Peanut Crop Insurance Regulations; and Common Crop Insurance Regulations, Peanut Crop Insurance Provisions

DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Parts 425 and 457

RIN 0563-AA85

Peanut Crop Insurance Regulations; and Common Crop Insurance

Regulations, Peanut Crop Insurance Provisions

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Final rule.

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SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes

specific crop provisions for the insurance of peanuts. The provisions

will be used in conjunction with the Common Crop Insurance Policy,

Basic Provisions, which contain standard terms and conditions common to

most crops. The intended effect of this action is to provide policy

changes to better meet the needs of the insured, include the current

peanut crop insurance regulations with the Common Crop Insurance Policy

for ease of use and consistency of terms, and restrict the effect of

the current peanut crop insurance regulations to the 1998 and prior

crop years.

EFFECTIVE DATE: July 9, 1998.

FOR FURTHER INFORMATION CONTACT: Gary Johnson, Insurance Management

Specialist, Research and Development, Product Development Division,

Federal Crop Insurance Corporation, United States Department of

Agriculture, 9435 Holmes Road, Kansas City, MO 64131, telephone (816)

926-7730.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule has been determined to be exempt for the purpose of

Executive Order 12866 and, therefore, has not been reviewed by the

Office of Management and Budget (OMB).

Paperwork Reduction Act of 1995

Pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C., chapter

35), the collections of information for this rule have been approved by

the Office of Management and Budget (OMB) under control number 0563-

0053 through October 31, 2000.

Unfunded Mandates Reform Act of 1995

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA)

establishes requirements for Federal agencies to assess the effects of

their regulatory actions on State, local, and tribal governments and

the private sector. This rule contains no Federal mandates (under the

regulatory provisions of title II of the UMRA) for State, local, and

tribal governments or the private sector. Therefore, this rule is not

subject to the requirements of sections 202 and 205 of the UMRA.

Executive Order 12612

It has been determined under section 6(a) of Executive Order 12612,

Federalism, that this rule does not have sufficient federalism

implications to warrant the preparation of a Federalism Assessment. The

provisions contained in this rule will not have a substantial direct

effect on States or their political subdivisions or on the distribution

of power and responsibilities among the various levels of government.

Regulatory Flexibility Act

This regulation will not have a significant economic impact on a

substantial number of small entities. New provisions included in this

rule will not impact small entities to a greater extent than large

entities. Under the current regulations, a producer is required to

complete an application and acreage report. If the crop is damaged or

destroyed, the producer is required to give notice of loss and provide

the necessary information to complete a claim for indemnity.

The producer must also annually certify to the previous years

production if adequate records are available to support the

certification. The producer must maintain the production records to

support the certified information for at least three years. This

regulation does not alter those requirements.

The amount of work required of the insurance companies delivering

and servicing these policies will not increase significantly from the

amount of work currently required. No additional actions are required

as a result of this rule on the part of either the insured or the

insurance companies. This rule does not have any greater or lesser

impact on the producer. Therefore, this action is determined to be

exempt from the provisions of the Regulatory Flexibility Act (5 U.S.C.

605), and no Regulatory Flexibility Analysis was prepared.

Federal Assistance Program

This program is listed in the Catalog of Federal Domestic

Assistance under No. 10.450.

Executive Order 12372

This program is not subject to the provisions of Executive Order

12372 which require intergovernmental consultation with State and local

officials. See the Notice related to 7 CFR part 3015, subpart V,

published at 48 FR 29115, June 24, 1983.

Executive Order 12988

This rule has been reviewed in accordance with Executive Order

12988 on civil justice reform. The provisions of this rule will not

have a retroactive effect. The provisions of this rule will preempt

State and local laws to the extent such State and local laws are

inconsistent herewith. The administrative appeal provisions published

at 7 CFR part 11 must be exhausted before any action for judicial

review of any determination made by FCIC may be brought.

Environmental Evaluation

This action is not expected to have a significant impact on the

quality of the human environment, health, and safety. Therefore,

neither an Environmental Assessment nor an Environmental Impact

Statement is needed.

National Performance Review

This regulatory action is being taken as part of the National

Performance Review Initiative to eliminate unnecessary or duplicative

regulations and improve those that remain in force.

Background

On Thursday, May 1, 1997, FCIC published a notice of proposed rule

making, in the Federal Register at 62 FR 23685 to add to the Common

Crop Insurance Regulations (7 CFR part 457),

[[Page 31332]]

new section, 7 CFR 457.134, Peanut Crop Insurance Provisions. The new

provisions will be effective for the 1999 and succeeding crop years.

These provisions will replace and supersede the current provisions for

insuring peanuts found at 7 CFR part 425 (Peanut Crop Insurance

Regulations). FCIC also amends 7 CFR part 425 to limit its effect to

the 1998 and prior crop years.

Following publication of the proposed rule, the public was afforded

30 days to submit written comments and opinions. A total of 204

comments were received from the National Crop Insurance Peanut Advisory

Committee, Peanut Growers Cooperative Marketing Association, National

Peanut Growers Group, Agricultural Commodity Commission for Peanuts,

State Peanut Growers Association, Production Farm Credit Association,

reinsured companies, and an insurance service organization. The

comments received and FCIC's responses are as follows:

Comment: Three producer groups, a lending institution, two

reinsured companies, and an insurance service organization recommended

revising the definition of ``average price per pound'' to delete the

words ``and insured,'' in part 1 and delete the words ``all non-quota''

and ``and insured,'' in part 2.

Response: FCIC has amended the definition accordingly.

Comment: Three producer groups, a lending institution, two

reinsured companies, and an insurance service organization expressed

concerns with the definition of ``good farming practices,'' which makes

reference to ``cultural practices generally in use in the county * * *

recognized by the Cooperative State Research, Education, and Extension

Service as compatible with agronomic and weather conditions in the

county.'' The commenters questioned whether cultural practices exist

that are not necessarily recognized (or possibly known) by the

Cooperative State Research, Education, and Extension Service. The

commenters also indicated that the term ``county'' in the definition of

``good farming practices'' should be changed to ``area.''

Response: The Cooperative State Research, Education, and Extension

Service (CSREES) recognizes farming practices that are considered

acceptable for producing peanuts. If a producer is following practices

currently not recognized as acceptable by the CSREES, such recognition

can be sought by interested parties. Although the cultural practices

recognized by the CSREES may only pertain to specific areas within a

county, the actuarial documents are on a county basis. Therefore, no

change has been made. However, the definition of ``good farming

practices'' has been removed from these Crop Provisions and is now

contained in the Basic Provisions.

Comment: Three producer groups, a lending institution, two

reinsured companies, and an insurance service organization recommended

deleting the second sentence of the definition of ``green peanuts,''

because not all producers who grow green peanuts market them

exclusively as boiled peanuts.

Response: FCIC has amended the definition accordingly.

Comment: Three producer groups, a lending institution, two

reinsured companies, and an insurance service organization recommended

deleting ``marketing window'' from the definition of ``practical to

replant.'' The commenters indicated that peanuts are unlike other

crops, such as processor and fresh market crops, where the producer

only has a certain amount of time to market the crop. The commenters

stated that the ability to contract peanuts with a sheller guarantees a

market for the crop.

Response: The concept of a ``marketing window'' is most applicable

to processor and fresh market crops, and FCIC recognizes that peanuts

are unlike these crops. However, Sec. 508(j)(4) of the Federal Crop

Insurance Act mandates that marketing windows be considered in

determining whether it is feasible to require replanting during a crop

year. The definition of ``practical to replant'' has been moved to the

Basic Provisions.

Comment: Three producer groups, a lending institution, two

reinsured companies, and an insurance service organization recommended

adding a definition for ``farm yield,'' rewrite the term ``farm

yield,'' or perhaps change to ``yield established by the actuarial

table'' in the definition of ``production guarantee.'' Commenters

indicated that since peanuts are based on a producer listing, and not

the producer's actual production history (APH), the term ``production

guarantee'' is inappropriate. A producer's classification (guarantee)

is determined by combining history from all farms in which he has grown

peanuts in the county.

Response: FCIC has revised the definition of ``production

guarantee'' to read ``* * * yield per acre contained in the actuarial

documents or the approved yield * * *''

Comment: An insurance service organization recommended deleting

from the definition of ``quota peanuts,'' the phrase, ``marketed for

domestic edible use, seed, or other related uses.'' Under the current

peanut policy, peanuts that are not eligible to be marketed for

domestic edible use or seed could be valued as quota. For example: if

peanuts grade segregation III, the remaining production from the farm

serial number (FSN) is not sufficient to satisfy the quota, and the

producer signs a waiver, the peanuts will be subject to a quality

adjustment against the support price. However, those peanuts would not

meet the definition of ``quota peanuts'' in the proposed rule.

Response: FCIC has amended the definition for ``quota peanuts''

accordingly.

Comment: Three producer groups, a lending institution, two

reinsured companies, and an insurance service organization recommended

that the definition of ``replanting'' be modified to include a

requirement that replanted peanuts be planted in rows wide enough apart

to permit cultivation and harvest in the same manner as the initially

planted peanuts. Commenters indicated that broadcast or drilled peanuts

are not acceptable methods of planting (or replanting) because such

methods do not permit mechanical cultivation or allow digging the crop.

Response: Section 12(b) of these Crop Provisions clearly states the

consequences of improperly replanting the crop. If the peanuts are

replanted using a practice that is uninsurable as an original planting,

the liability for the unit will be reduced by the amount of the

replanting payment, with no reduction in the premium owed. Further,

section 14(e)(1)(v), has been revised to specify that any production

from the improperly replanted acreage will count against the remaining

liability for the unit.

Comment: Three producer groups, a lending institution, two

reinsured companies, and an insurance service organization recommended

revision in the proposed definition of ``value per pound'' because the

definition is incomplete and somewhat vague.

Response: FCIC has revised the definition for clarification.

Comment: Three producer groups, a lending institution, two

reinsured companies, and an insurance service organization recommended

the current unit structure remain based on the FSN unit. Commenters

suggested that more optional units will increase the loss ratio. It

will be necessary to add procedures to show how to split the quota of

one FSN between separate basic units by share and to show what

verifiable records are required to support optional units and how those

records must be maintained because the APH program is not applicable

for

[[Page 31333]]

peanuts. Also, the commenters indicated that if a producer commingles

production now, the company apportions the production between the

units, whereas under the proposed rule, the insured will lose units

with commingled production at loss time.

Response: FCIC understands the complexity of the substantive change

toward converting units by FSN to a basic unit by share and optional

unit by FSN. The procedure to split the quota for basic units should be

no more difficult than any other crop permitting basic units. Further,

the producer receives records when production is delivered. The

delivered production and records must be maintained separately or the

producer will not qualify for optional units. Although FCIC and the

reinsured companies may be precluded from obtaining the producer's

production records from the Farm Service Agency, nothing precludes the

producer from providing such records as a condition of insurance. FCIC

is charged to maintain an actuarially sound program and one that is

consistent with provisions of other crop policies. The premium charged

will reflect any additional risks associated with basic and optional

units. Therefore, no changes will be considered until such information

is provided.

Comment: Three producer groups, a lending institution, two

reinsured companies, and an insurance service organization recommended

that section 3(c) be revised to incorporate the current producer

listing process for peanuts, and remove any references to ``annual

production reports'' and ``establish an approved yield.'' It was also

suggested that section 3(c) be deleted.

Response: Section 3(c) only requires an annual production report

when stated in the Special Provisions. The current method of

establishing yields will continue in these Crop Provisions. However,

the peanut price support program could be discontinued or modified and

in such an event, an alternative method for establishing production

guarantees may be needed. Therefore, no change has been made.

Comment: Three producer groups, a lending institution, two

reinsured companies, and an insurance service organization recommended

the contract change date be revised in section 4 from November 30 to

October 31 because of the short time frame between the contract change

date and sales closing date. The commenters indicated that with the

changing of sales closing dates, actuarial documents are needed earlier

to allow sales agents time to make quotes and proposals to producers

and lenders, especially since more producers are making loan

applications before the end of the year. Also, the November 30 contract

change date does not allow adequate time for companies to determine

changes, develop training materials, train agents, advise carryover

insureds of changes and sell to potential insureds.

Response: November 30 has always been the contract change date for

all counties that do not have an April 15 cancellation date under the

present peanut provisions. The proposed rule simply changed the

contract change date from December 31 to November 30 for all remaining

counties to maintain the same time period between the contract change

date and the revised cancellation dates and to achieve consistency with

other annual crop insurance policies. This time frame has proven to be

adequate to allow the necessary preparation for the sale of these

policies. Therefore, no change has been made.

Comment: Three producer groups, a lending institution, two

reinsured companies, and an insurance service organization recommended

the cancellation and termination date for Virginia to be changed to

March 15. Commenters indicated that these dates were originally April

15 and not February 28.

Response: FCIC has revised the cancellation and termination date

for Virginia accordingly.

Comment: An insurance service organization stated that the current

peanut policy establishes units by FSN, so reporting the effective

marketing quota by FSN on the acreage report made sense. The proposed

rule changes unit structure, but it does not address the resulting

complications of the unit requirement for reporting acreage in the new

peanut Crop Provisions.

Response: In addition to the requirements of section 6 of the Basic

Provisions, the insured is required to report the effective marketing

quota, if any, that is applicable to each unit for the current crop

year. This would include all basic and optional units. FCIC has revised

the provision to require the reporting of the effective poundage

marketing quota for each basic and optional unit.

Comment: Three producer groups, a lending institution, two

reinsured companies, and an insurance service organization recommended

section 7(e) be revised to read ``multiplying the result of section

7(d) by your share at the time coverage begins.'' The commenters

indicated that this will be consistent with section 7 of the Basic

Provisions and clarifies when premium is earned. Also, the commenters

recommended that a new section 7(f) be added to read as follows:

``multiplying the result of section 7(e) times any premium adjustment

percentage that may apply.'' This is needed for those policies that

continue to qualify for a premium discount or qualify for the hail and

fire exclusion reduction.

Response: FCIC has amended the provisions accordingly.

Comment: Three producer groups, a lending institution, two

reinsured companies, and an insurance service organization recommended

changing the word ``harvested'' to ``planted'' in section 8(b) so that

it reflects the planted peanuts with the intent of harvesting farmers'

stock peanuts. The commenters also recommended that section 8(d)(1) be

amended to state that if a crop is harvested for use as green peanuts,

such peanuts are insured and premium is earned and due. If the intent

is to harvest green peanuts, then the acreage should not be insurable.

Insurable acreage must be established at the time coverage attaches

(when planted), not at harvest.

Response: Section 8(b) already requires that the peanuts be planted

as farmers' stock peanuts. Therefore, no change has been made. FCIC

agrees with the recommendation to amend section 8(d)(1) to only exclude

coverage for peanuts planted for the purpose of harvesting as green

peanuts.

Comment: Three producer groups, a lending institution, two

reinsured companies, and an insurance service organization recommended

that section 9(b)(1) be rewritten as follows: ``On which peanuts are

grown using no-till or minimum tillage farming methods, unless a

written agreement allows otherwise or as provided on the Special

Provisions.'' The commenters indicated that the reference to the

Special Provisions will allow for adding a statement if needed, making

written agreements for these practices unnecessary. This would reduce

paperwork caused by having to request a written agreement for each

individual case. The commenter also suggested that section 9(b)(2) be

deleted. The commenters stated that there are no rotation requirements

for peanuts. If requirements are established in the future, the

requirements could be added either to the Special Provisions or by

endorsement.

Response: FCIC has amended section 9(b)(1) accordingly. However,

there are peanut types and in different areas of production where it is

essential that peanuts be rotated with other crops in order to insure

continuous successful

[[Page 31334]]

production. Therefore, no change has been made in the rotation

provision.

Comment: A reinsured company and an insurance service organization

questioned the reference to ``removed from the field'' in section

10(b). The commenters asked whether coverage continues after the

peanuts are threshed or harvested but still in the field. The current

provision had the wording ``threshed or removed from the field.'' The

commenters suggested only the words, ``threshed or harvested'' be

referenced and the words, ``removed from the field'' be deleted.

Response: Peanuts may be left in the field for a short period time

after combining or threshing for the purpose of drying. These Crop

Provisions provide coverage on such peanuts until they are removed from

the field for shelling, storing, and processing. Therefore, no change

has been made.

Comment: Three producer groups, a lending institution, two

reinsured companies, and an insurance service organization recommended

that FCIC: (1) keep the current minimum requirement of 10 acres or 10

percent of the unit to qualify for a replanting payment by adding that

information to section 12; (2) add the words ``multiplied by the number

of acres and by your insured share'' to section 12(a)(2)(i); and (3)

delete section 12(a)(2)(iii), thereby making the replanting payment per

acre the lesser of $80.00 or actual cost multiplied by the producer's

share. Commenters indicated that producers incur the same cost to

replant whether quota or non-quota acreage is being replanted. Since

peanuts must be planted in rows to allow proper cultivation and harvest

practices, the commenters recommended that section 12(b), which

requires replanting in rows far enough apart to cultivate, be deleted.

Response: The increase in the requirement from the lesser of 10

percent or 10 acres to 20 percent or 20 acres is consistent with other

crop provisions. This revision, coupled with the change in the amount

of replant payment, simplifies the program and does not significantly

affect the insured. Previous analyses of replant payments paid in major

peanut producing states showed that a small amount of peanut acreage

was replanted. FCIC has revised section 12(a)(2)(i) accordingly.

Inclusion of section 12(a)(2)(iii) is consistent with other annual

crops that have replant payments, plus it maintains an equitable

payment for replanted acreage. Section 12(b) is necessary to ensure

that the insured properly replants the crop. Further, this provision is

consistent with other annual crops that have replanting provisions.

Therefore, no changes have been made.

Comments: Three producer groups, a lending institution, two

reinsured companies, and an insurance service organization recommended

deleting the provision addressing combining optional units in section

14(a)(1).

Response: FCIC is maintaining the requirement that the producer

keep separate records by unit. If a producer fails to maintain separate

production records there is no way to authenticate the reported

production to count for each optional unit. Since production to count

cannot be accurately determined, the optional units must be combined.

Therefore, no change has been made.

Comments: Three producer groups, a lending institution, two

reinsured companies, and an insurance service organization recommend

that the Farm Service Agency (FSA) procedures that allow producers to

make ``fall'' transfers of their farm quota to another farm or producer

be revised. Commenters also recommended that sections 14(b)(1), (2),

and (3) should be revised because it adversely affects acreage

reporting and claims processing.

Response: FCIC cannot require another agency to revise its

provisions. However, FCIC will share the commenter's recommendation

regarding the revision of FSA procedure with FSA. To assure there is

not an indemnity paid for quota that is later transferred from one farm

to another farm or another producer, the provisions must limit the

effective poundage marketing quota for each unit to reflect such

transfers. Therefore, no change has been made.

Comments: Three producer groups, a lending institution, two

reinsured companies, and an insurance service organization recommended

that the peanut quota pounds indemnified by insurance be removed from

the quota pounds of the FSN at the FSA office. The commenters indicated

that this recommendation is to prevent insureds from collecting an

insurance indemnity and then collecting an additional benefit by

selling or transferring those quota pounds to another farm or producer.

Response: Sections 14(b)(1), (2), and (3) of these Crop Provisions

should ensure that insureds are not collecting an insurance indemnity

and then collecting an additional benefit by selling or transferring

their quota pounds to another farm or producer. Therefore, no change

has been made. However, FCIC will share this recommendation with FSA.

Comments: Three producer groups, a lending institution, two

reinsured companies, and an insurance service organization states that

the calculation in 14(c) is cumbersome and makes a difference in how

production is counted against the guarantee. Commenters indicated that

the calculation uses Segregation II and III production and that

production would be counted against the non-quota guarantee, but

current procedure counts all production against quota first. This new

calculation results in a different indemnity payment than current

procedure.

Response: The commenters are correct that all production does not

count against the quota first. This policy calculates the value of all

production and subtracts it from the value of the quota and non-quota

peanut guarantees. If Segregation II and III peanut production are not

eligible to be valued and insured as quota peanut production, it would

be unequitable to count such production against the quota guarantee.

Therefore, no change has been made.

Comments: An insurance service organization commented that the

language in section 14(c)(5) suggests that the peanut crop provision is

a ``dollar'' policy rather than ``guaranteed'' production policy. The

commenter suggested revising the following: ``pounds production to

count subtracted from pounds guaranteed multiplied by the quota price

election and non-quota price election.''

Response: This policy does not insure a specific dollar amount.

However, since there are more than one type of peanuts insured, the

value of the guarantee and production to count for each type is

calculated separately to ensure that the correct price is applied to

the specific type. Therefore, no change has been made.

Comments: Three producer groups, a lending institution, two

reinsured companies, and an insurance service organization suggest that

unharvested production should not be adjusted for quality. Commenters

indicated that quality adjustment should be restricted to mature

harvested production. Comments were made that United States Department

of Agriculture (USDA) inspectors do not accept unharvested samples for

grading purposes. Furthermore, it should be made clear that all

appraised production will be counted as quota as current procedure

requires.

Response: Producers should not be required to incur the costs

associated with harvest just to receive a quality adjustment when there

is no dispute that the production has been damaged. These Crop

Provisions are consistent with other crops that have quality adjustment

provisions. As stated above, appraised production of non-quota

[[Page 31335]]

peanuts will count against the value of the quota if there is

insufficient quota peanuts since the total value of all production to

count is subtracted from the total value of the quota and non-quota

guarantees. Therefore, no change has been made.

Comments: Three producer groups, a lending institution, two

reinsured companies, and an insurance service organization recommended

that section 14(d)(2)(iv) be revised to not allow the insured to defer

settlement of a claim and wait for a later, generally lower, appraisal,

especially on crops that have a short ``shelf life.''

Response: This provision allows deferment of a claim only if the

insurance provider and the insured do not agree on the appraisal or if

the insurance provider believes that the crop needs to be further cared

for. The insured must continue to care for the entire crop. If the

insured does not provide sufficient care for the crop, the original

appraisal will be used. Therefore, no change has been made.

Comments: An insurance service organization and a reinsured company

suggest that the requirement for a written agreement to be renewed each

year should be removed in section 15(d). Terms of the agreement should

be stated in the agreement to fit the particular situation for the

policy, or if no substantive changes occur from one year to the next,

allow the written agreement to be continuous.

Response: Written agreements are intended to supplement policy

terms or permit insurance in unusual situations that require

modification of the otherwise standard insurance provisions. If the

condition creating need for a written agreement continues from year to

year, it should be incorporated into the policy or the Special

Provisions. FCIC has moved the written agreement provisions to the

Basic Provisions but no change has been made.

Comments: Four producer groups, a lending institution, and two

reinsured companies ask: (1) whether the Late Planting Agreement Option

is still available; and (2) why late and prevented planting language

provisions were not included as they have been in other crops.

Response: The Late Planting Agreement Option is no longer

available. The late and prevented planting provisions in the Basic

Provisions will apply.

In addition to the changes indicated above, FCIC has made the

following changes:

1. Section 1. Definitions--Deleted the definitions of ``days'',

``final planting date,'' ``FSA,'' ``good farming practices,''

``interplanted,'' ``irrigated practice,'' ``practical to replant,''

``replanting,'' ``timely planted,'' ``USDA,'' and ``written agreement''

since their definitions have been moved to the Basic Provisions.

Revised the definition of ``planted acreage'' to remove those

provisions that have been moved to the Basic Provisions and added the

definition of ``approved yield'' for clarification. Deleted the

definition of ``harvest'' because language was added in section 10(c)

of these crop provisions and section 11 of the Basic Provisions to mark

the end of the insurance period for peanuts.

2. Section 2--Delete those provisions that have been moved to the

Basic Provisions.

3. Section 14--Added a note to inform policyholders with the

Catastrophic Risk Protection level of coverage on the limitation of

multiple benefits for the same crop loss.

List of Subjects in 7 CFR Parts 425 and 457

Crop insurance, Peanuts, Reporting and record keeping requirements.

Final Rule

Accordingly, for the reasons set forth in the preamble, the Federal

Crop Insurance Corporation hereby amends 7 CFR parts 425 and 457, as

follows:

PART 425--PEANUT CROP INSURANCE REGULATIONS FOR THE 1993 THROUGH

1998 CROP YEARS

1. The authority citation for 7 CFR part 425 is revised to read as

follows:

Authority: 7 U.S.C. 1506(l), 1506(p).

2. The part heading is revised to read as set forth above.

3. Subpart heading ``Subpart--Regulations for the 1993 and

Succeeding Crop Years'' is removed.

4. Section 425.7 is amended by revising the introductory text of

paragraph (d) to read as follows:

Sec. 425.7 The application and policy.

* * * * *

(d) The application for the 1993 and succeeding crop years is found

at subpart D of part 400-General Administrative Regulations (7 CFR

400.37, 400.38). The provisions of the Peanut Insurance Policy for the

1993 through 1998 crop years are as follows:

* * * * *

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

1998 AND SUBSEQUENT CONTRACT YEARS

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

follows:

Authority: 7 U.S.C. 1506(l), 1506(p)

6. Section 457.134 is added to read as follows:

Sec. 457.134 Peanut crop insurance provisions.

The Peanut Crop Insurance Provisions for the 1999 and succeeding

crop years are as follows:

FCIC policies:

United States Department of Agriculture

Federal Crop Insurance Corporation

Reinsured policies:

(Appropriate title for insurance provider)

Both FCIC and reinsured policies:

Peanut Crop Insurance Provisions

If a conflict exists among the policy provisions, the order of

priority is as follows: (1) the Catastrophic Risk Protection

Endorsement, if applicable; (2) the Special Provisions; (3) these

Crop Provisions; and (4) the Basic Provisions, with (1) controlling

(2), etc.

1. Definitions.

Approved yield. The yield calculated in accordance with 7 CFR

part 400, subpart G, if required by section 3(c) of these

provisions.

Average price per pound:

(1) The average CCC support price per pound, by type, for

Segregation I peanuts and Segregation II and III peanuts eligible to

be valued as quota peanuts; or

(2) The highest non-quota price election contained in the

Special Provisions for all Segregation I, II, and III peanuts not

eligible to be valued as quota peanuts.

Average support price per pound. The average price per pound for

each type of quota peanuts announced by the USDA under the peanut

price support program.

CCC. Commodity Credit Corporation, a wholly owned government

corporation within USDA.

County. In addition to the definition contained in the Basic

Provisions, ``county'' also includes any land identified by a FSA

farm serial number for such county but physically located in another

county.

Effective poundage marketing quota. The number of pounds

reported on the acreage report as eligible for the average support

price per pound (including transfers of quota peanuts from one farm

serial number to another farm serial number), not to exceed the

Marketing Quota established by FSA for the farm serial number.

Farmers' stock peanuts. Peanuts customarily marketed by

producers, produced in the United States, and which are not shelled,

crushed, cleaned, or otherwise changed (except for removal of

foreign material, loose shelled kernels, and excess moisture) from

the condition in which peanuts are harvested.

[[Page 31336]]

Green peanuts. Peanuts that are harvested and marketed prior to

maturity without drying or removal of moisture either by natural or

artificial means.

Inspection certificate and sales memorandum. A USDA form that

records the inspection grading results and marketing record for the

net weight of peanuts delivered to a buyer.

Non-quota peanuts. Peanuts other than quota peanuts.

Planted acreage. In addition to the requirement in the

definition in the Basic Provisions, peanuts must initially be

planted in rows wide enough apart to permit mechanical cultivation.

Acreage planted in any other manner will not be insurable unless

otherwise provided by the Special Provisions or by written

agreement.

Production guarantee (per acre). In addition to the definition

of ``production guarantee (per acre)'' in the Basic Provisions, the

production guarantee (per acre) is the number of pounds determined

by multiplying the yield per acre contained in the actuarial

documents or the approved yield multiplied by the coverage level

percentage you elect.

Quota peanuts. Peanuts that are eligible to be valued at the

average support price per pound.

Segregation I, II, or III. Grades designated and defined for

peanuts by the Agricultural Marketing Service of USDA.

Value per pound. A price determined by USDA as shown on the USDA

``Inspection Certificate and Sales Memorandum'' or other value

accepted by us.

2. Unit Division.

(a) In lieu of the provisions in section 34 of the Basic

Provisions that permit optional unit by section, section equivalent,

irrigated or non-irrigated acreage, each optional unit must be

located in a separate farm identified by a single FSA Farm Serial

Number.

(b) We may reject or modify any FSA reconstitution for the

purpose of the unit definition, if we determine the reconstitution

was done in whole or in part to defeat the purpose of the Federal

crop insurance program or to gain a disproportionate advantage under

this policy.

3. Insurance Guarantees, Coverage Levels, and Prices for

Determining Indemnities.

In addition to the requirements of section 3 of the Basic

Provisions:

(a) The price elections you choose for the quota and non-quota

peanuts must have the same percentage relationship to the maximum

price election offered by us for quota and non-quota peanuts. For

example, if you choose 100 percent of the maximum quota peanut price

election, you must also choose 100 percent of the maximum non-quota

election.

(b) The maximum pounds that may be insured at the quota price

election are the lesser of :

(1) The effective poundage marketing quota; or

(2) The insured acreage multiplied by the production guarantee.

If the insured acres multiplied by the production guarantee exceeds

the effective poundage marketing quota, the difference will be

insured at the non-quota peanut price election.

(c) You may be required to file an annual production report to

us, if required by the Special Provisions, to establish an approved

yield in lieu of the yield published in the actuarial documents. If

we require you to file an annual production report, you must do so

in accordance with section 3(c) of the Basic Provisions.

4. Contract Changes

In accordance with section 4 of the Basic Provisions, the

contract change date is November 30 preceding the cancellation date.

5. Cancellation and Termination Dates.

In accordance with section 2 of the Basic Provisions, the

cancellation and termination dates are:

Cancellation and Termination

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

State and county Dates

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

Jackson, Victoria, Golliad, Bee, Live Oak, January 15

Mullen, La Salle, and Dimmit Counties, Texas

and all Texas Counties lying south thereof.

El Paso, Hudspeth, Culberson, Reeves, Loving, February 28

Winkler, Ector, Upton, Reagan, Sterling, Coke,

Tom Green, Concho, McCulloch, San Saba, Mills,

Hamilton, Bosque, Johnson, Tarrant, Wise,

Cooke Counties, Texas, and all Texas counties

south and east thereof; and all other states.

New Mexico; Oklahoma; Virginia; and all other March 15

Texas counties.

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

6. Report of Acreage.

In addition to the requirements of section 6 of the Basic

Provisions, you must report the effective poundage marketing quota,

if any, that is applicable to each basic and optional unit for the

current crop year.

7. Annual Premium

In lieu of the premium amount determinations contained in

section 7(c) of the Basic Provisions, the annual premium will be

determined by:

(a) Multiplying the insured effective poundage marketing quota

by the price election for quota peanuts;

(b) Multiplying the insured pounds of non-quota peanuts by the

price election for non-quota peanuts;

(c) Totaling the results of section 7(a) and 7(b);

(d) Multiplying the total of section 7(c) by the applicable

premium rate stated in the actuarial documents;

(e) Multiplying the result of section 7(d) by your share at the

time coverage begins; and

(f) Multiplying the result of section 7(e) by any premium

adjustment percentages that may apply.

8. Insured Crop

In accordance with section 8 of the Basic Provisions, the crop

insured will be all the peanuts in the county for which a premium

rate is provided by the actuarial documents:

(a) In which you have a share;

(b) That are planted for the purpose of marketing as farmers'

stock peanuts;

(c) That are a type of peanut designated in the Special

Provisions as being insurable; and

(d) That are not (unless allowed by the Special Provisions or by

written agreement):

(1) Planted for the purpose of harvesting as green peanuts;

(2) Interplanted with another crop; or

(3) Planted into an established grass or legume.

9. Insurable Acreage

In addition to the provisions of section 9 of the Basic

Provisions:

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

planting date, to the extent that the majority of producers in the

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

unless we agree that replanting is not practical.

(b) We will not insure any acreage:

(1) On which peanuts are grown using no-till or minimum tillage

farming methods unless allowed by the Special Provisions or written

agreement; or

(2) Which does not meet the rotation requirements, if any,

contained in the Special Provisions.

10. Insurance Period

In accordance with the provisions of section 11 of the Basic

Provisions, the calendar date for the end of the insurance period is

the date immediately following planting as follows:

(a) November 30 in all states except New Mexico, Oklahoma, and

Texas; and

(b) December 31 in New Mexico, Oklahoma, and Texas.

(c) ``Removal of peanuts from the field'' replaces ``harvest''

as an event marking the end of the insurance period in section 11 of

the Basic Provisions.

11. Causes of Loss

In accordance with the provisions of section 12 of the Basic

Provisions, insurance is provided only against the following causes

of loss that occur during the insurance period:

(a) Adverse weather conditions;

(b) Fire;

(c) Insects, but not damage due to insufficient or improper

application of pest control measures;

(d) Plant disease, but not damage due to insufficient or

improper application of disease control measures;

[[Page 31337]]

(e) Wildlife;

(f) Earthquake;

(g) Volcanic eruption; or

(h) Failure of the irrigation water supply, if due to a cause of

loss contained in section 11(a) through (g) that occurs during the

insurance period.

12. Replanting Payments

(a) In accordance with section 13 of the Basic Provisions:

(1) A replanting payment is allowed if the crop is 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 and it is practical to replant.

(2) The maximum amount of the replanting payment for the unit

will be the lesser of :

(i) Eighty dollars ($80.00) per acre multiplied by the number of

acres replanted and multiplied by your insured share;

(ii) The actual cost of replanting per acre multiplied by the

number of acres replanted and multiplied by your insured share; or

(iii) Twenty percent (20%) of the production guarantee

multiplied by your quota price election, multiplied by the number of

acres replanted, and multiplied by your insured share.

(b) When peanuts are replanted using a practice that is

uninsurable as 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.

13. Duties In The Event of Damage or Loss

In accordance with the requirements of section 14 of the Basic

Provisions, the representative samples of the unharvested crop that

we may require must be at least 10 feet wide and extend the entire

length of each field in the unit. If you intend to put the acreage

to another use or not harvest the crop, the samples must not be

harvested or destroyed until our inspection.

14. Settlement of Claim

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

you are unable to provide separate acceptable production records:

(1) For any optional units, we will combine all optional units

for which such production records were not provided; and

(2) For any basic units, we will allocate any commingled

production to such units in proportion to our liability on the

harvested acreage for the units.

(b) When settling your claim, the effective poundage marketing

quota, if any, for each unit will be limited to the lesser of:

(1) The amount of the effective poundage marketing quota

reported on the acreage report;

(2) The amount of the FSA effective poundage marketing quota; or

(3) The amount determined at the final settlement of your claim.

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

will settle your claim by:

(1) Multiplying the insured acreage for the unit by the

production guarantee per acre, by type if applicable;

(2) Subtracting the insured effective poundage marketing quota

from the result of section 14(c)(1) to determine the amount of

insured non-quota peanuts;

(3) Multiplying the insured effective poundage marketing quota

and the result of section 14(c)(2) by the respective price election

by type, if applicable, for quota and non-quota peanuts,

respectively;

(4) Totaling the results of section 14(c)(3) (This amount will

be the same as (3) if there is only one type);

(5) Multiply the production to count for quota and non-quota

peanuts (see section 14(d)), for each type if applicable, by the

respective price elections;

(6) Totaling the results of section 14(c)(5) (This amount will

be the same as (5) if there is only one type);

(7) Subtracting the result of section 14(c)(6) from section

14(c)(4); and

(8) Multiplying the result in section 14(b)(7) and section

14(b)(8) by your share.

For example:

You have 100 percent share in 25 acres of Valencia peanuts in

the unit, with a 2000 pounds per acre guarantee, an effective

poundage marketing quota of 40,000 pounds, and a price election of

$0.34 per pound for quota and $0.15 per pounds for non-quota. You

are able to harvest 43,000 pounds in which 40,000 pounds are quota

segregation I and 3,000 pounds are non-quota segregation II and III

due to quality adjustment. Your indemnity would be calculated as

follows:

(1) 25 acres x 2,000 pounds per acre = 50,000 pounds

guarantee;

(2) 50,000 pounds guarantee -40,000 pounds of effective

marketing quota = 10,000 pounds of non-quota guarantee;

(3) 40,000 pounds x $.34 price election for quota = $13,600.00

value of guarantee; 10,000 pounds x $.15 price election for non-

quota = $1,500.00 value of guarantee;

(4) $13,600.00 + $1,500.00 = $15,100.00 total of value of

guarantee;

(5) 40,000 pounds of quota production to count x .34 =

$13,600.00 quota value of production to count;

3,000 pounds of non-quota production to count x .15 = $450.00

non-quota value of production to count;

(6) $13,600.00 + $450.00 = $14,050.00 total value of production

to count;

(8) $15,100.00 total value guarantee -$14,050.00 total value of

production to count = $1,050.00 loss; and

(9) $1,050.00 value of loss x 100 percent = $1,050.00

indemnity payment.

(d) The total production to count (in pounds) from all insurable

acreage on the unit will include all appraised and harvested

production.

(e) All appraised production will include:

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

(i) That is abandoned;

(ii) Put to another use without our consent;

(iii) Damaged solely by uninsured causes; or

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

acceptable to us; or

(v) Not replanted as required by this policy.

(2) Production lost due to uninsured causes;

(3) Unharvested production (mature unharvested production may be

adjusted for quality deficiencies and excess moisture in accordance

with section 14(f)); and

(4) Potential production on insured acreage that you intend to

put to another use or abandon, if you and we agree on the appraised

amount of production. Upon such agreement, the insurance period for

that acreage will end when you put the acreage to another use or

abandon the crop. If agreement on the appraised amount of production

is not reached:

(i) If you do not elect to continue to care for the crop, we may

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

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); or

(ii) If you elect to continue to care for the crop, the amount

of production to count for the acreage will be the harvested

production, or our reappraisal if additional damage occurs and the

crop is not harvested; and

(5) All harvested production from the insurable acreage.

(f) Mature peanut production that is damaged by insurable causes

and for which the value per pound is less than the average support

price per pound for the type will be adjusted by:

(1) Dividing the value per pound for the insured type of peanuts

by the applicable average price per pound; and

(2) Multiplying this result by the number of pounds of such

production.

(g) To enable us to determine the net weight and quality of

production of any peanuts for which an ``Inspection Certificate and

Sales Memorandum'' has not been issued, we must be given the

opportunity to have such peanuts inspected and graded before you

dispose of them. If you dispose of any production without giving us

the opportunity to have the peanuts inspected and graded, the gross

weight of such production will be used in determining total

production to count unless you submit a marketing record

satisfactory to us which clearly shows the net weight and quality of

such peanuts.

(Note: In accordance with the Federal Crop Insurance Act, in the

event of a crop loss, policyholders with the Catastrophic Risk

Protection level of coverage must elect to either receive benefits

under these Crop Provisions or if applicable, the Commodity Credit

Corporation Quota Loan Pool Regulations.)

Signed in Washington, D.C., on June 3, 1998.

Kenneth D. Ackerman,

Manager, Federal Crop Insurance Corporation.

[FR Doc. 98-15302 Filed 6-8-98; 8:45 am]

BILLING CODE 3410-08-P