Common Crop Insurance Regulations, Basic Provisions; and Various Crop Insurance Provisions, 40194-40252 [06-5962]

Agencies

• DEPARTMENT OF AGRICULTURE
• Federal Crop Insurance Corporation

[Federal Register Volume 71, Number 135 (Friday, July 14, 2006)]
[Proposed Rules]
[Pages 40194-40252]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-5962]



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Part II





Department of Agriculture





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Federal Crop Insurance Corporation



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7 CFR Part 457



Common Crop Insurance Regulations, Basic Provisions; and Various Crop 
Insurance Provisions; Proposed Rule

Federal Register / Vol. 71, No. 135 / Friday, July 14, 2006 / 
Proposed Rules

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DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Part 457

RIN 0563-AB96


Common Crop Insurance Regulations, Basic Provisions; and Various 
Crop Insurance Provisions

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Proposed rule with request for comments.

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SUMMARY: The Federal Crop Insurance Corporation (FCIC) proposes to 
amend the Common Crop Insurance Regulations, Basic Provisions, Small 
Grains Crop Insurance Provisions, Cotton Crop Insurance Provisions, 
Coarse Grains Crop Insurance Provisions, Malting Barley Crop Insurance 
Provisions, Rice Crop Insurance Provisions, and Canola and Rapeseed 
Crop Insurance Provisions to provide revenue protection and yield 
protection. FCIC also proposes to amend the Common Crop Insurance 
Regulations, Basic Provisions to incorporate changes resulting from 
input and recommendations by the prevented planting work group. The 
amended provisions will replace the Crop Revenue Coverage (CRC), Income 
Protection (IP), Indexed Income Protection (IIP), and the Revenue 
Assurance (RA) plans of insurance. The intended effect of this action 
is to offer producers a choice of revenue protection (protection 
against loss of revenue caused by low prices, low yields or a 
combination of both) or yield protection (protection for production 
losses only) within one Basic Provisions and the applicable Crop 
Provisions to reduce the amount of information producers must read to 
determine the best risk management tool for their operation and to 
improve the prevented planting and other provisions to better meet the 
needs of insured producers. The changes will apply for the 2009 and 
succeeding crop years.

DATES: Written comments and opinions on this proposed rule will be 
accepted until close of business September 12, 2006 and will be 
considered when the rule is to be made final. Comments on information 
collection under the Paperwork Reduction Act of 1995 must be received 
on or before September 12, 2006.

ADDRESSES: Interested persons are invited to submit comments, titled 
``Combination Basic and Crop Provisions'', by any of the following 
methods:
     By Mail to: Director, Product Administration and Standards 
Division, Risk Management Agency, United States Department of 
Agriculture, 6501 Beacon Drive, Stop 0812, Room 421, Kansas City, MO 
64133-4676.
     E-Mail: DirectorPDD@rma.usda.gov.
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
    A copy of each response will be available for public inspection and 
copying from 7 a.m. to 4:30 p.m., c.s.t., Monday through Friday, except 
holidays, at the above address.

FOR FURTHER INFORMATION CONTACT: For further information contact Louise 
Narber, Risk Management Specialist, Product Management, Product 
Administration and Standards Division, Risk Management Agency, at the 
Kansas City, MO, address listed above, telephone (816) 926-7730. For a 
copy of the Cost-Benefit Analysis, contact Leiann Nelson, Economist, at 
the office, address, and telephone number listed above.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule has been determined to be significant for the purposes of 
Executive Order 12866 and, therefore, it has been reviewed by the 
Office of Management and Budget (OMB).

Cost-Benefit Analysis

    A Cost Benefit Analysis has been completed and is available at the 
Kansas City address listed above to interested persons. In summary, the 
analysis finds that changes in the rule will have positive potential 
benefits for producers and insurance providers. The PayGo impact of no 
longer providing revenue coverage for sunflowers is estimated at 
$36,814. This was calculated based on the lower rate from MPCI 
coverage, the higher administrative and operating subsidy percentage 
from MPCI coverage, a lower amount of premium subsidy paid due to the 
lower premium, and a small amount of lesser indemnity paid based on no 
losses due to the harvest price. The PayGo impact of changing the 
rapeseed price mechanism for revenue coverage is estimated at $5,233. 
This was calculated based on the lower rate from MPCI coverage, a lower 
amount of premium subsidy paid due to the lower premium, and a small 
amount of lesser indemnity paid. A misreporting information penalty was 
put into place in the 2005 crop year. This misreporting penalty was 
based on the APH yield and acres reported. The policy already held 
misreported acres and yields against the producer and when the 
misreporting factor was also applied to the indemnity, the penalty 
proved to be overly harsh. In addition, the penalty was difficult to 
determine and administer. The total indemnity withheld in 2005 due to 
the MIF penalty was slightly under $2.7 million and involved just over 
608 thousand acres. RMA is recommending that the MIF penalty be removed 
from the policy based on the following facts: (1) Penalties against 
misreporting continue in the policy and acres and yields that are 
misreported are held against the indemnity; and (2) Fraud against crop 
insurance is punishable by law.
    Combining yield protection (protection for production losses only) 
and revenue protection (protection against loss of revenue caused by 
low prices, low yields or a combination of both) within one Basic 
Provisions and the applicable Crop Provisions will minimize the 
quantity of documents needed to be included in the contract between the 
producer and the insurance provider. A producer benefits because he or 
she will not receive several copies of largely duplicative material as 
part of the insurance contracts for crops insured under different 
insurance plans. Approved insurance providers benefit because there is 
no need to maintain inventories of similar materials. Handling and 
mailing costs are reduced to the extent that duplication of Basic or 
Crop Provisions is eliminated. Benefits accrue due to avoided costs 
(resources employed for duplicative effort) which are intangible in 
nature. Certain avoided costs are the need to prepare and publish 
multiple copies of similar documents and the need to store and mail 
multiple copies of similar documents. These proposed changes will 
increase the efficiency of the approved insurance providers by 
eliminating the need to maintain and track separate forms and by 
eliminating the potential for providing an incorrect set of documents 
to an insured person by inadvertent error.
    Revisions to the prevented planting provisions will clarify certain 
terms and conditions to reduce fraud, waste, and abuse. Also, the 
prevented planting payment amount will not exceed the payment level for 
the crop that is prevented from being planted. Current provisions allow 
payment based on another crop when there are no remaining eligible 
acres for the crop that is prevented from being planted. Payment is 
currently based on the other crop. Proposed provisions allow eligible 
acres for another crop to be used but limit the payment amount to that 
associated with the crop that was prevented from being planted.

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    CRC, RA, IP and IIP plans of insurance currently use a market-price 
discovery method to determine prices. This rule proposes to use this 
same method for determining prices used for crops with both revenue 
protection and yield protection. The benefits of this action primarily 
accrue to FCIC, which will no longer be required to make two estimates 
of the respective market price for these crops. Approved insurance 
providers benefit because they no longer will be required to process 
multiple releases of the expected market price for a crop year. 
Producers also benefit because the price at which they may insure the 
crops included under yield protection should more closely approximate 
the market value of any loss in yield that is subject to an indemnity. 
There are essentially no direct costs for this change since the market-
price price discovery mechanism already exists and is in use for the 
insurance plans to be included in revenue protection. All required data 
are available and similar calculations are currently being made.
    Sunflowers, which are currently eligible for revenue-based 
coverage, will no longer be eligible under the proposed changes. Very 
few crop policies of sunflowers earned premium in 2003. Removal of this 
crop from eligibility is appropriate because the mechanism for price 
discovery does not adequately reflect either market value or changes in 
the market valuation during the period between planting and harvest.
    These changes will simplify administration of the crop insurance 
program, reduce the quantity of documents and electronic materials 
prepared and distributed, better define the terms of coverage, provide 
greater clarity, and reduce the potential for waste, fraud, and abuse.
    Many of the benefits and costs associated with the proposed rule 
cannot be quantified. The qualitative assessment indicates that the 
benefits outweigh the costs of the regulation.

Paperwork Reduction Act of 1995

    In accordance with section 3507(j) of the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3501), the information collection and recordkeeping 
requirements included in this rule have been submitted for approval to 
OMB. Please submit written comments to the Desk Officer for 
Agriculture, Office of Information and Regulatory Affairs, Office of 
Management and Budget (OMB), Washington, DC 20503. A comment to OMB is 
best assured of having its full effect if OMB receives it within 30 
days of publication of this rule.
    Comments are being solicited from the public concerning this 
proposed information collection and recordkeeping requirements. This 
outside input will help:
    (1) Evaluate whether the proposed collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information has practical utility;
    (2) Evaluate the accuracy of our estimate of the burden of the 
proposed collection of information, including the validity of the 
methodology and assumption used;
    (3) Enhance the quality, utility, and clarity of the information to 
be collected; and
    (4) Minimize the burden of the collection of information on those 
who are to respond (such as through the use of appropriate automated, 
electronic, mechanical, or other technological collection techniques or 
other forms of information technology, e.g., permitting electronic 
submission responses.)
    Title: Common Crop Insurance Regulations, Basic Provisions; and 
Various Crop Insurance Provisions.
    Abstract: The Federal Crop Insurance Corporation (FCIC) proposes to 
amend the Common Crop Insurance Regulations, Basic Provisions, Small 
Grains Crop Insurance Provisions, Cotton Crop Insurance Provisions, 
Coarse Grains Crop Insurance Provisions, Malting Barley Crop Insurance 
Provisions, Rice Crop Insurance Provisions, and Canola and Rapeseed 
Crop Insurance Provisions to provide revenue protection and yield 
protection. The amended provisions will replace the Crop Revenue 
Coverage (CRC), Income Protection (IP), Indexed Income Protection 
(IIP), and Revenue Assurance (RA) plans of insurance. The intended 
effect of this action is to offer producers a choice of revenue 
protection (protection against loss of revenue caused by low prices, 
low yield or a combination of both) or yield protection (protection for 
production losses only) within one Basic Provisions and the applicable 
Crop Provisions to reduce the amount of information producers must read 
to determine the best risk management tool for their operation and to 
improve the prevented planting and other provisions to better meet the 
needs of insured producers. (The burden hours for reading the various 
policies to determine the best risk management tool for the producer's 
farming operation were not included in the current information 
collection burden hours. Burden hours for reading insurance documents 
are now included in the revised information collection package.)
    Purpose: To amend 7 CFR part 457.
    Burden Statement: The information collection requirements are 
necessary for administering the crop insurance program. Producers are 
required to report specific data when they apply for crop insurance and 
report acreage, yields, and notices of loss. Insurance companies accept 
applications, issue policies, establish and provide insurance coverage, 
compute liability, premium, subsidies, and losses, indemnify producers, 
and report specific data to FCIC, as required. Insurance agents market 
crop insurance and service the producer. This data is used to 
administer the Federal crop insurance program in accordance with the 
Federal Crop Insurance Act, as amended.
    Estimate of Burden: The public reporting burden for this collection 
of information is estimated to average 0.4 of an hour per response.
    Respondents: Producers and insurance companies reinsured by FCIC.
    Estimated Annual Number of Respondents: 1,248,281.
    Estimated Annual Number of Responses Per Respondent: 3.6.
    Estimated Annual Number of Responses: 4,551,705.
    Estimated Total Annual Burden Hours on Respondents: 1,866,457.

Government Paperwork Elimination Act (GPEA) Compliance

    FCIC is committed to compliance with the GPEA, which requires 
Government agencies, in general, to provide the public with the option 
of submitting information or transacting business electronically to the 
maximum extent possible. FCIC requires that all reinsured companies be 
in compliance with the Freedom to E-File Act and section 508 of the 
Rehabilitation Act.

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 UMRA.

Executive Order 13132

    It has been determined under section 1(a) of Executive Order 13132,

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Federalism, that this rule does not have sufficient implications to 
warrant consultation with the States. The provisions contained in this 
rule will not have a substantial direct effect on States, or on the 
relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government.

Regulatory Flexibility Act

    FCIC certifies that this regulation will not have a significant 
economic impact on a substantial number of small entities. Program 
requirements for the Federal crop insurance program are the same for 
all producers regardless of the size of their farming operation. For 
instance, all producers are required to submit an application and 
acreage report to establish their insurance guarantees and compute 
premium amounts, and all producers are required to submit a notice of 
loss and production information to determine the amount of an indemnity 
payment in the event of an insured cause of crop loss. Whether a 
producer has 10 acres or 1000 acres, there is no difference in the kind 
of information collected. To ensure crop insurance is available to 
small entities, the Federal Crop Insurance Act authorizes FCIC to waive 
collection of administrative fees from limited resource farmers. FCIC 
believes this waiver helps to ensure that small entities are given the 
same opportunities as large entities to manage their risks through the 
use of crop insurance. A Regulatory Flexibility Analysis has not been 
prepared since this regulation does not have an impact on small 
entities, and, therefore, this regulation is exempt from the provisions 
of the Regulatory Flexibility Act (5 U.S.C. 605).

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 proposed 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. With respect to any direct action taken by FCIC 
or to require the insurance provider to take specific action under the 
terms of the crop insurance policy, the administrative appeal 
provisions published at 7 CFR part 11 must be exhausted before any 
action against FCIC for judicial review may be brought.

Environmental Evaluation

    This action is not expected to have a significant economic impact 
on the quality of the human environment, health, or safety. Therefore, 
neither an Environmental Assessment nor an Environmental Impact 
Statement is needed.

Background

1. History

a. APH
    The Actual Production History (APH) plan of insurance was developed 
by FCIC and provides protection only against reductions in yield and 
prevented planting. Beginning with the 1985 crop year, FCIC offered an 
individual yield coverage plan that was based on the actual production 
of the producer. Previous to that crop year, coverage was based on an 
area yield. The individual yield coverage plan required 3 years of 
records, building to a maximum of 10 years.
    In 1994, the Federal Crop Insurance Reform Act of 1994 legislated 
that insurance coverage be based on the producer's actual production 
history, with 4 years of records required to establish the initial APH 
and building to ten year historic yield record. Congress also mandated 
that producers without the requisite records would receive a 
transitional yield determined by FCIC until 4 years of records were 
reached.
    Under the APH program, each year of APH history is added together 
and averaged to determine the approved yield for the unit. If the 
producer's production for a crop year for the unit was less than the 
guarantee (the amount determined by multiplying the approved yield by 
the coverage level), the producer was eligible for an indemnity 
payment. For each insured crop, the expected market price at the time 
of harvest was set by FCIC and announced by the contract change date, 
which usually predated harvest by at least six to nine months depending 
on the crop. FCIC eventually revised the policy to allow for the 
announcement of an additional price before the sales closing date to 
allow FCIC to obtain additional information to more accurately estimate 
the harvest price. However, for each insured crop, only one market 
price is used to establish whether an indemnity is owed, except for 
certain crop types that have separate market prices per type. The APH 
program does not provide coverage for any change in the market price.
b. CRC
    The Federal Crop Insurance Reform Act of 1994 also created section 
508(h) of the Federal Crop Insurance Act (Act), which allows a person 
to submit to the FCIC Board of Directors (Board) other crop insurance 
policies, provisions of policies or premium rates. If the Board finds 
that the interests of the producers are adequately protected and that 
any premiums charged to the producers are actuarially appropriate, the 
submission is approved by the Board for reinsurance and for sale by 
approved insurance providers to producers at actuarially appropriate 
rates and under appropriate terms and conditions.
    American Agrisurance, Inc. (AmAg), the managing general agent for 
Redland Insurance Company (Redland), an approved insurance provider, 
developed and submitted their CRC policy to the Board under section 
508(h) of the Act, requesting reinsurance, administrative and operating 
expense subsidy, and premium subsidy beginning with the 1996 crop year. 
The policy provided protection against reductions in yield and changes 
in market price that occur during the insurance period. Eventually AmAg 
became the managing general agent for American Growers Insurance 
Company (American Growers) and continued to maintain CRC. In 2002, 
American Growers failed and AmAg determined it could not continue to 
maintain CRC. In December 2002, in accordance with section 522(b)(4)(C) 
of the Act, AmAg transferred the responsibility for CRC to FCIC.
    CRC built upon the APH plan of insurance by adding a price 
protection component that for the first time used the commodity 
exchanges, such as the Chicago Board of Trade, to establish the 
expected market price for the crop. Before the insurance period, the 
expected market price is established using futures contracts to 
determine the expected market price at the time of harvest. Toward the 
end of the insurance period, the futures contracts from the same 
commodity exchange are again used to determine the new expected market 
price at the time of harvest. In this manner, the expected market price 
at the time of harvest is calculated before the insurance period begins 
and again toward the end of the insurance period so that any change in 
the expected market price can be measured.

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    CRC protects against both increases and decreases in price. Before 
the insurance period, the market price is established using futures 
contracts to determine the expected market price at the time of 
harvest. Toward the end of the insurance period, futures contracts for 
the same commodity exchanges are used to establish a new market price 
at the time of harvest. This meant that if the expected market price 
decreased during the insurance period or the producer suffered a loss 
in yield, the producer would be indemnified if the change in 
combination of price and yield results in the value of the production 
to count being less than the value of the guarantee.
c. RA
    In 1995, the Iowa Farm Bill Study Team proposed RA. The idea was 
further developed by the Iowa Farm Bureau Federation and Farm Bureau 
Mutual Insurance Company (Farm Bureau) at the request of the Iowa Farm 
Bureau membership. RA was eventually owned and administered by American 
Farm Bureau Insurance Services, Inc. RA was submitted to the Board 
under section 508(h) of the Act and was first approved by the Board for 
the 1997 crop year. RA provided coverage against loss of production and 
a decrease in price. RA was later modified to allow producers the 
option of receiving coverage for both an increase and decrease in 
price.
    Farm Bureau continued to maintain RA through the 2004 crop year, 
the last year for which maintenance costs were reimbursable under 
section 522(b)(4)(B) of the Act. For the 2005 crop year, Farm Bureau 
transferred the responsibility for maintenance for RA to FCIC.
    RA built upon the APH plan of insurance by adding a price 
protection component that also used the commodity exchanges, such as 
the Chicago Board of Trade, to establish the expected market price for 
the crop. Before the insurance period, the market price is established 
using futures contracts to determine the expected market price at the 
time of harvest. Toward the end of the insurance period, futures 
contracts for the same commodity exchange are used to establish a new 
market price at the time of harvest. When it was first introduced, it 
only protected against decreases in price. This meant that if the 
expected market price decreased during the insurance period or the 
producer suffered a loss in yield, the producer would be indemnified if 
the change in combination of price and yield results in the value of 
the production to count being less than the value of the guarantee. 
Eventually RA was revised to allow producers to elect to purchase an 
option that would provide coverage in case the expected market price 
increased during the insurance period.
d. IP
    In the Federal Crop Insurance Reform Act of 1994, Congress enacted 
section 508(h)(6) of the Act, which authorized FCIC to provide coverage 
against a reduction in price or yield resulting from an insured cause. 
FCIC subsequently developed IP and made it available for the 1997 crop 
year.
    IP built upon the APH plan of insurance by adding a price 
protection component that also used the commodity exchanges, such as 
the Chicago Board of Trade, to establish the expected market price for 
the crop. Before the insurance period, the expected market price is 
established using futures contracts to determine price at the time of 
harvest. Toward the end of the insurance period, futures contracts from 
the same commodity exchange are again used to determine a new expected 
market price. IP only protects against decreases in price. This meant 
that if the expected market price decreased during the insurance period 
or the producer suffered a loss in yield, the producer would be 
indemnified if the change in combination of price and yield results in 
the value of the production to count being less than the value of the 
guarantee.
e. IIP
    Beginning with the 1999 crop year, an alternative version of IP, 
Indexed IP, was available on a limited basis. IIP is currently 
available for corn and soybeans. IIP is identical to regular IP with 
the exception of the method used to calculate the APH approved yield. 
If the producer has experienced several losses during the period during 
which the APH is calculated, the producer's approved yield averages are 
reduced and may not reflect the expected yield of the crop during 
normal growing conditions. Indexing producer yields alleviates this 
problem. The indexing process uses county data to moderate the effect 
of these successive loss years. The IIP yield is calculated by 
subtracting the average of the producer's reported yields at the 
enterprise unit level from the average of the county yields for the 
same years, and subtracting that difference from the county's expected 
yield for the current crop year. This pilot program may provide an 
improved yield guarantee for producers in areas that have experienced 
numerous significant losses in recent years.

2. Proposed Policy

    FCIC proposes to amend the Common Crop Insurance Regulations; Basic 
Provisions, Small Grains Crop Insurance Provisions, Cotton Crop 
Insurance Provisions, Coarse Grains Crop Insurance Provisions, Malting 
Barley Crop Insurance, Rice Crop Insurance Provisions, and Canola and 
Rapeseed Crop Insurance Provisions to provide both revenue protection 
and yield protection. Barley, canola and rapeseed, corn, cotton, grain 
sorghum, rice, soybeans, sunflowers, and wheat are currently insured 
under at least one of the CRC, IP, IIP, and RA plans of insurance as 
well as under the APH plan of insurance.
    FCIC also proposes that sunflowers will no longer have revenue 
protection due to the lack of consistent and appropriate price data. 
Sunflowers will only be insurable under APH coverage and a price 
election will be established by FCIC.
    FCIC is proposing that the best features of each of the above 
stated plans of insurance be combined into the revised Basic Provisions 
and applicable Crop Provisions. Under this proposal, for each insured 
crop for which revenue protection is available, producers must choose 
whether to insure the crop under the revenue protection provisions or 
the yield protection provisions. Revenue protection provides coverage 
against loss of revenue caused by low prices or low yields or a 
combination of both.
    If revenue protection is selected, the producer will receive 
protection against both the increase and decrease in price unless the 
producer elects the harvest price exclusion option, which eliminates 
coverage against an increase in price. If yield protection is selected 
by the producer, the producer will only receive coverage for production 
losses and not for any change in the expected market price.
    The proposed changes to the policy will give producers the ability 
to insure their yield risk or their revenue risk under one policy. 
However, revenue protection will not be available for all crops that 
are covered by the Basic Provisions. Revenue protection is proposed to 
be provided only for those crops that were previously covered by CRC 
and RA, except for sunflowers, in all counties where APH is available 
for such crops. The actuarial documents will reflect the crops and 
counties where revenue coverage under the proposed Basic Provisions and 
applicable Crop Provisions will be made available. Revenue protection 
may be made available for additional crops as appropriate. Producers 
who previously

[[Page 40198]]

had revenue coverage will automatically continue to have revenue 
protection under the revised policy absent notice from such producers 
that they are canceling the insurance coverage by the cancellation date 
or changing their coverage by the sales closing date.
    The purpose of this endeavor is to create one simple policy and 
remove the redundancies and excess documents that currently add 
unnecessary complexity to the program. CRC, RA, and the APH Common Crop 
Insurance Policy each have different Basic Provisions. The Common Crop 
Insurance Policy Basic Provisions is also used for IP and IIP. The 
various Basic Provisions and Crop Provisions for each of these plans of 
insurance contain many of the same or similar terms and conditions. The 
proposed Basic Provisions and applicable Crop Provisions will allow 
agents to more effectively assist producers in comparing the choices 
that are available because all the terms will be contained in one 
policy, actuarial documents, premium calculators, etc. This will 
significantly reduce the burdens on agents and insurance providers 
through less training and supporting documentation costs. Producers 
will have fewer documents to review when evaluating the best plan of 
insurance for their particular farming operations. The proposed Basic 
Provisions and applicable Crop Provisions will also improve program 
integrity by eliminating potential conflicts and the mistakes that can 
occur when individual plans of insurance are revised differently.

3. Existing Coverages and Proposed Changes

    Following is a summary of the relevant terms of the current plans 
of insurance and the proposed changes to such terms.
a. Coverage Levels
    Under APH, producers choose coverage levels ranging from 50 to 75 
percent (up to 85 percent depending on the crop and county) in 5 
percent increments. Catastrophic risk protection (CAT) coverage is 
available with a coverage level of 50 percent of the approved yield and 
55 percent of the expected market price, or a comparable coverage as 
determined by FCIC for policies with other than individual yield (For 
example, a dollar plan of insurance has coverage of 27.5 percent of an 
established dollar amount).
    Under CRC, producers choose the amount of revenue protection that 
meets their risk management needs by selecting a coverage level between 
50 and 75 percent (up to 85 percent depending on the crop and county) 
in 5 percent increments. Catastrophic risk protection coverage is not 
available.
    For IP and IIP, producers choose the amount of revenue protection 
that meets their risk management needs by selecting either CAT (based 
on 27.5 percent of the approved yield and 100 percent price election) 
or a coverage level between 50 and 75 percent (85 percent depending on 
the crop and location) in 5 percent increments.
    Under RA, producers choose the amount of revenue protection that 
meets their risk management needs by selecting a coverage level between 
65 and 85 percent for whole-farm and enterprise units and 65 to 75 
percent for basic and optional units (80 and 85 percent coverage is 
available where the APH plan of insurance allows 80 and 85 percent 
coverage, except for cotton). Catastrophic risk protection coverage is 
not available.
    Under the revised Basic Provisions and Crop Provisions, FCIC 
proposes to adopt the coverage levels ranging from 50 to 75 percent (up 
to 85 percent depending on the crop and county) in 5 percent 
increments. Catastrophic risk protection (CAT) coverage will be 
available for yield protection with a coverage level of 50 percent of 
the approved yield and 55 percent of the expected market price, or a 
comparable coverage as determined by FCIC (For example, 27.5 percent of 
the approved yield and 100 percent of the expected market price is a 
comparable coverage). CAT coverage will not be available for revenue 
protection.
    CAT coverage will not be available for revenue protection because 
CAT coverage is intended to be a nominal coverage provided in the event 
of catastrophic disasters. As such, producers do not pay premium and 
are only charged an administrative fee. Because CAT coverage is only 
intended to provide the most basic of protection, its options have 
always been severely limited, such as no written agreements, no 
optional units, no additional prevented planting coverage, no other 
optional coverages offered, etc. Since revenue protection is an 
additional option available to producers it would be inconsistent to 
allow such coverage to be available for CAT coverage.
b. Unit Structure
    Producers insured under the APH plan of insurance must insure all 
the acreage of the insured crop in the county in which they have an 
interest with the exception of high-risk land. Producers may exclude 
high-risk land from coverage or insure it at the CAT coverage level. 
Insured acreage may be divided into smaller acreage or units. Basic 
units are determined by share. For example, a producer who owns one 
field and rents another field in exchange for a share of the crop can 
have two basic units. However, if the same producer owned both fields 
or cash rented one of the fields, the producer would only be eligible 
for one basic unit.
    Basic units may generally be subdivided into optional units that 
are determined by boundaries (i.e., section, Farm Serial Numbers, non-
contiguous land, etc.) and/or production practice (i.e., irrigated, 
non-irrigated) and each proposed optional unit must be supported by 
separate historical records of planted acreage and yield. For some 
crops, basic units may also be combined into an enterprise unit, which 
means all acreage of the insured crop in the county in which the 
producer has an interest will be in one unit, regardless of share. 
There is a separate guarantee for each basic, optional or enterprise 
unit. A premium discount is available if the producer elects basic or 
enterprise units.
    Producers insuring under the CRC plan of insurance must also insure 
all the acreage of the insured crop in the county in which they have an 
interest. Insured acreage may be divided into smaller acreage or units. 
Like APH, basic units are determined by share. Like APH, basic units 
may be subdivided into optional units that are determined by boundaries 
(i.e., section, Farm Serial Numbers, non-contiguous land, etc.) and/or 
production practice (i.e., irrigated, non-irrigated) and each proposed 
optional unit must be supported by separate historical records of 
planted acreage and yield. Like APH, basic units may also be combined 
into an enterprise unit, which means all acreage of the insured crop in 
the county in which the producer has an interest will be in one unit. 
There is a separate revenue protection guarantee for each basic or 
optional unit. Basic or optional units comprising the enterprise unit 
retain separate final guarantees. A premium discount is available if 
the producer elects basic or enterprise units.
    Like APH and CRC, producers that insure under the RA plan of 
insurance must also insure all the acreage of the insured crop in the 
county in which they have an interest. Insured acreage may be divided 
into smaller acreage or units. Like APH and CRC, basic units are 
determined by share. Like APH and CRC, basic units may be subdivided 
into optional units that are determined by boundaries (i.e., section, 
Farm Serial Numbers, non-contiguous land, etc.)

[[Page 40199]]

and/or production practice (i.e., irrigated, non-irrigated) and each 
proposed optional unit must be supported by separate historical records 
of planted acreage and yield. Like APH and CRC, basic units may also be 
combined into an enterprise unit, which means all acreage of the 
insured crop in the county in which the producer has an interest will 
be insured in one unit. However, RA also offers whole-farm units, where 
all crops for which insurance is available is insured in one unit, 
except winter wheat.
    RA provides a premium discount if the producer elects a basic or an 
enterprise unit. An additional premium discount is available when the 
insured elects the whole-farm unit.
    With respect to IP and IIP, insurance is only provided for an 
enterprise unit. Whole-farm, basic and optional units are not 
available.
    Under the revised Basic Provisions and Crop Provisions, FCIC 
proposes to require that producers must insure all the acreage of the 
insured crop in the county in which they have an interest regardless of 
whether yield or revenue protection is selected. However, producers 
with yield or revenue protection may select from several unit 
structures: Basic, optional or enterprise units. However, producers 
with revenue protection may also select whole-farm units. Basic units 
are again determined by share.
    FCIC is proposing that basic units may be subdivided into optional 
units that are determined by boundaries (i.e., section, Farm Serial 
Numbers, non-contiguous land, etc.) and/or production practice (i.e., 
irrigated, non-irrigated) and each proposed optional unit must be 
supported by separate historical records of planted acreage and yield.
    FCIC is also proposing that an enterprise unit may be available for 
certain crops, as designated in the actuarial documents. The revised 
policy provides a premium discount if the producer elects a basic or 
enterprise unit.
    FCIC is also proposing to allow producers to obtain whole-farm 
units. The producer cannot selectively choose which crops to include 
under the whole-farm unit. The producer must include all insured crops 
for which revenue protection is available and in which the producer has 
a share, except winter barley and winter wheat, which may not be 
included in the whole-farm unit. Fall planted crops are excluded from 
the whole-farm unit because the different growing seasons make it 
impossible to establish the guarantee or premium that may be owed at 
the time of application because the information regarding the spring 
planted crops is not yet available. Further, producers with fall 
planted crops would have to wait until after harvest of all their 
spring planted crops before an indemnity could be paid. An additional 
premium discount is available when the producer elects the whole-farm 
unit.
c. Price Methodology
    As stated above, under the APH plan of insurance, there is a price 
election announced by FCIC for each insured crop or type. The price 
elections represent 100 percent of the expected market price. Price 
elections are determined by FCIC based on the best available data to 
estimate the expected market price at the time of harvest and are 
issued by the contract change date for each insured crop. In addition 
to the price election available on the contract change date, FCIC may 
provide an additional price election no later than 15 days prior to the 
crop's sales closing date. The additional price election will not be 
less than the price available on the contract change date and is 
intended to allow FCIC to update its available data so that the 
expected market price can more accurately reflect the expected market 
price the producer will receive at the time of harvest. Producers must 
elect the additional price election by the sales closing date. The 
producer can elect a percentage of this announced price. For example, 
the producer can elect to receive a price that is 80 percent of the 
price election announced by FCIC.
    Further, as stated above, under the CRC plan of insurance, the base 
price is 100 percent of the expected market price at the time of 
harvest but it is established prior to the attachment of insurance. The 
base price is used to establish the guarantee. The harvest price is 
also 100 percent of the expected market price at the time of harvest 
but is established just before the crop is normally harvested. The 
harvest price is used to calculate the value of the production to count 
and to recalculate the revenue guarantee when the harvest price exceeds 
the base price. The CRC base and harvest prices are an average of the 
commodity exchange daily settlement prices for the insured crop, 
futures contract or index, for the period specified in the Commodity 
Exchange Endorsement.
    As stated above, like CRC, RA uses two prices. The projected 
harvest price and the fall harvest price. The projected harvest price 
is 100 percent of the expected market price at the time of harvest 
established prior to the attachment of insurance and this price is used 
to set the guarantee. The fall harvest price is also 100 percent of the 
expected market price at the time of harvest established just before 
the crop is normally harvested and it is used to determine the value of 
the production to count. The RA projected harvest price and fall 
harvest price are an average of the commodity exchange daily settlement 
prices for the insured crop, futures contract or index, for the period 
specified in the Crop Provisions. Only protection against a reduction 
in price is built into the RA policy. To obtain protection in case the 
fall harvest price is greater than the projected harvest price, the 
producer must purchase the fall harvest price option for an additional 
premium.
    As stated above, IP and IIP use two prices to measure price 
fluctuation. The projected price establishes the revenue guarantee. The 
harvest price establishes the value of the production to count. IP and 
IIP prices are 100 percent of the average daily settlement price for 
the insured crop, futures contract or index, for the period specified 
in the Crop Provisions. IP and IIP only provide price protection if the 
harvest price is less than the projected price. They do not provide 
protection if the harvest price exceeds the projected price.
    For the revised Basic Provisions and Crop Provisions, for crops for 
which revenue protection is available, FCIC proposes to use the 
commodity exchanges to establish a projected price and a harvest price 
(the harvest price will only be used for crops with revenue 
protection). FCIC also proposes that the revised policy provide 
coverage for both an increase and decrease in price, unless the 
producer selects the harvest price exclusion option. Selection of the 
harvest price exclusion option will only provide protection against a 
decrease in the price. No matter whether the producer selects to insure 
against both an increase and decrease in price or selects the harvest 
price exclusion option, the harvest price will be used to value 
production to count.
    If the producer elects yield protection for a crop for which 
revenue protection is available, the projected price will be used to 
calculate the value of the production to count. For crops for which 
revenue protection is not available, expected market prices, amounts of 
insurance, and the value of the production to count, as applicable, 
will continue to be based on the price elections determined by FCIC in 
accordance with the applicable Crop Provisions.
    The price discovery methodology for crops with revenue protection 
available will be specified in the Commodity Exchange Price Provisions 
(CEPP). The

[[Page 40200]]

CEPP will include the information necessary to derive the projected 
price and the harvest price including the applicable commodity exchange 
and the relevant futures trading days, if applicable.
    FCIC proposes that the price discovery period end not less than 15 
days prior to the sales closing date and the projected price will be 
released within 5 days after the price determination period ends. This 
will allow FCIC to establish the most relevant price possible for the 
projected price. Therefore, the projected price will be available on 
the Actuarial Data Master (ADM) at least 10 days prior to the sales 
closing date.
    RMA proposes to add an informational tool to RMA's Web site that 
will accumulate revenue protection volatility factors and projected 
prices and harvest prices, as defined in the Commodity Exchange Price 
Provisions, during the price discovery period. While the values in the 
accumulator will only be estimates until the price discovery period 
expires, this informational tool will be useful for producers and 
agents to begin making informed decisions about the risk management 
alternatives as far in advance of sales closing dates as possible.
    FCIC is also proposing that if there is insufficient price 
information to set the projected price for a crop, the projected price 
will be determined by FCIC and no revenue protection will be available. 
In such case, producers who elected revenue protection will 
automatically have yield protection, unless the policy is cancelled by 
the cancellation date, and the projected price determined by FCIC will 
be used to establish the value of the guarantee and production to 
count. If there is sufficient price information to set the projected 
price for a crop for which revenue protection is offered but there is 
insufficient information to set the harvest price, the harvest price 
will be set equal to the projected price.
    For corn silage insured under revenue protection, FCIC is proposing 
that the harvest price be set equal to the projected price because corn 
silage is not traded under any commodity exchange and corn silage 
prices do not have a correlation to corn for grain or other crop prices 
that are established on a commodity exchange. The result of this action 
will allow the producer to insure both corn for silage and grain and 
may allow the producer to qualify for a whole-farm unit under revenue 
protection.
    For rapeseed insured under revenue protection, FCIC is also 
proposing that the harvest price will be set equal to the projected 
price because rapeseed is not traded under any commodity exchange and 
rapeseed prices no longer have a consistent correlation to canola 
prices that are established on a commodity exchange. The result of this 
action will allow the producer to insure both rapeseed and canola and 
may allow the producer to qualify for a whole-farm unit under revenue 
protection.
d. Guarantees
    Under the APH plan of insurance, the guarantee is determined by 
multiplying the approved yield by the coverage level selected by the 
producer.
    Under the CRC plan of insurance, the guarantee used to calculate 
premium and any replant payment and prevented planting payment is the 
approved yield times the coverage level times the base price. Since the 
policy is intended to cover both increases and decreases in price, to 
determine the guarantee for the purposes of establishing an indemnity, 
the higher of the base price or harvest price is used to establish the 
final guarantee.
    Under the RA plan of insurance, the revenue guarantee is determined 
by multiplying the approved yield times the coverage level times the 
projected harvest price. Unless the producer selects the fall harvest 
price option, this revenue guarantee will be used to calculate premium, 
and any replant payment and any prevented planting payment and 
indemnity. If the producer elects the fall harvest price option, the 
revenue guarantee is determined by multiplying the approved yield times 
the coverage level times the higher of the projected harvest price or 
the fall harvest price.
    Under the IP plan of insurance, the guarantee is determined by 
multiplying the coverage level times the approved yield times the 
projected price. Since IP only provides coverage for reductions in 
price, the same guarantee is always used to calculate premiums and 
losses.
    Under the IIP plan of insurance, the guarantee is the coverage 
level times the indexed approved yield (the producer's individual yield 
indexed against the county yield) times the projected price. Since IP 
only provides coverage for reductions in price, the same guarantee is 
always used to calculate premiums and replant payments, prevented 
planting payments and indemnities.
    For the revised Basic Provisions and Crop Provisions, FCIC proposes 
that, for crops for which revenue protection is available, if the 
producer selects revenue protection, the revenue guarantee used to 
calculate premium, replant payment and any prevented planting payment 
is the approved yield times the coverage level times the projected 
price. Since the policy will cover both increases and decreases in 
price, to determine the guarantee for the purposes of establishing an 
indemnity, the final revenue guarantee will be calculated by 
multiplying the approved yield times the coverage level times the 
higher of the projected price or harvest price, unless the harvest 
price exclusion option is selected. If the harvest price exclusion 
option is selected, the revenue guarantee used to calculate premium 
will be used to calculate any indemnity.
    If the producer selects yield protection, the guarantee for the 
purposes of establishing the premium and calculating any replanting 
payment, prevented planting payment, and indemnity will be based on the 
approved yield times the coverage level times the projected price.
    For crops for which revenue protection is not available, the 
guarantee for the purposes of establishing the premium and calculating 
any replanting payment, prevented planting payment, and indemnity will 
continue to be based on the price elections or amounts of insurance, if 
applicable, determined by FCIC.
e. Production to Count and Indemnities
    For APH, production to count is the amount of appraised and 
harvested production at the time of loss, adjusted for any quality 
losses, as applicable. Under the APH plan of insurance, an indemnity is 
calculated by subtracting the production to count from the production 
guarantee. If the production to count is less than the guarantee, an 
indemnity will be paid that is the difference between the guarantee and 
the production to count times the price election selected by the 
producer times the producer's share.
    For CRC, production to count is the amount of appraised and 
harvested production at the time of loss, adjusted for any quality 
losses, as applicable. Under the CRC plan of insurance, an indemnity is 
calculated by subtracting the value of the production to count 
(production to count times the harvest price) from the final guarantee 
and multiplying the result by the producer's share.
    For RA, production to count is the amount of appraised and 
harvested production at the time of loss, adjusted for any quality 
losses, as applicable. Under the RA plan of insurance, an indemnity is 
calculated by subtracting the value of production to count (production 
to count times the fall harvest price) from the revenue

[[Page 40201]]

guarantee and multiplying the result by the producer's share.
    For IP and IIP, production to count is the amount of appraised and 
harvested production at the time of loss, adjusted for any quality 
losses, as applicable. Under IP and IIP, the indemnity is calculated by 
subtracting the value of the production to count (total production to 
count times the harvest price) from the amount of protection and 
multiplying the result by the producer's share.
    For the revised Basic Provisions and Crop Provisions, FCIC proposes 
that for crops for which revenue protection is available and selected, 
production to count is the amount of appraised and harvested production 
at the time of loss, adjusted for any quality losses, as applicable. 
FCIC proposes that an indemnity is calculated by subtracting the value 
of the production to count (production to count times the harvest 
price) from the revenue protection guarantee, multiplied by the 
producer's share.
    FCIC proposes that for crops for which revenue protection is 
available but yield protection is selected, production to count is the 
amount of appraised and harvested production at the time of loss, 
adjusted for any quality losses, as applicable. Further, FCIC proposes 
that an indemnity is calculated by subtracting the value of the 
production to count (production to count times the projected price) 
from the yield protection guarantee. The yield protection guarantee is 
based on the projected price.
f. Rating and Premium Subsidy
    For APH, the premium is determined to be an amount necessary to 
cover the anticipated losses and a reasonable reserve. Premium covers 
only the anticipated losses associated with the loss of production. The 
premium subsidy is the portion of the total premium paid by the 
government and is in the amount established in section 508(e) of the 
Act.
    For CRC, the premium rate is determined by using the premium rate 
for the APH plan of insurance with an additional rate necessary to 
cover the anticipated losses associated with the risk that the harvest 
price will exceed the base price and guarantees will be adjusted when 
calculating losses. The premium subsidy is the portion of the total 
premium paid by the government and is in the amount established in 
section 508(e) of the Act.
    RA premium rates are calculated by a rating model incorporating the 
variability and correlation of yield and price. When the fall harvest 
price option is selected by the producer an additional premium rate is 
charged to cover the risk that the harvest price will exceed the 
projected price and guarantees will be adjusted when calculating 
losses. The premium subsidy is the portion of the total premium paid by 
the government and is in the amount established in section 508(e) of 
the Act.
    IP and IIP premium rates are calculated by a rating model 
incorporating the variability of yield and price. The premium subsidy 
is the portion of the total premium paid by the government and is in 
the amount established in section 508(e) of the Act.
    For the revised Basic Provisions and Crop Provisions, for revenue 
protection, premium rates are calculated by a rating model 
incorporating the variability and correlation of yield and price. For 
yield protection, premium rates are calculated the same as the APH 
policy. The premium subsidy is the portion of the total premium paid by 
the government and is in the amount established in section 508(e) of 
the Act.
g. Maximum Price Movement
    With respect to changes in the value of the commodity that can 
occur during the insurance period, some policies contained limitations 
on the amount of price change that would be covered under the policy. 
This restriction was added because some markets were volatile and there 
needed to be a mechanism to measure the risk for actuarially sound 
rating. For instance, if the base price was $4.30 for soybeans and the 
market price at the time of harvest was $8.00, if the maximum price 
movement allowed is $3.00, the harvest price would be $7.30.
    The maximum price movement was not applicable to APH because there 
is no revenue component to the coverage. Only yield risk is covered.
    For CRC, the maximum price movement allowed under the policy was 
$1.50 per bushel for corn and grain sorghum, $3.00 per bushel for 
soybeans, $2.00 per bushel for wheat, $0.05 per pound for rice, and 
$0.70 per pound for cotton.
    RA, IP and IIP did not contain a maximum price movement.
    For the revised Basic Provisions and Crop Provisions, FCIC proposes 
that the harvest price will not exceed 160 percent of the projected 
price. However, this percentage will be contained in the Commodity 
Exchange Price Provisions to permit an expedited adjustment if 
necessary. Any adjustments will be made prior to the contract change 
date.
h. Exclusions and Availability
    APH only provides protection against loss of yield due to a named 
insured peril. The hail and fire exclusion is available, which permits 
producers to exclude these perils from their APH policy and obtain 
private commercially available insurance. The premium rate for the APH 
policy is reduced to reflect the exclusion of these perils. Coverage 
may be precluded in certain instances, such as losses due to poor 
farming practices and other uninsured causes of loss such as 
negligence. High-risk land is eligible for coverage and written 
agreements are available. APH is available for most major commodities.
    The CRC policy provides insurance protection for unavoidable loss 
of revenue due to insured causes of loss, including market price 
changes. Coverage may be precluded in certain instances, such as losses 
due to poor farming practices and other uninsured causes of loss such 
as negligence. The hail and fire exclusion is not available. High-risk 
land is eligible for coverage and written agreements are available. CRC 
is currently available for wheat, rice, cotton, corn, grain sorghum, 
and soybeans in all counties where the APH program is available.
    The RA policy provides insurance protection for unavoidable loss of 
revenue due to insured causes of loss, including market price changes. 
Coverage may be precluded in certain instances, such as losses due to 
poor farming practices and other uninsured causes of loss such as 
negligence. The hail and fire exclusion is not available. High-risk 
land is eligible for coverage and written agreements are limited in 
availability. RA is currently available for wheat, canola and rapeseed, 
rice, cotton, corn, sunflowers, soybeans, barley and malting barley in 
selected states.
    The IP and IIP policies provide insurance protection for 
unavoidable loss of revenue due to insured causes of loss, including 
reduced market prices. Coverage may be precluded in certain instances, 
such as losses due to poor farming practices and other uninsured causes 
of loss such as negligence. The hail and fire exclusion is not 
available. High-risk land is not eligible for coverage and written 
agreements are not available. IP is currently available for wheat, 
cotton, corn, grain sorghum, soybeans, barley and malting barley in 
selected states. IIP is available for corn in Maryland, New York, North 
Carolina, and Pennsylvania and soybeans in Maryland and North Carolina.
    In the revised Basic Provisions and Crop Provisions, FCIC proposes 
to provide insurance protection for loss of

[[Page 40202]]

revenue due to loss of yield or changes in the market price resulting 
from insured causes of loss. Market price fluctuations will be presumed 
to be from insured causes of loss unless there is specific evidence 
that such fluctuation was caused by an uninsured cause of loss, such as 
quarantine or terrorist attack. Coverage may be precluded in certain 
instances, such as losses due to poor farming practices and other 
uninsured causes of loss such as negligence. The hail and fire 
exclusion is available. High-risk land is eligible for coverage and 
written agreements are also available. Revenue protection will be 
provided for those crops and counties where CRC, RA, IP and IIP were 
available, except for sunflowers.

4. Commodity Exchange Price Provisions

    FCIC proposes that the Commodity Exchange Price Provisions be 
available for public inspection on RMA's Web site at https://
www.rma.usda.gov/, or a successor Web site, by the contract change date 
and will also be available in the agent's office. The Commodity 
Exchange Price Provisions will not be published in the Code of Federal 
Regulations. However, FCIC would like comments on the Commodity 
Exchange Price Provisions and, therefore, has included its text below.

Commodity Exchange Price Provisions of Insurance; 2006 and Succeeding 
Crop Years

1. Definitions

    Additional daily settlement price--Daily settlement prices for 
full active trading days based on the contract immediately prior and 
immediately following the appropriate commodity contract, or the 
contract immediately prior to the appropriate contract, provided the 
substitute contract(s) are within the same crop year. These prices 
are used to establish the projected and harvest price when at least 
8 average daily settlement prices are not available.
    Average daily settlement price--The sum of all daily settlement 
prices established on full active trading days, as specified in the 
applicable insured crop's projected price or harvest price 
definition, divided by the total number of full active trading days 
included in the sum. The average must include a minimum of 8 prices 
established on full active trading days. If there is not a minimum 
of 8 prices established on full active trading days for the 
applicable contract months specified for the insured crop in 
paragraph 3, additional daily settlement prices will be used to 
establish the average daily settlement price until there are 8 
prices established on full active trading days.
    CBOT--Chicago Board of Trade.
    CME--Chicago Mercantile Exchange.
    Full active trading day--Any day on which the relevant market is 
open during all regular trading hours for the relevant futures 
contract, and there are at least 25 open interest contracts on the 
relevant futures contract.
    Harvest Price--Defined in section 3.
    KCBT--Kansas City Board of Trade.
    MGE--Minneapolis Grain Exchange.
    National Agricultural Statistics Service (NASS)--An agency 
within USDA.
    NYBT--New York Board of Trade.
    Projected Price--Defined in section 3.
    USDA--United States Department of Agriculture.
    WCE--Winnipeg Commodity Exchange.

2. Price Determinations

    (a) In accordance with section 1 of the Common Crop Insurance 
Policy Basic Provisions, these Commodity Exchange Price Provisions 
specify how and when the projected price and harvest price will be 
determined by crop.
    (b) If revenue protection is available for the crop, average 
daily settlement prices will be used to determine:
    (1) The projected price and harvest price for insured crops for 
which revenue protection is selected; or
    (2) The projected price for insured crops for which yield 
protection is selected.
    (c) Additional daily settlement prices will be derived beginning 
with the latest date defined by the applicable projected price or 
harvest price definition not qualifying as a full active trading 
day.
    (d) RMA reserves the right to omit any daily settlement price or 
additional daily settlement price if market conditions are different 
than those used to rate or price revenue protection (For example, 
the trading hits the limits imposed by the Commodity Exchange).
    (e) For the projected price, if the average daily settlement 
price cannot be calculated by the procedures outlined in these price 
provisions, no revenue protection coverage will be available.
    (1) If revenue protection coverage is not available, notice will 
be provided on the Risk Management Agency Web site at https://
www.rma.usda.gov/ by the date specified in the applicable projected 
price definition.
    (2) Yield protection may still be obtained for the crop by 
making application by the appropriate sales closing date or, for 
revenue protection policies that were in effect for the previous 
crop year, the coverage under such policy will automatically revert 
to yield protection. In such instances, the projected price will be 
established by RMA and released by the date specified in the 
appl