at

least 90 percent of the production guarantee for the acreage as opposed

to the unit.

Comment: FCIC agrees that changing the language as recommended

makes replanting payment provisions consistent between the Basic Policy

and Winter Wheat Coverage Endorsement. Changes have been made

accordingly.

Comment: The provisions do not include any limitation regarding the

date an insured can replant and be eligible for a replanting payment.

One comment recommended adding a provision requiring that acreage be

replanted within 25 days after the spring final planting date to remain

eligible for a replant payment. The comment also recommended clarifying

if ``sweetening'' is considered replanting.

Response: FCIC agrees that replanting should take place within 25

days after the spring final planting date and has added appropriate

language. The provision has been changed to indicate that planting new

seed into an existing damaged stand at a reduced seeding rate will not

be considered replanting.

Comment: One comment stated that the replant payment provisions do

not indicate the consequences when wheat is replanted using a practice

that is uninsurable for an original planting. The comment recommended

the following language be added to clearly indicate what happens in

such a situation: ``When wheat is replanted using a practice that is

uninsurable for an original planting, the liability for the unit will

be reduced by the amount of the replanting payment. The premium amount

will be based on the original liability.''

Response: FCIC agrees with the comment and has added the language

as recommended.

Comment: One comment recommended that replant payments apply onto

wheat. In addition, the comment recommended clarification that no

replant payment for barley, oats, rye or flax will be provided.

Response: The provisions already clearly state that a replant

payment is allowed only for wheat. Further clarification is not

necessary. After loss experience with wheat replanting payments is

analyzed, replanting payment coverage may be extended to barley, oats,

rye and flax.

Comment: One comment inquired why the number of days a

representative sample must be left unharvested has been changed from 15

to 30.

Response: The provisions have been revised to require that

representative samples be left until the earlier time the insurer gives

consent to destroy the samples or 15 days after harvest.

Comment: One comment stated that the proposed provisions do not

link the time notice is given with the requirement to leave

representative samples of the insured crop. In addition, the provisions

do not clearly indicate that a sample is required for each field in the

unit. The comment recommended that there be some indication that the

requirements in this provision are in addition to the insured's duties

contained in the Common Crop Insurance Policy. The comment also

recommended that the following language be used: ``In addition to your

duties contained under section 14 of the Common Crop Insurance Policy

(Sec. 457.8), if you initially discover damage to any insured crop

within 15 days of, or during harvest, you must leave representative

samples of the unharvested crop for our inspection. The samples must be

at least 10 feet wide and the entire length of each field in the unit,

and must not be harvested or destroyed until the earlier of our

inspection or 30 days after harvest is completed on the unit.''

Response: FCIC agrees with the comment and has changed the

provisions as recommended with the exception of the 30 day requirement.

Comment: One comment inquired about the intent of the provisions

under the heading, ``Duties in the Event of Damage or loss.''

Response: This provision requires that representative samples be

left when notice of damage is given within 15 days of, or during

harvest. It does not apply only when the producer is going to destroy

the acreage. The intent of this provision is to enable the loss

adjustor to have a reasonable amount of time to inspect a portion of

the undisturbed crop and determine the extent of insurable damage.

After the crop is harvested it can be extremely difficult to accurately

determine the extent of insurable damage.

Comment: One comment suggested clarifying the provisions under

section 11, ``Settlement of Claim'', by indicating that mixed grains

will be graded based on a sample of the insured (predominant) grain.

Response: According to current procedure, mixed grains may be

quality adjusted if the predominant grain is separable from other

grains in the mix. Additionally, the predominant grain must meet policy

requirements for quality adjustment. This is a procedural matter and

will remain in loss adjustment procedure handbooks.

Comment: Two comments recommended that the provisions be revised to

state that only those optional units on which production is commingled

will be combined. As proposed, the provisions require that all optional

units within a basic unit be combined when production is commingled

between any optional units.

Response: FCIC agrees with the comment and has revised the

provisions accordingly.

Comment: One comment stated that language under section 11,

``Settlement of Claim'', is misleading because it indicates that ``All

appraised production which is: Not less than the production guarantee

will be counted for acreage that is abandoned * * *'' This could lead

the reader to believe that only appraised production in excess of the

production guarantee will be counted. The comment recommended revising

the language as follows: ``All appraised production as follows: Not

less than the production guarantee for acreage which is abandoned * *

*.''

Response: FCIC agrees with the comment and has revised the language

as recommended.

Comment: One comment suggested that ``appraised production'' be

defined in the policy. The comment also inquired if FCIC intends to

include definitions of ``appraised production,'' ``harvested

production'' and ``uninsured causes'' in the small grains policy?

Response: The term ``appraised production'' is defined in the

provisions. ``Harvested production'' and ``uninsured causes'' are

definitive terms and do not require specific definitions.

Comment: One comment suggested clarifying the provisions under

section 11, ``Settlement of Claim'', by revising the language to read

as follows: ``(i) not less than the production guarantee for: (a)

acreage which is abandoned, (b) put to another use without our consent,

(c) damaged solely by uninsured causes, or (d) for which you fail to

provide records of production that are acceptable to us.''

Response: FCIC agrees that separating the items in the language

makes it easier to read and revisions have been made accordingly.

Comment: One comment recommended that the provisions under section

11, ``Settlement of Claim'', be revised to allow adjusting production

for both (1) moisture exceeding the requirements in the policy and (2)

quality deficiencies exceeding the grade requirements stated in the

policy for each small grain crop. The comment also recommended that an

adjustment for moisture should be addressed using moisture charts in

the handbook.

Response: FCIC agrees with the comment and has revised the

provisions so that adjustments for moisture and quality are determined

separately.

Comment: One comment inquired if individuals licensed under the

United States Warehouse Act are qualified to determine grade due to

damaged kernels, shrunken or broken kernels, defects, sound barley,

thin barley, sound oats, etc. The comment also inquired if tests for

vomitoxin by state university labs and commercial labs licensed by the

state will continue to be acceptable.

Response: Grain graders licensed under the United States Warehouse

Act are authorized to inspect, weigh, and grade grain for the purposes

of warehouse receipts. Ability to grade grain varies considerably. When

grade problems exist and elevator personnel are unable to adequately

establish the quality, samples are generally sent to Federal Grain

Inspection Service (FGIS) for a grade determination. FGIS has the

authority to make final grade determinations. Insurers who are

uncomfortable with grade determinations made by individuals licensed

under the United States Warehouse Act should send samples to FGIS for

final grade determination. Specialized tests, such as tests for

vomitoxin, must be performed by a qualified laboratory. Language

specifying that specialized tests must be performed by a laboratory

approved by the insurer has been added to the provisions.

Comment: One comment recommended clarifying the definition of

``local market price''.

Response: FCIC agrees that the definition should be clarified and

has done so.

Comment: Two comments recommended changing the term ``final

inspection'' under section 11, ``Statement of Claim'', to either:

``final settlement'' or ``the date the loss is adjusted.''

Response: The date of the final inspection is used to determine

values used in quality adjustment. This is the date the claim is

completed. Changing the term to either of the above suggestions does

not significantly clarify the provision.

Comment: One comment recommended revising the provisions concerning

quality adjustment under section 11, ``Statement of Claim'', to the

following: ``The value we use for the damaged production will reflect

only reduction in value to the requirements outlined in 11(d). It will

not reflect any reduction in value due to moisture content, uninsured

causes, charges for drying, handling or processing or any other

reduction.''

Response: FCIC agrees with the comment and has revised the language

accordingly.

Comment: One comment expressed concern over FCIC's option to

utilize prices of outside markets as opposed to local markets to

establish the value for local grain.

Response: This provision allows insurers to seek higher prices for

damaged grain which may result in the insured receiving compensation

from a buyer rather than from an insurance indemnity. This provision

should help reduce indemnities and keep premiums lower.

Comment: One comment suggested requiring damaged grain with zero

value be destroyed prior to paying any indemnity.

Response: Once a loss adjuster determines a crop has no value it

should remain the insured's choice how to handle its disposition. Loss

adjustors are trained to make accurate evaluations of crop potential

and any determinations made by them should be accepted by the insurer.

The suggested language has not been added.

Comment: One comment recommended that a provision be added to

clarify that any discount used to establish the net price of damaged

production be usual, customary, and reasonable.

Response: FCIC agrees with the comment and has revised the

provision accordingly.

Comment: One comment recommended revising paragraph 11.(d)(3)

regarding moisture reduction to read as follows: ``Production eligible

for moisture adjustment will be reduced by .12 percent for each .1

percentage point of moisture in excess of * * *.''

Response: FCIC agrees with the comment and has revised the

paragraph accordingly.

Comment: Four comments indicated that it is difficult to assess

provisions of the Winter Coverage Endorsement without knowing the

premium rates. One of the comments points out that dissatisfaction

would occur with the Endorsement when premium rates are published. The

author of another comment expressed concern that the proposed Options

may erode the affordable value of the insurance product in counties

currently covered by the Winter Coverage Option/Fall Seeded

Endorsement. If Option B is priced too high, it may cause a migration

of business to the less expensive Option A or the basic endorsement.

The result would be less significant protection, on an affordable

basis, and an overall devaluation of the effectiveness of the insurance

product in counties that currently have the Winter Coverage Option.

Response: Final rate determinations cannot be made until the

endorsement provisions are finalized. Any premium rate changes will

reflect the coverage provided by regulations published in this final

rule. Adequate time will be allowed to inform insureds of coverage and

rate changes, and for insureds to make choices regarding their

insurance protection.

Comment: Three comments stated that it will be necessary to provide

extra training to insurance agents before they sell the Winter Coverage

Endorsement.

Response: FCIC agrees that it is imperative to properly train

insurance agents regarding program changes. Adequate training will be

provided prior to implementing program changes contained in the new

Winter Coverage Endorsement.

Comment: One comment stated that ``conservation compliance

requirements are encouraging more intensive rotational systems.

Producers throughout South Dakota are opting to use both Spring wheat

and Winter wheat within their rotational systems. Unfortunately for

many producers, they are unable to buy winter wheat coverage in a large

portion of the state.'' The comment suggested that serious

consideration be given to allowing insurance coverage for both wheats

on a state wide basis.

Response: The Wheat Winter Coverage Endorsement will be available

in all South Dakota counties that currently have both fall and spring

final planting dates. Research is being done by FCIC to determine if

the Endorsement should be available in other counties. Expanded

availability will depend on the outcome of this research.

Comment: One comment submitted the following questions: If an

insured chooses to destroy damaged acreage covered by the Wheat Winter

Coverage Endorsement, can they destroy only damaged acres, or do they

have to destroy all the remaining acres in the unit? Is spring wheat

insurable on acres indemnified under Winter Wheat Option A? Will the

insured qualify for a replant payment on those acres?

Response: The insured may destroy only the damaged acres on the

unit and qualify for coverage as long as at least 20 acres or 20

percent of the acreage in the unit does not have an adequate stand to

produce at least 90 percent of the production guarantee for the

acreage. Under Option A, an insured may choose to have the acreage

appraised, destroy damaged winter wheat, or plant spring wheat on the

acreage and insure it separately. If the insured chooses to accept an

appraisal of the remaining potential, a replant payment is not allowed,

even if the acreage is replanted to spring wheat.

Comment: One comment recommended adding the following to the last

sentence in paragraph 3 of the Winter Coverage Endorsement: ``* * *

unless we agree in writing that it is practical to replant after the

spring final planting date.''

Response: The provisions of paragraph 3 do not prevent a replant

payment for acreage replanted after the spring final planting date. It

is not necessary to extend coverage after the period covered by the

Winter Coverage Endorsement.

Comment: One comment stated that the word ``damage,'' used in the

Winter Coverage Endorsement, can be interpreted to mean that a crop

which has suffered one percent damage can either be replanted, carried

to harvest or destroyed. The comment recommended that ``damage'' be

qualified to mean damaged to the extent that the crop does not have the

potential to produce the yield used to determine the production

guarantee, will not be further cared for, will not be harvested or will

be abandoned.

Response: Coverage under both Options A and B is limited to

situations in which at least 20 acres or 20 percent of the acreage in

the unit, whichever is less, is damaged to the extent that it does not

have an adequate stand to produce at least 90 percent of the production

guarantee for the acreage (see first paragraphs under Options A and B).

Comment: Two comments indicated that since one of the choices the

insured has under the Winter Coverage Option is to replant to spring

wheat, the notice of damage should be required by the spring final

planting date. The deadline for notice of loss under the current Fall-

Winter Coverage Option is the spring final planting date.

Response: FCIC agrees that notice of damage under the Endorsement

should be provided by the spring final planting date. The provisions

have been revised accordingly.

Comment: Eight comments were received regarding coverage

limitations under Option A of the Wheat Winter Coverage Endorsement.

The comments stated that limiting coverage for damaged wheat to 30

percent of the production guarantee, after the time period covered by

the Endorsement, is inappropriate. A crop carried on after the winter

coverage period would have a potential much greater than 30 percent of

the production guarantee. Two of the comments recommended allowing

coverage to remain at the full production guarantee when the insured

continues to care for the crop. One comment recommended allowing

coverage to remain in place at the actual crop potential.

Response: Option A limited coverage to 30 percent of the production

guarantee even if the insured elected to carry the damaged wheat to

harvest. FCIC has revised Option A to allow coverage to continue based

on the full guarantee if the production potential on the spring final

planting date is such that growers in the area continue to maintain the

crop.

Comment: The author of one comment submitted the following

questions: Under Option A of the Wheat Winter Coverage Endorsement, is

70 percent of the production guarantee levied against total production

on damaged acres only? What if there is winter damage and the insurer

was not informed until after harvest?

Response: Option A clearly indicates that the amount of production

to count will not be less than 70 percent of the production guarantee

for the damaged acreage. If notice of damage is not given in accordance

with policy provisions, and such lack of notice interferes with

determination of covered damage, a claim may not be payable for the

unit.

Comment: One comment outlined concerns that the coverage under

Option A will not be sufficient to cover production costs incurred

before the crop must be destroyed. The comment also inquired about the

actual premium costs.

Response: Option A of the Wheat Winter Coverage Endorsement is

designed as a lower cost alternative to the full coverage of Option B.

Although full production costs may not be covered, there is a

significant increase in coverage over the base policy which does not

provide protection unless the crop is replanted. Rate determinations

cannot be made until the Endorsement provisions are finalized. The

premium rates for Option A will reflect the coverage provided by

regulations published in this final rule.

Comment: One comment recommended adding language to the Wheat

Winter Coverage Endorsement that would state that when damaged winter

wheat is replanted to spring wheat, the spring wheat will have the

winter wheat guarantee.

Response: FCIC agrees that clarification is needed and has revised

the language accordingly.

Comment: Two comments were received regarding the provisions in the

Wheat Winter Coverage Endorsement that allow an insured to destroy

damaged wheat acreage, replant the acreage to spring wheat, and

consider such replanted acreage as a separate crop. One comment

indicated that the endorsement may cause program abuse by encouraging

an insured to gamble and seed winter wheat if he is normally a spring

wheat producer. If there is not a good stand in the spring, the insured

could destroy the crop, collect an indemnity, and plant spring wheat as

is normally done. The second comment indicated that the provision will

cause FCIC to insure two different crops of wheat on the same acreage

during one crop year, which could cause a myriad of administrative

problems.

Response: As written, both Option A and B allow an insured to

destroy damaged winter wheat, receive any applicable indemnity payment,

and then replant to spring wheat. The spring wheat can then be insured

separately for a separate premium. If the insured is forced to include

acreage replanted to spring wheat as part of the winter unit, a

significant coverage provided by the options is eliminated. FCIC does

not anticipate the administrative difficulties will be unmanageable.

Comment: The following question was submitted: ``Under Option A, if

damaged winter wheat is replanted to spring wheat, does the harvested

spring wheat production count against the winter wheat unit production

guarantee?''

Response: Yes.

Comment: The following question was submitted: ``Does the winter

wheat guarantee continue on the replanted spring wheat crop under

paragraph b of Option B.''

Response: Yes.

Comment: One comment stated that Option B provides better coverage

than Option A and will be more attractive to insureds. The comment

found no appreciable differences between the new Option B and former

Winter Coverage Option for wheat.

Response: Option B is not similar to the current Winter Coverage

Endorsement. Option B allows spring wheat (planted to replace damaged

winter wheat) to be treated as a separate crop. The current Endorsement

requires that spring wheat in this situation be a part of the winter

wheat unit. This new choice provides more comprehensive coverage than

the current Endorsement.

Comment: One comment inquired if FCIC is aware of the

recommendations from the meeting of the Montana Committee and the

Billings RSO regarding clarification of the Malting Barley Option.

Response: FCIC has considered and incorporated the recommendations

of the Billings Regional Service Office and the Montana Committee. The

recommendations were to: (1) Include a clearer definition of the entity

(i.e., a brewery or business that makes or sells malt or processed mash

to a brewery) contracting with the insured to produce malting barley;

and (2) clearly state that the insurer's liability under the Option is

limited to the lesser of the number of contracted bushels or the

production guarantee.

Comment: One comment inquired if malting barley basic units can be

divided into optional units by section/ASCS FSN and/or irrigated/non-

irrigated acreage. The comment stated that if this division is

possible, paragraph 4 of the Malting Barley Option needs to be revised

to refer to the Small Grains Crop Provisions, not the Basic Provisions.

Response: Paragraph 4 of the Malting Barley Option refers to the

``Basic Policy,'' not the ``Basic Provisions.'' The ``Basic Policy''

includes all provisions applicable to small grains (both the Common

Crop Insurance Policy, and the Small Grains Crop Provisions). Revision

is not necessary.

Comment: A comment recommended that the approved malting barley

varieties be specified in the Special Provisions.

Response: FCIC agrees with the comment and has specified the

varieties in the Special Provisions.

Comment: A comment suggested that the ``date of the final

inspection for the unit'' be clarified.

Response: The date of the final inspection is the date that the

loss adjustor completes the claim.

Comment: One comment recommended that the Malting Barley Option be

revised to allow adjusting production for both (1) moisture exceeding

the requirements in the policy and (2) exceeding the grade requirements

stated in the Option.

Response: FCIC agrees with the comment and has modified the

paragraphs so that adjustments for moisture and quality are determined

separately.

During the interim between publication of the Small Grains Crop

Provisions as a proposed rule and preparation of this final rule,

provisions providing coverage for Late and Prevented Planting were

added to the current Wheat Endorsement (Sec. 401.101), Barley

Endorsement (Sec. 401.103), and Oat Endorsement (Sec. 401.105). These

provisions for Late and Prevented Planting Coverage, which were

published in the Federal Register on December 22, 1993, have been

incorporated into this final rule to continue the coverage provided by

the current endorsements for barley, oats, and wheat, and to provide

the same coverage benefits to those insuring flax or rye. In addition,

FCIC has determined that revised language is needed in subparagraph

11.(c)(1)(iv) regarding acreage an insured wants to put to another use

prior to harvest. These provisions now allow an insured to destroy such

acreage when an appraisal amount is not agreed upon, if the insured

agrees to leave representative samples of the crop in place. The

samples will be used to later determine the amount of production to

count.

Accordingly, the rule, ``General Crop Insurance Regulations; Small

Grains Crop Insurance Provisions'' published at 58 FR 32458 as revised

as set out below is hereby adopted as final rule.

List of Subjects in 7 CFR Part 457

Crop insurance; Barley, Flax, Malting barley, Oats, Rye, Wheat,

Winter wheat.

Final Rule

Accordingly, pursuant to the authority contained in the Federal

Crop Insurance Act, as amended (7 U.S.C. 1501 et seq.), the Federal

Crop Insurance Corporation hereby amends the Common Crop Insurance

Regulations (7 CFR part 457), effective for the 1995 and succeeding

crop years, in the following instances:

1. The authority citation for 7 CFR part 457 continues to read as

follows:

Authority: 7 U.S.C. 1506, 1516.

2. 7 CFR Part 457 is amended by revising the heading; by adding and

reserving Secs. 457.9 through 457.100; and by adding Secs. 457.101

Small Grains Crop Provisions, 457.102 Wheat Crop Insurance Winter

Coverage Endorsement, and 457.103 Malting Barley Option to read as

follows:

PART 457--COMMON CROP INSURANCE; REGULATIONS FOR THE 1994 AND

SUBSEQUENT CONTRACT YEARS

* * * * *

Sec. 457.9-457.100 [Reserved]

Sec. 457.101 Small Grains Crop Insurance.

The Small Grains Crop Insurance provisions for the 1995 and

succeeding crop years are as follows:

United States Department of Agriculture

Federal Crop Insurance Corporation

Small Grains Crop Provisions

If a conflict exists between the Common Crop Insurance Policy

(Sec. 457.8) and the Special Provisions, the Special Provisions will

control. If a conflict exists between these Crop Provisions and the

Special Provisions, the Special Provisions will control.

1. Definitions

(a) Adequate stand--A population of live plants per unit of

acreage which will produce at least the yield used to establish your

production guarantee.

(b) Days--Calendar days.

(c) Final planting date--The date contained in the Special

Provisions by which the insured crop must initially be planted in

order to be insured for the full production guarantee.

(d) Good farming practices--The cultural practices necessary for

the insured crop to make usual and normal progress toward maturity

and which can be expected to produce at least the yield used to

determine the production guarantee. Good farming practices are

generally those in use in the county for production of the insured

crop and are recognized by the Cooperative Extension Service as

compatible with agronomic and weather conditions in the area.

(e) Harvest--Combining or threshing the insured crop for grain

or cutting for hay or silage on any acreage. A crop which is swathed

prior to combining is not considered harvested.

(f) Initially planted--The first occurrence of planting the

insured crop on insurable acreage for the crop year.

(g) Interplanted--Acreage on which two or more crops are planted

in a manner that does not permit separate agronomic maintenance or

harvest of the insured crop.

(h) Irrigated practice--A method of producing a crop by which

water is artificially applied during the growing season by

appropriate systems, and at the proper times, with the intention of

providing the quantity of water needed to produce at least the yield

used to establish the production guarantee on the irrigated acreage

planted to the insured crop.

(i) Late planted--Acreage planted during the late planting

period.

(j) Late planting period--(not applicable for fall-planted

wheat)--The period that begins the day after the final planting date

for the insured crop and ends twenty-five (25) days after the final

planting date.

(k) Latest final planting date--

(1) The final planting date for spring-planted acreage in all

counties for which the Special Provisions designate a final planting

date for spring-planted acreage only;

(2) The final planting date for fall-planted acreage in all

counties for which the Special Provisions designate a final planting

date for fall-planted acreage only; or

(3) The final planting date for spring-planted acreage in all

counties for which the Special Provisions designate final planting

dates for both spring-planted and fall-planted acreage.

(l) Local market price--The cash grain price per bushel for the

U.S. No. 2 grade of the insured crop offered by buyers in the area

in which you normally market the insured crop. The local market

price will reflect the maximum limits of quality deficiencies

allowable for the U.S. No. 2 grade of the insured crop. Factors not

associated with grading under the Official United States Standards

for Grain, including but not limited to protein, oil or moisture

content, or milling quality will not be considered.

(m) Nurse crop (companion crop)--A crop planted into the same

acreage as another crop, that is intended to be harvested

separately, and which is planted to improve growing conditions for

the crop with which it is grown.

(n) Planted acreage--Land in which seed has been placed by a

machine appropriate for the insured crop and planting method, at the

correct depth, into a seedbed which has been properly prepared for

the planting method and production practice. Except for flax, land

on which seed is initially spread onto the soil surface by any

method and subsequently is mechanically incorporated into the soil

in a timely manner and at the proper depth will be considered

planted. Flax seed must initially be placed in rows to be considered

planted.

(o) Practical to replant--(subsection 1.(ff) of the Common Crop

Insurance Policy (Sec. 457.8) does not apply to small grains.) Our

determination, after loss or damage to the insured crop, based on

factors, including but not limited to moisture availability,

condition of the field, time to crop maturity, etc., that a

replanting of the insured crop will attain maturity in the remainder

of the crop year. It will not be considered practical to replant

after the end of the late planting period or the final planting date

if a late planting period is not applicable (see section 7) except

that it may be determined practical to replant after the end of the

late planting period or the final plant date if such procedure is

generally occurring in the area.

(p) Prevented planting--Inabiltiy to plant the insured crop with

proper equipment by:

(1) The latest final planting date for the insured crop in the

county; or

(2) The end of the late planting period.

You must have been unable to plant the insured crop due to an

insured cause of loss that is general in the area (i.e., most

producers in the surrounding area are unable to plant due to similar

insurable causes) and that occurs between the sales closing date and

the latest final planting date for the insured crop in the county or

within the late planting period.

(q) Production guarantee--The number of bushels determined by

multiplying the approved yield per acre by the coverage level

percentage you elect.

(r) Replanting--Performing the cultural practices necessary to

replace seed for the insured crop, and replacing the seed in the

insured acreage with the expectation of growing a successful crop.

(s) Small grains--Wheat, barley, oats, rye, and flax.

(t) Swathed--Severance of the stem and grain head from the

ground without removal of the seed from the head and placing into a

windrow.

(u) Timely planted--Planted on or before the final planting date

designated in the Special Provisions.

2. Unit Division

Unless limited by the Special Provisions, a unit as defined in

subsection 1.(tt) of the Common Crop Insurance policy (Sec. 457.8)

may be divided into optional units if, for each optional unit you

claim, all the conditions of subsections 2.(a), (b), and (c), and

the conditions of paragraph 2.(d)(1), (d)(2, or (d)(3) are met, or

if we agree to such division in writing. Optional units must be

established at the time you file your report of acreage for each

crop year.

(a) You must have verifiable records of planted acreage and

production for each optional unit for at least the last crop year

used to determine your production guarantee.

(b) You must plant the crop in a manner which results in a clear

and discernable break in the planting pattern at the boundaries of

each optional unit.

(c) You must have measurements of stored production or market

production from each optional unit in a manner that permits us to

verify the production from the optional unit.

(d) Each optional unit must meet one or more of the following:

(1) Optional Units by Section, Section Equivalent, or ASCS Farm

Serial Number: Optional units may be established if each optional

unit is located in a separate section. In the absence of sections,

we may consider parcels of land legally identified by other methods

of measure including, but not limited to: Spanish grants, railroad

surveys, leagues, labors, or Virginia Military Lands. In areas which

have not been surveyed using the systems identified above or another

system approved by us, and in areas where boundaries are not readily

discernable, each optional unit must be located in separate ASCS

Farm Serial Number.

(2) Optional Units on Acreage Including Both Irrigated and Non-

Irrigated Practices: In addition to or instead of establishing

optional units by section, section equivalent, or ASCS Farm Serial

Number, optional units may be established if each optional unit

contains only irrigated acreage or only non-irrigated acreage. The

irrigated acreage may not extend beyond the point at which your

irrigation system can deliver the quantity of water needed to

produce the yield on which your guarantee is based. You must plant,

cultivate, fertilize, or otherwise care for the irrigated acreage

and the non-irrigated acreage in an appropriate manner.

(3) Optional Units by Initially Planted Winter Wheat or

Initially Planted Spring Wheat: For wheat only, in addition to or

instead of establishing optional units by section, section

equivalent, or ASCS Farm Serial Number as described in paragraph

2.(d)(1) or by irrigated and non-irrigated practices as described in

paragraph 2.(d)(2), optional units maybe established if each

optional unit contains only initially planted winter wheat or only

initially planted spring wheat. Optional units may be established in

this manner only in counties having both fall and spring final

planting dates as designated by the Special Provisions.

Basic units may not be divided into optional units on any basis

(production practice, type, variety, planting period, etc.) other

than as described under this section. If you do not comply fully

with these conditions, we will combine all optional units which are

not established in compliance with these provisions into the basic

unit from which they were formed. We may do this at any time we

discover that you have failed to comply with these conditions. If

failure to comply with these provisions is determined to be

inadvertent, and if the optional units are combined, the premium

paid for electing optional units will be refunded to you.

3. Insurance Guarantees, Coverage Levels, and Prices for Determining

Indemnities

In addition to the requirements under section 3 (Insurance

Guarantees, Coverage Levels, and Prices for determining Indemnities)

of the Common Crop Insurance Policy (Sec. 457.8) you may select only

one price election for each crop insured under this policy in the

county.

4. Contract Changes

The contract change date is December 31 preceding the

cancellation date for counties with an April 15 cancellation date

and June 30 preceding the cancellation date for all other counties

(see the provisions under section 4. (Contract changes) in the

Common Crop Insurance Policy Sec. 457.8).

5. Cancellation and Termination Dates

The cancellation and termination dates are:

------------------------------------------------------------------------

Crop, state and county Cancellation date Termination date

------------------------------------------------------------------------

Wheat:

All Colorado counties September 30 September 30.

except Alamosa,

Archuleta, Conejos,

Costilla, Custer,

Delta, Dolores, Eagle,

Garfield, Grand, La

Plata, Mesa, Moffat,

Montezuma, Montrose,

Ouray, Pitkin, Rio

Blanco, Rio Grande,

Routt, Saguache, and

San Miguel Counties;

all Iowa Counties

except Plymouth,

Cherokee, Buena Vista,

Pocahontas, Humbolt,

Wright, Franklin,

Butler, Black Hawk,

Buchanan, Delaware, and

Dubuque Counties and

all Iowa counties north

thereof; all Wisconsin

Counties except

Trempealeau, Jackson,

Wood, Portage, Waupaca,

Outagamie, Brown, and

Kewaunee Counties and

all Wisconsin counties

north and west thereof;

and all other states

except Alaska, Arizona,

California,

Connecticut, Idaho,

Maine, Massachusetts,

Minnesota, Montana,

Nevada, New Hampshire,

New York, North Dakota,

Oregon, Rhode Island,

South Dakota, Utah,

Vermont, Washington,

and Wyoming.

Archuleta, Custer, September 30 November 30.

Delta, Dolores, Eagle,

Garfield, Grand, La

Plata, Mesa, Moffat,

Montezuma, Montrose,

Ouray, Pitkin, Rio

Blanco, Routt, and San

Miguel Counties,

Colorado; Connecticut;

Idaho; Plymouth,

Cherokee, Buena Vista,

Pocahontas, Humboldt,

Wright, Franklin,

Butler, Black Hawk,

Buchanan, Delaware, and

Dubuque Counties, Iowa,

and all Iowa counties

north thereof;

Massachusetts; all

Montana counties except

Daniels, Roosevelt,

Sheridan, and Valley

Counties; New York;

Oregon; Rhode Island;

all South Dakota

counties except

Harding, Perkins,

Corson, Walworth,

Edmonds, Faulk, Spink,

Beadle, Jerauld,

Aurora, Douglas, and

Bon Homme Counties and

all South Dakota

counties north and east

thereof; Washington;

and all Wyoming

counties except Big

Horn, Fremont, Hot

Springs, Park, and

Washakie Counties.

Matanuska-Susitna October 31 November 30.

County, Alaska;

Arizona; California;

Nevada; and Utah.

All Alaska Counties April 15 April 15.

except Matanuska-

Susitna County;

Alamosa, Conejos,

Costilla, Rio Grande,

and Saguache Counties,

Colorado; Maine;

Minnesota; Daniels,

Roosevelt, Sheridan,

and Valley Counties,

Montana; New Hampshire;

North Dakota; Harding,

Perkins, Corson,

Walworth, Edmunds,

Faulk, Spink, Beadle,

Jerauld, Aurora,

Douglas, and Bon Homme

Counties, South Dakota,

and all South Dakota

counties north and east

thereof; Vermont;

Trempealeau, Jackson,

Wood, Portage, Waupaca,

Outagamie, Brown, and

Kewaunee Counties,

Wisconsin, and all

Wisconsin counties

north and west thereof;

Big Horn, Fremont, Hot

Springs, Park, and

Washakie Counties,

Wyoming.

Barley:

All New Mexico counties September 30 September 30.

except Taos County;

Oklahoma, Missouri,

Illinois, Indiana,

Ohio, Pennsylvania, New

Jersey, and all states

south and east thereof.

Kit Carson, Lincoln, September 30 November 30.

Elbert, El Paso,

Pueblo, Las Animas

Counties, Colorado and

all Colorado Counties

south and east thereof;

Connecticut; Kansas;

Massachusetts; and New

York.

Arizona; California; and October 31 November 30.

Clark and Nye Counties,

Nevada.

All Colorado counties April 15 April 15.

except Kit Carson,

Lincoln, Elbert, El

Paso, Pueblo, and Las

Animas Counties and all

Colorado counties south

and east thereof; all

Nevada counties except

Clark and Nye Counties;

Taos County, New

Mexico; and all other

states except: Arizona,

California,

Connecticut, Kansas,

Massachusetts, New

York; and (except)

Oklahoma, Missouri,

Illinois, Indiana,

Ohio, Pennsylvania, and

New Jersey and all

states south and east

thereof.

Oats:

Alabama; Arkansas; September 30 September 30.

Florida; Georgia;

Louisiana; Mississippi;

All New Mexico counties

except Taos County;

North Carolina;

Oklahoma; South

Carolina; Tennessee;

Texas; and Patrick,

Franklin, Pittsylvania,

Campbell, Appomattox,

Fluvanna, Buckingham,

Louisa, Spotsylvania,

Caroline, Essex, and

Westmoreland Counties,

Virginia, and all

Virginia counties east

thereof.

Arizona; All California October 31 October 31.

counties except Del

Norte, Humboldt,

Lassen, Modoc, Plumas,

Shasta, Siskiyou and

Trinity Counties.

Del Norte, Humbolt, April 15 April 15.

Lassen, Modoc, Plumas,

Shasta, Siskiyou, and

Trinity Counties,

California; Taos

County, New Mexico; all

Virginia counties

except Patrick,

Franklin, Pittsylvania,

Campbell, Attomattox,

Fluvanna, Buckingham,

Louisa, Spotsylvania,

Caroline, Essex, and

Westmoreland Counties

and all Virginia

counties east thereof;

and all other except

Alabama, Arizona,

Arkansas, Florida,

Georgia, Louisiana,

Mississippi, North

Carolina, Oklahoma,

South Carolina,

Tennessee, and Texas.

Rye:

All states.............. September 30 September 30.

Flax:

All states.............. April 15 April 15.

------------------------------------------------------------------------

6. Insured Crop

(a) The crop insured will be each small grain you elect to

insure, that is grown in the county on insurable acreage, and for

which premium rates are provided by the actuarial table:

(1) In which you have a share;

(2) That is planted for harvest as grain (a grain mixture in

which barley or oats is the predominate grain may also be insured if

allowed by the Barley or Oat Special Provisions, or if we agree in

writing to insure such mixture. The crop insured will be the grain

which is predominate in the mixture. The production from such

mixture will be considered as the predominate grain on a weight

basis);

(3) That is not:

(i) Interplanted with another crop except as allowed in

paragraph 6.(a)(2);

(ii) Planted into an established grass or legume; or

(iii) Planted as a nurse crop, unless planted as a nurse crop

for new forage seeding, but only if seeded at a normal rate and

intended for harvest as grain.

(4) We may agree, in writing, to insure a crop prohibited under

paragraph 6.(a)(3) if you so request. Your request to insure such

crop must be in writing, and submitted to your agent not later than

15 days after the acreage reporting date.

(b) If you anticipate destroying any acreage prior to harvest

you:

(1) May report all planted acreage when you report your acreage

for the crop year and specify any acreage to be destroyed as

uninsurable acreage. (By doing so, no coverage will be considered to

have attached on the specified acreage and no premium will be due

for such acreage. If you do not destroy such acreage, you will be

subject to the under-reporting provisions contained in subsection

6.(f) of the Common Crop Insurance Policy (Sec. 457.8)); or

(2) If the actuarial table provides a reduced premium rate for

acreage destroyed by a date designated in the Special Provisions,

you may report all planted acreage as insurable when you report your

acreage for the crop year. Premium will be due on all the acreage.

Your premium amount will be reduced by the amount shown on the

Actuarial Table for any acreage you destroy prior to a date

designated in the Special Provisions if you do not claim an

indemnity on such acreage. In accordance with subsection 14.(b) of

the Common Crop Insurance Policy (Sec. 457.8), you must obtain our

consent before and give us notice after you destroy any of the

insured crop so your acreage report can be revised to make you

eligible for this reduction in premium.

(c) In counties for which the Wheat Special Provisions designate

both fall and spring final planting dates, you may elect a winter

coverage endorsement for wheat. This endorsement provides two

options for alternative coverage for wheat that is damaged between

the fall final planting date and the spring final planting date.

Coverage under the endorsement will be effective only if you

designate the coverage option you elect by executing the endorsement

by the sales closing date for winter wheat in the county.

7. Insurance Period

In lieu of the requirements under section 11 (Insurance Period)

of the Common Crop Insurance Policy (Sec. 457.8), and subject to any

provisions provided by the Wheat crop insurance winter coverage

endorsement (Sec. 457.102) if you have elected such endorsement, the

insurance period is as follows:

(a) Insurance attaches on each unit or part thereof on the later

of the date we accept your application or the date the insured crop

is planted.

(1) For oats, rye and flax, the following limitations apply:

(i) The acreage must be planted on or before the final planting

date designated in the Special Provisions for the insured crop

except as allowed in subsection 12.(c).

(ii) Any acreage of the insured crop damaged before the final

planting date, to the extent that growers in the area would normally

not further care for the crop, must be replanted unless we agree

that replanting is not practical (see subsection 1.(o)).

(2) For barley and wheat, the following limitations apply:

(i) The acreage must be planted on or before the final planting

date designated in the Special Provisions for the type (winter or

spring) except as allowed in subsection 12.(c).

(ii) Whenever the Special Provisions designate only a fall final

planting date, any acreage of winter barley or wheat damaged before

such final planting date, to the extent that growers in the area

would normally not further care for the crop, must be replanted to a

winter type of the insured crop unless we agree that replanting is

not practical.

(iii) Whenever the Special Provisions designate both fall and

spring final planting dates, winter barley or wheat planted on or

before the final planting date which is damaged:

(A) Before the fall planting final planting date, to the extent

that growers in the area would normally not further care for the

crop, must be replanted to a winter type of the insured crop unless

we agree that replanting is not practical.

(B) On or after the fall final planting date, but before the

spring final planting date, to the extent that growers in the area

would normally not further care for the crop, must be replanted to

an appropriate variety of the insured crop unless we agree that

replanting is not practical.

If you have elected coverage under one of the available wheat

winter coverage options available in the county, the insurance

period for wheat will be in accordance with the selected options.

(iv) Whenever the Special Provisions designate a spring final

planting date, any acreage of spring barley or wheat damaged before

such final planting date, to the extent that growers in the area

would normally not further care for the crop, must be replanted to a

spring type of the insured crop unless we agree that replanting is

not practical.

(v) Whenever the Special Provisions designate only a spring

final planting date, any acreage of fall planted barley or wheat is

not insured unless you request such coverage and we agree in writing

that the acreage has an adequate stand in the spring to produce the

yield used to determine your production guarantee. Insurance will

then attach to acreage having an adequate stand on the earlier of

the spring final planting date or the date we agree to accept the

acreage for insurance. If such fall planted acreage is not to be

insured it must be recorded on the acreage report as an uninsured

fall planted crop.

(b) Insurance ends on each unit at the earliest of:

(1) Total destruction of the insured crop on the unit;

(2) Harvest of the unit;

(3) Final adjustment of a loss on the unit;

(4) September 25 following planting in Alaska, or October 31 of

the calendar year in which the crop is normally harvested in all

other states; or

(5) Abandonment of the crop on the unit.

8. Causes of Loss

In addition to the provisions under section 12 (Causes of Loss)

of the Common Crop Insurance Policy, any loss covered by this policy

must occur within the insurance period.

The specific causes of loss for small grains are:

(a) Adverse weather conditions;

(b) Fire;

(c) Insects, but not damage allowed because of insufficient or

improper application of pest control measures;

(d) Plant disease, but not damage allowed because of

insufficient or improper application of disease control measures;

(e) Wildlife;

(f) Earthquake;

(g) Volcanic eruption; or

(h) Failure of the irrigation water supply.

9. Replanting Payments

(a) A replant payment for wheat only is allowed as follows:

(1) You comply with all requirements regarding replanting

payments contained under section 13 (Replanting Payment) of the

Common Crop Insurance Policy and in any winter coverage endorsement

for which you are eligible and which you have elected;

(2) The wheat must be damaged by an insurable cause of loss to

the extent that the remaining stand will not produce at least 90

percent of the production guarantee for the acreage;

(3) The acreage must have been initially planted to spring wheat

in those counties with only a spring final planting date;

(4) The damage must occur after the fall final planting date in

those counties where both a fall and spring final planting date are

designated;

(5) Replanting must take place not later than 25 days after the

spring final planting date; and

(6) The replant wheat must be seeded at a rate that is normal

for initially planted wheat (if new seed is planted at a reduced

seeding rate into a partially damaged stand of wheat, the acreage

will not be eligible for a replanting payment).

(b) No replanting payment will be made for acreage initially

planted to winter wheat in any county for which the Special

Provisions contain only a fall final planting date.

(c) In accordance with subsection 13.(c) of the Common Crop

Insurance Policy (Sec. 457.8), the maximum amount of the replanting

payment per acre will be the lesser of 20 percent (20%) of the

production guarantee or 3 bushels, multiplied by your price election

multiplied by your share.

(d) When wheat is replanted using a practice that is uninsurable

for an original planting, the liability for the unit will be reduced

by the amount of the replanting payment. The premium amount will not

be reduced.

10. Duties in the Event of Damage or Loss

In addition to your duties under section 14 of the Common Crop

Insurance Policy (Sec. 457.8), if you initially discover damage to

any insured crop within 15 days of, or during harvest, you must

leave representative samples of the unharvested crop for our

inspection. The samples must be at least 10 feet wide and the entire

length of each field in the unit, and must not be harvested or

destroyed until the earlier of our inspection or 15 days after

harvest of the balance of the unit is completed.

11. Settlement of Claim

(a) We will determine your loss on a unit basis. In the event

you are unable to provide records of production that are acceptable

to us for any:

(1) Optional unit, we will combine all optional units for which

acceptable records of production were not provided; or for any

(2) Basic unit, we will allocate any commingled production to

such units in proportion to our liability on the harvested acreage

for each unit.

(b) In the event of loss or damage covered by this policy, we

will settle your claim by:

(1) Multiplying the insured acreage by the production guarantee;

(2) Subtracting from this the total production to count;

(3) Multiplying the remainder by your price election; and

(4) Multiplying this result by your share.

(c) The total production (bushels) to count from all insurable

acreage on the unit will include:

(1) All appraised production as follows:

(i) Not less than the production guarantee for acreage:

(A) Which is abandoned;

(B) Put to another use without our consent;

(C) Damaged solely by uninsured causes; or

(D) For which you fail to provide records of production that are

acceptable to us;

(ii) Production lost due to uninsured causes;

(iii) Unharvested production (mature unharvested production may

be adjusted for quality deficiencies and excess moisture in

accordance with subsection 11.(d));

(iv) Potential production on insured acreage you want to put to

another use or you wish to abandon and no longer care for, if you

and we agree on the appraised amount of production. Upon such

agreement, the insurance period for that acreage will end if you put

the acreage to another use or abandon the crop. If:

(A) Agreement on the appraised amount of production is not

reached, you may elect to continue to care for the crop, or we will

give you consent to put the acreage to another use if you agree to

leave intact, and provide sufficient care for, representative

samples of the crop in locations acceptable to us. The amount of

production to count for such acreage will be based on the harvested

production or appraisals from the samples at the time harvest should

have occurred. If you do not leave the required samples intact, or

you fail to provide sufficient care for the samples, our appraisal

made prior to giving you consent to put the acreage to another use

will be used to determine the amount of production to count.

(B) You elect to continue to care for the crop, we will

determine the amount of production to count for the acreage using

the harvested production, or our reappraisal if additional damage

occurs and the crop is not harvested.

(2) All harvested production from the insurable acreage.

(d) Mature wheat, barley, oat, and rye production may be

adjusted for excess moisture and quality deficiencies. Flax

production may be adjusted for quality deficiencies only.

(1) Production will be reduced by .12 percent for each .1

percentage point of moisture in excess of:

(i) 13.5 percent for wheat;

(ii) 14.5 percent for barley;

(iii) 14.0 percent for oats; and

(iv) 16.0 for rye.

We may obtain samples of the production to determine the

moisture content.

(2) Production will be eligible for quality adjustment if:

(i) Deficiencies in quality, in accordance with the Official

United States Standards for Grain, result in:

(A) Wheat not meeting the grade requirements for U.S. No. 4

(grades U.S. No. 5 or worse) because of test weight, total damaged

kernels (excluding heat damage), shrunken or broken kernels, or

defects (excluding foreign material and heat damage), or grading

garlicky, light smutty, smutty or ergoty;

(B) Barley not meeting the grade requirements for U.S. No. 4

(grades U.S. No. 5 or worse) because of test weight, percentage of

sound barley, damaged kernels, thin barley, or black barley, or

grading smutty, garlicky, or ergoty;

(C) Oats not meeting the grade requirements for U.S. No. 4

(grade U.S. sample grade) because of test weight or percentage of

sound oats, or grading smutty, garlicky, or ergoty;

(D) Rye not meeting the grade requirements for U.S. No. 3

(grades U.S. No. 4 or worse) because of test weight, percent damaged

kernels or thin rye, or grading smutty, garlicky, or ergoty;

(E) Flaxseed not meeting the grade requirements for U.S. No. 2

(grades U.S. sample grade) due to damaged kernels; or

(ii) Substances or conditions are present, including mycotoxins,

that are identified by the Food and Drug Administration or other

public health organizations of the United States as being injurious

to human or animal health.

(3) Quality will be a factor in determining your loss only if:

(i) The deficiencies, substances, or conditions resulted from a

cause of loss against which insurance is provided under these crop

provisions;

(ii) The deficiencies, substances, or conditions result in a net

price for the damaged grain that is less than the local market price

of U.S. No. 2 production;

(iii) All determinations of these deficiencies, substances, or

conditions are made using samples of the production obtained by us

or by a disinterested third party approved by us; and

(iv) The samples are analyzed by a grain grader licensed under

the authority of the United States Grain Standards Act or the United

States Warehouse Act with regard to deficiencies in quality, or by a

laboratory approved by us with regard to substances or conditions

injurious to human or animal health. Test weight for quality

adjustment purposes may be determined by one loss adjustor.

(4) Production of small grains that is eligible for quality

adjustment, as specified in paragraphs 11.(d) (2) and (3), will be

reduced as follows:

(i) The market price of the qualifying damaged production and

the local market price will be the prices on the earlier of the date

such quality adjusted production is sold or the date of final

inspection for the unit. The price for the qualifying damaged

production will be the market price for the local area to the extent

feasible. Discounts used to establish the net price of the damaged

production will be limited to those which are usual, customary, and

reasonable. Any reduction in price due to the following factors will

not be accepted:

(A) Moisture content;

(B) Damage due to uninsured causes; or

(C) Drying, handling, processing, or any other costs associated

with normal harvesting, handling, and marketing of the grain;

except, if the price of the damaged production can be increased by

conditioning, we may reduce the price of the production after it has

been conditioned by the cost of conditioning but not lower than the

value of the production before conditioning. We may obtain prices

from any buyer of our choice. If we obtain prices from one or more

buyers located outside your local market area, we will reduce such

prices by the additional costs required to deliver the production to

those buyers.

(ii) The value of the damaged or conditioned production will be

divided by the local market price to determine the quality

adjustment factor.

(iii) The number of bushels remaining after any reduction due to

excessive moisture (the moisture-adjusted gross bushels (if

appropriate)) of the damaged or conditioned production will then be

multiplied by the quality adjustment factor to determine the net

production to count.

(e) Any production harvested from plants growing in the insured

crop may be counted as production of the insured crop on a weight

basis.

12. Late Planting and Prevented Planting

(a) In lieu of paragraph 8.(b)(2) and subsection 1.(aa) of the

Common Crop Insurance Policy (Sec. 457.8), insurance will be

provided for acreage planted to the insured crop during the late

planting period (see subsection (c)), and acreage you were prevented

from planting (see subsection (d)). These coverages provide reduced

production guarantees. The reduced guarantees will be combined with

the production guarantee for timely planted acreage for each unit.

The premium amount for late planted acreage and eligible prevented

planting acreage will be the same as that for timely planting

acreage. If the amount of premium you are required to pay (gross

premium less our subsidy) for late planting acreage or prevented

planting acreage exceeds the liability on such acreage, coverage for

those acres will not be provided (no premium will be due and no

indemnity will be paid for such acreage). For example, assume you

insure one unit in which you have a 100 percent share. The unit

consists of 150 acres, of which 50 acres were planted timely, 50

acres were planted 7 days after the final planting date (late

planted), and 50 acres are unplanted and eligible for prevented

planting coverage. To calculate the amount of any indemnity which

may be due to you, the production guarantee for the unit will be

computed as follows:

(1) For timely planted acreage, multiply the per acre production

guarantee for timely planted acreage by the 50 acres planted timely;

(2) For late planted acreage, multiply the per acre production

guarantee for timely planted acreage by 93 percent (0.93) and

multiply the result by the 50 acres planted late; and

(3) For prevented planting acreage, multiply the per acre

production guarantee for timely planted acreage by 50 percent (0.50)

and multiply the result by the 50 acres eligible for prevented

planting coverage.

The total of the three calculations will be the production

guarantee for the unit. Your premium will be based on the result of

multiplying the per acre production guarantee for timely planted

acreage by the 150 acres in the unit.

(b) You must provide written notice to us if you were prevented

from planting (see subsection 1.(p)). This notice must be given not

later than three (3) days after:

(1) The final planting date if you have unplanted acreage that

may be eligible for prevented planting coverage; and

(2) The date you stop planting within the late planting period

on any unit that may have acreage eligible for prevented planting

coverage.

(c) Late Planting:

(1) For spring-planted wheat acreage in counties for which the

Special Provisions designate a spring final planting date, and all

barley, flax, oat, and rye acreage which is planted after the final

planting date but on or before 25 days after the final planting

date, the production guarantee for each acre will be reduced for

each day planted after the final planting date by:

(i) One percent (.01) for the first through the tenth day; and

(ii) Two percent (.02) for the eleventh through the twenty-fifth

day.

(2) In addition to the requirements of section 6 (Report of

Acreage) of the Common Crop Insurance Policy (Sec. 457.8), you must

report the dates the acreage is planted within the late planting

period.

(3) If planting of the insured crop continues after the final

planting date, or you are prevented from planting during the late

planting period, the acreage reporting date will be the later of:

(i) The acreage reporting date contained in the Special

Provisions; or

(ii) Five (5) days after the end of the late planting period.

(d) Prevented Planting (Including Planting After the Late

Planting Period)

(1) If you were prevented from planting the insured crop (see

subsection 1.(p)), you may elect:

(i) To plant the insured crop during the late planting period

(The production guarantee for such acreage will be determined in

accordance with paragraph 12.(c)(1));

(ii) Not to plant this acreage to any crop that is intended for

harvest in the same crop year (The production guarantee for such

acreage which is eligible for prevented planting coverage will be 50

percent (50%) of the production guarantee for timely planted acres.

In counties for which the Special Provisions designates a spring

final planting date, the prevented planting guarantee will be based

on your approved yield for spring-planted acreage of the insured

crop. For example, if your production guarantee for timely planted

acreage is 30 bushels per acre, your prevented planting production

guarantee would be equivalent to 15 bushels per acre (30 bushels

multiplied by 0.50). This subparagraph does not prohibit the

preparation and care of the acreage for conservation practices, such

as planting a cover crop, as long as such crop is not intended for

harvest); or

(iii) To plant the insured crop after the late planting period

(The production guarantee for such acreage will be 50 percent (50%)

of the production guarantee for timely planted acres. For example,

if your production guarantee for timely planted acreage is 30

bushels per acre, your prevented planting production guarantee would

be equivalent to 15 bushels per acre (30 bushels times 0.50).

Production to count for such acreage will be determined in

accordance with subsections 11.(c) through (e)).

(2) In addition to the provisions under section 11 (Insurance

Period), of the Common Crop Insurance Policy (Sec. 457.8) the

beginning of the insurance period for prevented coverage is the

sales closing date designated in the Special Provisions for the

insured crop in the county.

(3) Unless we agree in writing, prior to the sales closing date,

the acreage to which prevented planting coverage applies will be

limited as follows:

(i) Eligible acreage will not exceed the greater of:

(A) The number of acres planted to the insured crop on each ASCS

Farm Serial Number during the previous crop year (adjusted for any

reconstitution which may have occurred prior to the sales closing

date);

(B) The ASCS base acreage for the insured crop reduced by any

acreage reduction applicable to the farm under any program

administered by the United States Department of Agriculture; or

(C) One hundred percent (100%) of the simple average of the

number of acres planted to the insured crop during the crop years

that were used to determine your yield;

Unless we agree in writing, prior to the sales closing date, to

approve acreage exceeding this limit.

(ii) Acreage intended to be planted under an irrigated practice

will be limited to the number of acres properly prepared to carry

out an irrigated practice.

(iii) A prevented planting production guarantee will not be

provided for:

(A) Any acreage that does not constitute at least 20 acres or 20

percent (20%) of the acres in the unit, whichever is less;

(B) Land for which the actuarial table does not designate a

premium rate unless you submit a written request for coverage for

such acreage prior to the sales closing date for the insured crop in

the county and we provide a written insurance offer for such

acreage;

(C) Land used for conservation purposes or intended to be or

considered to have been left unplanted under any program

administered by the United States Department of Agriculture;

(D) Land on which any crop, other than the insured crop, has

been planted and is intended for harvest, or has been harvested in

the same crop year; or

(E) Land which planting history or conservation plans indicate

would remain fallow for crop rotation purposes.

(iv) For the purpose of determining eligible acreage for

prevented planting coverage, acreage for all units will be combined

and reduced by the number of acres of the insured crop that are

timely planted and late planted. For example, assume you have 100

acres eligible for prevented planting coverage in which you have a

100 percent (100%) share. The acreage is located in a single ASCS

Farm Serial Number which you insure as two separate optional units

consisting of 50 acres each. If you planted 60 acres of the insured

crop on one optional unit and 40 acres of the insured crop on the

second optional unit, your prevented planting eligible acreage would

be reduced to zero (i.e., 100 acres eligible for prevented planting

coverage minus 100 acres planted equals zero). If you report more

acreage of the insured crop under this contract than is eligible for

prevented planting coverage, we will allocate the eligible acreage

to insured units based on the number of prevented planting acres and

share you report for each unit.

(4) When the ASCS Farm Serial Number covers more than one unit,

or a unit consists of more than one ASCS Farm Serial Number, the

covered acres will be pro-rated based on the number of acres in each

unit or ASCS Farm Serial Number that could have been planted to the

insured crop in the current crop year.

(5) In accordance with the provisions of section 6 (Report of

Acreage) of the Common Crop Insurance Policy (Sec. 457.8), you must

report any insurable acreage you were prevented from planting. This

report must be submitted on or before the acreage reporting date for

spring-planted acreage of the insured crop in counties for which the

Special Provisions designates a spring final planting date, or the

acreage reporting date for fall-planted acreage of the insured crop

in counties for which the Special Provisions designates a fall final

planting date only, even though you may elect to plant the acreage

after the late planting period. Any acreage you report as eligible

for prevented planting coverage which is not eligible will be

deleted from prevented planting coverage.

Sec. 457.102 Wheat crop insurance winter coverage endorsement.

United States Department of Agriculture

Federal Crop Insurance Corporation

Wheat Crop Insurance Winter Coverage Endorsement

(This is a Continuous Endorsement)

(a) In return for payment of the additional premium designated

in the Actuarial Table, this endorsement is attached to and made

part of your Small Grains Crop Provisions subject to the terms and

conditions described herein.

(b) This endorsement is available only in counties for which the

Special Provisions designate both a fall final planting date and a

spring final planting date.

(c) This endorsement modifies the provisions of sections 7 and

11 of the Small Grains Crop Insurance policy (Sec. 457.101).

(1) You must have a Small Grains Crop Insurance policy in force

and elect to insure wheat under that policy.

(2) You may select either Option A or Option B. Failure to

select either Option A or Option B means that you have rejected both

Options and this endorsement would be void.

(3) Insurance Period. Coverage under this endorsement begins on

the later of the date we accept your application for coverage or on

the fall final planting date designated in the Special Provisions.

Coverage ends on the spring final planting date designated in the

Special Provisions.

(4) The provisions under section 14 of the Common Crop Insurance

Policy (Sec. 457.8) are amended to require that all notices of

damage must be provided to us by the spring final planting date

designated in the Special Provisions.

Option A (30 Percent Coverage and Acreage Release)

Whenever any winter wheat is damaged during the insurance period

(see section 3, above), and at least 20 acres or 20 percent of the

acreage in the unit, whichever is less, does not have an adequate

stand to produce at least 90 percent of the production guarantee for

the acreage, you may take any one of the following actions:

(a) Destroy the remaining crop on such acreage. By doing so, you

agree to accept an amount of production to count against the unit

production guarantee equal to 70 percent of the production guarantee

for the damaged acreage, or an appraisal determined in accordance

with paragraph 11.(c)(1) of the Small Grains Crop Insurance

Provisions (Sec. 457.101) if such an appraisal results in a greater

amount of production. This amount will be considered production to

count in determining any final indemnity on the unit and will be

used to settle your claim as described in the provisions under

section 11. (Settlement of Claim) of the Small Grains Crop Insurance

Provisions (Sec. 457.101). You may use such acreage for any purpose,

including planting and separately insuring any other crop. If you

elect to utilize such acreage for the production of spring wheat,

you must:

(1) Plant the spring wheat in a manner which results in a clear

and discernible break in the planting pattern at the boundary

between it and any remaining winter wheat; and

(2) Store or market the production from such acreage in a manner

which permits us to verify the amount of spring wheat production

separately from any winter wheat production.

In the event you are unable to provide records of production

that are acceptable to us, the spring wheat acreage will be

considered to be a part of the original winter wheat unit. If you

elected to insure the spring wheat acreage as a separate optional

unit, any premium amount for such acreage will be considered earned

and payable to us.

(b) Continue to care for the damaged crop. By doing so, coverage

will continue under the terms of the Common Crop Insurance Policy

(Sec. 457.8), the Small Grains Crop Insurance Provisions

(Sec. 457.101), and this Option.

(c) Replant the acreage to an appropriate variety of wheat, if

it is practical, and receive a replanting payment in accordance with

the terms of section 9. (Replanting Payments) of the Small Grains

Crop Provisions (Sec. 457.101). By doing so, coverage will continue

under the terms of the Common Crop Insurance Policy (Sec. 457.8),

the Small Grains Crop Insurance Provisions (Sec. 457.101), and this

Option, and the production guarantee for winter wheat will remain in

effect.

Option B (With Full Winter Damage Coverage)

Whenever any winter wheat is damaged during the insurance period

and at least 20 acres or 20 percent of the acreage in the unit,

whichever is less, does not have an adequate stand to produce at

least 90 percent of the production guarantee for the acreage, you

may, at your option, take one of the following actions:

(a) Continue to care for the damaged crop. By doing so, coverage

will continue under the terms of the Common Crop Insurance Policy

(Sec. 457.8), the Small Grains Crop Insurance Provisions

(Sec. 457.101), and this Option.

(b) Replant the acreage to an appropriate variety of wheat, if

it is practical, and receive a replanting payment in accordance with

the terms of section 9. (Replanting Payments) of the Small Grains

Crop Provisions (Sec. 457.101). By doing so, coverage will continue

under the terms of the Common Crop Insurance Policy (Sec. 457.8),

the Small Grains Crop Insurance Provisions (Sec. 457.101), and this

Option, and the production guarantee for winter wheat will remain in

effect.

(c) Accept our appraisal of the crop on the damaged acreage as

production to count against the production guarantee for the damaged

acreage, destroy the remaining crop on such acreage, and be eligible

for any indemnity due under the terms of the Common Crop Insurance

Policy (Sec. 457.8) and the Small Grains Crop Provisions

(Sec. 457.101). The appraisal will be considered production to count

in determining any final indemnity on the unit and will be used to

settle your claim as described in the provisions of section 11.

(Settlement of Claim) of the Small Grains Crop Insurance Provisions

(Sec. 457.101). You may use such acreage for any purpose, including

planting and separately insuring any other crop. If you elect to

utilize such acreage for the production of spring wheat, you must:

(1) Plant the spring wheat in a manner which results in a clear

and discernable break in the planting pattern at the boundary

between it and any remaining winter wheat; and

(2) Store or market the production from such acreage in a manner

which permits us to verify the amount of spring wheat production

separately from any winter wheat production.

In the event you are unable to provide records of production

that are acceptable to us, the spring wheat acreage will be

considered to be a part of the original winter wheat unit. If you

elected to insure the spring wheat acreage as a separate optional

unit, any premium amount for such acreage will be considered earned

and payable to us.

Sec. 457.103 Malting barley option.

The Malting Barley Option Provisions for the 1995 and succeeding

crop years are as follows:

United States Department of Agriculture

Federal Crop Insurance Corporation

Small Grains Crop Insurance Malting Barley Endorsement

(This is a continuous Endorsement. Refer to section 2 of the Common

Crop Insurance Policy)

In return for payment of the additional premium designated in

the actuarial table, it is hereby agreed that the Common Crop

Insurance Policy (Sec. 457.8) and Small Grains Crop Provisions

(Sec. 457.101) are amended to incorporate the following terms and

conditions:

(a) This Endorsement must be submitted to us on or before the

final date for accepting applications for the initial crop year in

which you wish to insure your malting barley acreage under this

Option.

(b) You must have a Common Crop Insurance Policy (Sec. 457.8)

and a Small Grains Crop Insurance policy (Sec. 457.101) in force and

elect to insure barley under those policies.

(c) You must provide:

(1) Acceptable records of the sale of malting barley for malting

purposes for three of the previous five crop years by the production

reporting date; and

(2) Before the acreage reporting date, written contract with a

brewery or business that makes or sells malt or processed mash to a

brewery, which states the quantity contracted and purchase price or

method for determining such price by the acreage reporting date. Our

liability under this Option will be limited to the lesser of the

number of contracted bushels or your production guarantee.

(d) All barley acreage in the county planted to an approved

malting variety in which you have a share will be insured under this

Endorsement. All barley acreage of any non-malting variety will be

insured under the terms of the Small Grains Endorsement. Malting

barley and basic barley acreage will be separate basic units.

Further unit division may be allowed in accordance with the Common

Crop Insurance Policy.

(e) Your price election will be provided by the actuarial table.

(f) In lieu of subparagraphs 11.(d)(2)(i)(B) and 11.(d)(1)(ii)

of the Small Grains Crop Provisions:

(1) Mature malting barley production will be reduced .12 percent

for each one tenth (.1) percentage point of moisture in excess of

13.0 percent; and

(2) Mature malting barley production, which due to insurable

causes, is not accepted by a buyer of malting barley and will not

meet the applicable standards for two-rowed or six-rowed malting

barley will be adjusted by:

(i) Dividing the value per bushel for the insured malting barley

by the price election for malting barley; and

(ii) Multiplying the result not to exceed one (1.0) by the

number of bushels of such barley.

(3) All grade determination must be made by a grader licensed to

inspect barley under the United States Grain Standards Act using

samples obtained by a licensed sampler or our loss adjuster. Any

production which is not sampled and graded as provided by this

section will be considered as malting barley meeting the applicable

standards.

(g) As used in the Endorsement:

(1) Applicable standards--For two-rowed and six-rowed malting

barley are defined in the Official United States Standards for

barley.

(2) Approved malting variety--The varieties specified in the

Special Provisions.

(3) Brewery--A facility where malt liquors are commercially

produced for human consumption.

(4) Value per bushel means:

(i) The local market price of U.S. No. 2 barley (basic barley)

if the insure mature malting barley production, due to insurable

causes, grades U.S. No. 4 or better and does not grade smutty,

garlicky, or ergoty; or

(ii) The local market price of basic barley of the same quality

as the insured malting barley, if the malting barley does not grade

better than U.S. No. 5.

The prices used for this adjustment will be the prices on the

earlier of the date such quality-adjusted barley is sold or the date

of final inspection for the unit.

Done in Washington, DC, on February 16, 1994.

Kenneth D. Ackerman,

Manager, Federal Crop Insurance Corporation.

[FR Doc. 94-4230 Filed 2-25-94; 8:45 am]

BILLING CODE 3410-08-M