[Senate Report 106-247]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 464
106th Congress                                                   Report
                                 SENATE
 2d Session                                                     106-247

======================================================================



 
                RISK MANAGEMENT FOR THE 21ST CENTURY ACT

                                _______
                                

                 March 22, 2000.--Ordered to be printed

                                _______
                                

Mr. Lugar, from the Committee on Agriculture, Nutrition, and Forestry, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 2251]

    The Committee on Agriculture, Nutrition, and Forestry, 
having considered an original bill (S. 2251) to amend the 
Federal Crop Insurance Act to improve crop insurance coverage, 
to provide agricultural producers with choices to manage risk, 
and for other purposes, reports favorably thereon and 
recommends that the bill do pass.

                                CONTENTS

                                                                   Page
  I. Purpose, Need, and Background....................................1
 II. Section by Section Analysis......................................5
III. Legislative History and Votes in Committee......................22
 IV. Regulatory Impact Statement.....................................26
  V. Budgetary Impact of the Bill....................................27
 VI. Changes in Existing Law.........................................30

                    I. Purpose, Need, and Background

    The Risk Management for the 21st Century Act is intended to 
address four aspects of the Federal crop insurance program that 
need improvement. First, producer participation must be 
increased. Second, program administration needs to be 
streamlined, and procedures for approving policies and plans of 
insurance must be simplified to facilitate flexibility, 
innovation and transparency, and encourage the development of 
new products from the private sector. Third, better risk 
management in production agriculture must be encouraged by 
offering new types of insurance coverage such as whole farm 
revenue and combined individual and area yield policies, 
especially for specialty crops. Finally, fraud and abuse in the 
federal crop insurance program must be better managed.
    Since the expansion of the federal crop insurance program 
in 1980, Congress has undertaken several reforms to improve the 
scope and success of the program available to producers. The 
most significant reforms occurred in 1994 with the passage of 
the Federal Crop Insurance Reform Act. The purpose of this 
legislation was to address concerns with poor participation in 
the program and to attempt to stop the near annual need for 
agricultural disaster assistance legislation.
    Agricultural producers must deal with the vagaries of 
weather, pests, and disease that few other industries in our 
society. Better use of crop insurance and other risk management 
tools by agricultural producers are essential if Congress is to 
avoid the need for future disaster programs. Producers are less 
willing to purchase crop insurance and use other risk 
management strategies if they believe Congress will provide 
disaster assistance each year.
    Nobody, producers, lenders, or the Congress, want to depend 
on disaster bills. Funding levels of such ad hoc assistance are 
unpredictable, making it difficult for producers and lenders to 
make financial decisions at the beginning of a crop year. By 
its very nature, it is uncertain whether ad hoc disaster 
legislation will be passed in any one year. One purpose of the 
Risk Management for the 21st Century Act is to avoid this ad 
hoc approach.
    Prior to 1994, producer participation percentages were 
often below 40 percent. This low participation rate and the 
desire to end disaster programs led Congress to passage of the 
1994 legislation. Subsequent reforms were made to the program 
in 1996 in the Federal Agriculture Improvement and Reform Act, 
and in 1998 in the Agricultural Research, Extension, and 
Education Reform Act. These reforms to the program appear to 
have been successful, as participation in the program increased 
from 38 percent of insurable crops in 1994 to 67 percent in 
1998.
    Despite these increases in participation, many producers 
still believe that the crop insurance program does not provide 
an adequate coverage. This is largely because the higher levels 
of premium subsidy are targeted at the lower levels of 
coverage, and the subsidy level falls as insurance coverage 
levels rise. Thus, if a producer wants to increase coverage 
from 65/100 to 75/100, the cost of the policy nearly doubles 
even though that actual coverage increases by only 10 percent. 
The current subsidy structure provides a strong disincentive to 
producers from increasing their levels of coverage.
    High participation rates are also dependant on the crop 
insurance program's ability to adapt to constantly changing 
conditions involving weather, agronomy, technology, and 
economics. Currently, many producers, especially specialty 
crops producers, do not believe this is occurring. While 
participation percentages have increased for many crops, the 
rate of participation for many specialty crops has continued to 
lag. Many specialty crop producers argue that low participation 
levels are caused by the slow or nonexistent development and 
approval of policies that address their needs.
    Despite the real progress and positive steps in the crop 
insurance program in recent years, calls for improvements to 
crop insurance began to intensify in 1998 and 1999. During this 
time, many of the inadequacies in the current subsidy 
structure, APH system, and product approval and development 
process began to become all too apparent. As a result of 
demands to improve the crop insurance program, during the late 
fall of 1998, interested commodity and farm groups, lending 
organizations, approved providers, and insurance agents were 
given the opportunity to provide comments and recommendations 
about how to improve the program.
    The responses from these groups were overwhelming, and 
common themes emerged. First, the premium subsidy needed to be 
inverted to provide increased subsidies for higher levels of 
coverage. Second, the subsidy should be equivalent for revenue 
and yield policies. Third, modifications to the calculation of 
actual production history (APH) was necessary to account for 
multiple year disasters. Fourth, additional APH adjustments 
were necessary for new and beginning farmers. Fifth, a stronger 
program was dependant on a stronger FCIC Board of Directors and 
streamlined product approval and development processes. 
Finally, increased emphasis and money was necessary for 
programs and polices of affecting specialty crop producers. All 
stakeholders also expressed a need to eliminate fraud and abuse 
in the crop insurance program.
    The Risk Management for the 21st Century Act addresses all 
of these concerns. A largely inverted premium subsidy structure 
is provided, allowing for higher levels of assistance at higher 
levels of coverage. The purpose of this provision is to 
facilitate purchases of higher levels of coverage worthwhile 
for producers. Under the current structure, producers' out of 
pocket costs will often double for a 10 percent increase in 
coverage. This discourages producers from taking coverage they 
would otherwise consider, and increases the odds that Congress 
will feel compelled to pass a disaster bill each year.
    These changes are also supported in large part by the 
lending community. If a producer can show the lender that 
adequate protection against potential production losses has 
been procured, it is more likely that the lender will provide 
an operating loan to the producer. The inverted subsidy 
provides additional confidence and certainty to the lending 
process for both producers and lenders.
    The exception to the inverted structure (in the Risk 
Management for the 21st Century Act) is at the 50/100 level of 
buy-up coverage, where the premium subsidy will be 60 percent. 
This was done to address regional concerns where producers 
largely purchase only the lowest, catastrophic (CAT) level of 
coverage. To encourage producers to purchase coverage above the 
CAT level, the premium subsidy at this lowest level of coverage 
was increased.
    Through numerous discussions with producers, the severity 
of problems affecting producers suffering from multiple years 
of crop losses became very apparent. While this has been a 
problem throughout the country, it has been particularly 
pronounced in the northern plains. The current legislation 
provides the Risk Management Agency with a mechanism to deal 
with this problem. However, the legislation also includes a 
phase-out that allows for this provision to be terminated when 
the Board determines that appropriate crop insurance polices 
have been developed to address this issue. The Committee 
encourages the FCIC and approved insurance providers to work 
together to expeditiously develop these polices.
    Many producers also believe that the current assigned yield 
system for new and beginning farmers provides inadequate 
coverage. The Committee is concerned that this adversely 
impacts those producers who need insurance coverage the most--
young, beginning farmers who are often the leveraged 
financially.
    Several concerns have been expressed about the inadequacy 
of the noninsured crop assistance (NAP) for producers of 
specialty and program crops. Producers using NAP are 
disadvantaged because NAP is not provided through formal, 
approved insurance policies. One concern is that currently 
different varieties of the a crop cannot be combined for the 
purpose of computing losses, and is insufficiently flexible for 
new crops. Of particular concern to many producers was the area 
trigger prerequisite to a NAP indemnity payment. Complaints 
regarding the area trigger were numerous. Producers expressed 
concern that certain sections of a county or area may often 
suffer losses, but the losses are not severe enough throughout 
the county to trigger NAP assistance. The Committee is acutely 
aware that this is a problem in western states where the 
difference between the highest and lowest elevations in a 
county may be 4,000 to 5,000 feet. Because NAP inadequately 
addresses their needs, producers are put at a serious 
disadvantage for managing their risk.
    Specialty crop producers should also have access to many of 
the same crop insurance products available to producers of the 
major crops. However, most specialty crop producers believe 
they are inadequately served by the crop insurance program. 
Addressing the needs of specialty crop producers is a major 
goal of the current legislation. The Committee strongly 
believes that products available to these producers must be 
expanded and improved. The legislation provides a commitment to 
these producers by providing an additional $20 million annually 
for grants to outside entities to undertake research in 
developing these polices. The Committee expects RMA and the 
FCIC Board to be aggressive in these areas.
    One of the top concerns the Committee heard from numerous 
producers, farm and commodity organizations, and approved 
insurance providers involved problems with the regulatory and 
product approval processes in the crop insurance program. Most 
believe that the current process is burdensome and contains 
insurmountable roadblocks that have stifled the development of 
new products and polices. The Committee strongly believes that 
the crop insurance program cannot be successful if it cannot 
respond to a changing agriculture and producers needs.
    The current legislation includes a major restructuring of 
the FCIC Board of Directors. The intent underlying these 
changes is to bring the expertise of producers and individuals 
in the insurance industry to the Board. The Committee strongly 
believes the best way to improve the program is through the 
advice and expertise of those who actually use the program. The 
legislation creates new positions for staff to assist the board 
with the product review and approval process, and to review and 
evaluate existing policies. The purpose of the staff is to 
provide the Board with a qualified, unbiased opinion regarding 
the approval of new and existing products. There is a strong 
feeling among the agriculture and insurance communities, and in 
Congress that product development has too often been stifled by 
Federal agency (FCIC) competition and redundancy with the 
private sector. The Committee believes these roadblocks are not 
healthy and harm the overall effectiveness of the program. For 
this reason, a streamlined private product approval process is 
included in the bill. The Committee fully expects the Secretary 
to implement this approval process and to substantially 
streamline, accelerate, and implement the private product 
approval process.
    Fraud and abuse cannot be tolerated in the Federal crop 
insurance program. Fraud and abuse undermine the integrity of 
the program, increase costs to producers, and violate the trust 
of the taxpayers who ultimately pay for the program. If fraud 
and abuse is occurring, it gives all of agriculture a black-
eye. The Committee is committed to curbing fraud and abuse in 
these programs. The legislation provides substantial changes in 
the program's fraud and compliance provisions, and the 
Committee expects the Secretary to use these tools as 
necessary. Conversely, only those situations that clearly 
warrant investigation and penalties should be vigorously 
enforced and prosecuted. These provisions are not intended to 
provide carte blanc to undertake investigations without 
evidence or clear indications that they are necessary.
    Finally, the Committee believes that a strong private/
public partnership is an important cornerstone of the crop 
insurance program. Private involvement in the program is 
healthy and often eliminates inefficiencies that occur when 
programs are administered through the public sector. The 
Committee intends for the Secretary to take continued steps to 
strengthen this partnership. The crop insurance program should 
remain a function solely of the Risk Management Agency with 
delivery provided through approved insurance providers. Other 
agencies within the Department of Agriculture lack the 
necessary staffing, training, or, in some cases, resources to 
administer this program in the manner producers and taxpayers 
expect.

                    II. Section by Section Analysis


                    TITLE I--CROP INSURANCE COVERAGE

Section 101. Quality adjustment

    The FCIC is required to provide insurance coverage that 
allows a reduction in quantity of production for the purpose of 
establishing yield when the quality standards established in 
the policy are not met. A producer can opt to exclude this 
coverage from the insurance policy. This section allows 
producers to opt out of crop insurance coverage protecting 
against quality losses and requires the FCIC to analyze and 
modify its quality adjustment procedures to more accurately 
reflect local quality discounts.
    In 1997, FCIC amended its method of accounting for quality 
losses by standardizing ``reduction in value'' (RIV) charts, 
which use a national quality adjustment factor instead of the 
previous method of factoring quality discounts assessed by 
local elevators. The Committee is concerned that FCIC's current 
procedure can significantly understate quality discounts 
subtracted from producers' crop values. The Committee is most 
concerned that the standardized quality adjustment factors are 
based on national averages, while quality problems of any 
significant impact are found mainly on a regional basis. The 
Committee recognizes FCIC's concern about potential market 
manipulation to take advantage of a market-based quality 
adjustment procedure. It is also aware of the agency's 
difficulty in determining quality factors that address the 
changing magnitude of factors throughout the marketing year. 
The Committee understands that these concerns were major 
factors leading to FCIC's implementation of procedures 
incorporating the national RIV charts. Still, producers are now 
assessed greater quality discounts than those covered by their 
policies, due to FCIC's revised procedures. Producers purchased 
coverage to manage this risk and many believe they are not 
receiving satisfactory coverage. The Committee agrees.
    The Committee expects FCIC to keep it informed of its plans 
for analysis of the quality adjustment procedures and the 
agency's progress while the analysis is being conducted. It 
also urges FCIC to use quality discounts when determining 
initial losses, not only after a producer has met the loss 
threshold. The Committee intends for new quality adjustment 
procedures to be implemented for the 2001 crop year. In the 
case that large numbers of producers opt out of quality 
adjustment coverage, the Committee urges FCIC to take measures 
to prevent increases in coverage costs for producers who 
continue to insure themselves and manage their liabilities 
against these risks.

Section 102. Prevented planting

    Requires equal coverage for each insurable commodity. 
Allows planting of substitute commodity on acreage on which a 
prevented planting payment has been received. The substitute 
commodity is not eligible for insurance coverage. If a 
substitute crop is planted, the FCIC will assign a yield for 
that year equal to 60 percent of the producer's actual 
production history (APH) on the crop that was prevented from 
being planted. If a substitute commodity is planted before the 
latest planting date established by the Corporation for the 
crop prevented from being planted, the producer will not 
receive a prevented planting payment. Requires re-rating to 
reflect these changes not later than the 2001 reinsurance year. 
A producer can opt to exclude this coverage from the insurance 
policy. Effective for the 2001-2004 reinsurance years.
    The Committee intends that producers not be required by 
FCIC to idle productive land that could otherwise yield a crop 
and provide critical farm income. This section will effectively 
eliminate the so-called ``black dirt'' policy that has been 
imposed by FCIC. The Committee recognizes that allowing 
producers to receive prevented planting indemnities and then 
replant the ground to a second crop could foster fraud and 
abuse. The limitations contained in this section, including 
that directed to area conditions, should be implemented by the 
agency in a manner that will tend to reduce the opportunity for 
fraud and abuse. However, the Committee expects FCIC to 
implement such limitations in a way that does not undermine the 
fundamental intention of the Committee. The provisions on final 
planting date and area conditions should be implemented in a 
common sense fashion. The ``latest planting date established'' 
is intended to refer to the final planting date for the 
original commodity and not to any late planting period that 
might be established by FCIC. It is not the intent of the 
Committee to insure failure or poor performance of a 
replacement crop because planting was delayed pending the 
passage of the final planting date for the original commodity. 
The Corporation should ensure that planting dates are 
determined and implemented in a manner that takes regional 
conditions into consideration.

Section 103. Payment of portion of premium by corporation

    Premium subsidies for loss of yield and revenue coverage 
are made equal. Premium subsidies for plans of insurance are 
established at:
          60% premium subsidy on 50/100 yield or revenue 
        coverage, or an equivalent coverage;
          45% premium subsidy on 55/100-60/100 yield or revenue 
        coverage, or an equivalent coverage;
          50% premium subsidy on 65/100-70/100 yield or revenue 
        coverage, or an equivalent coverage; and
          55% premium subsidy on 75/100 and greater levels of 
        yield or revenue coverage, or an equivalent coverage.
    For levels of yield or revenue coverage higher than 75/100, 
the premium subsidy is established at a level that equals the 
dollar amount of the subsidy calculated at the 75/100 coverage 
level. Allows Cost-of-Production policies to be developed. 
Potatoes are not eligible for revenue coverage except as a part 
of a whole farm plan of insurance. Allows individual yield and 
area yield coverage to be combined into a single policy and 
made available to farmers if such a policy is approved through 
the private submissions procedure authorized by section 508(h) 
of the Federal Crop Insurance Act. Effective for the 2001-2004 
reinsurance years.
    Under current law, producers receive a premium subsidy that 
is based upon the level of coverage they are purchasing. This 
level of subsidy falls as a producer purchases higher levels of 
coverage. Thus, as producers purchase higher levels of 
coverage, their out-of-pocket costs increase 
disproportionately. This has discouraged many producers from 
purchasing higher levels of buy-up coverage, which many members 
of the Committee believe has led to the need for disaster 
assistance bills. This provision works to address this problem 
and encourages producers to purchase higher levels of coverage.
    Under this legislation, premium subsidies are provided in 
an inverted formula to encourage producer participation in 
higher levels of coverage. This provides producers with greater 
risk management coverage and reduces their out of pocket 
expenses. Subsidies are as follows: 50/100, 60 percent; 55/100 
and 60/100, 45 percent; 65/100 and 70/100, 50 percent; and 75/
100, 55 percent. The exception to the complete inversion of 
subsidies is at the 50/100 level. The Committee heard from many 
specialty crop producers who are concerned that the cost of 
increasing coverage from Catastrophic (CAT) levels to the 50/
100 level is cost prohibitive. Current subsidies at this level 
are 55 percent. The legislation increases this to 60 percent as 
an incentive to encourage producers to increase coverage from 
the CAT to the 50/100 level. Premium subsidy is to be 
determined under section 508(e) solely on the percentage of 
yield a producer elects to insure without regard to the price 
election selected by the producer. In the case of equivalent 
coverage on other than a loss of yield basis, the premium 
subsidy shall be an equivalent monetary value.
    The Committee intends that the FCIC provide coverage 
choices to producers in increments of 5 percent as soon as 
practicable. This section also authorizes FCIC to provide a 
price election under a policy or plan of insurance based on the 
projected cost of producing the covered commodity. The 
Committee believes cost-of-production policies will help to 
address the concerns of many producers when APHs fall as a 
result of multiple years of crop losses.
    Subsection (e) strikes Section 508(e)(4) of the Federal 
Crop Insurance Act (Act) that provides the FCIC with specific 
authority to approve plans of insurance that would combine 
individual yield or revenue and area yield or revenue coverage 
into a single policy. The Risk Management Agency has indicated 
that 508(e)(4)'s specific authority is not necessary because 
such combined policies can be approved for subsidy and 
reinsurance through the more general authority provided by the 
Act's section 508(h), as amended by this bill. The Committee 
supports the crop insurance industry's efforts to make a 
combined individual and area yield policy available to farmers 
through the Act's 508(h) approval process, and intends that 
such a policy be fully eligible for premium subsidy.
    The 1998 Omnibus Consolidated and Emergency Supplemental 
Appropriations Act of 1998 authorized a crop insurance premium 
discount of approximately 30 percent. Utilizing the authority 
granted to the Secretary of Agriculture, an additional 20 
percent discount was provided to wheat and barley producers who 
had been impacted by an unusual extreme of excess moisture 
which caused the disease known as ``scab'' in those crops. 
Subsequently, these producers purchased higher levels of 
coverage to further mitigate their risks of losses due to crop 
disease. The Committee finds merit in this program, as it 
encourages and provides incentives for producers to take 
individual action to manage risk to the maximum extent 
possible.
    In the past three to four years, many potato producers in 
the Red River Valley, as well as other potato growing areas, 
have suffered from a crop disease known as potato blight, and 
other internal soft rot diseases, caused in large part by 
excess moisture. These losses have caused a direct economic 
loss of more than $100 million in 1999, in the Red River Valley 
alone. The Committee expects Congress to consider, during 
discussions of possible crop disaster programs this year, 
offering premium discounts to potato producers who have 
suffered from excess moisture. The Committee urges the 
Secretary to use his authority to offer a supplemental 2000 
crop year premium discount, at least equivalent to that 
established by the wheat and barley scab precedent, to potato 
producers impacted by excess moisture during previous years.
    The conforming amendments in Section 103 include a 
provision to equalize the premium subsidy for revenue products. 
Revenue insurance has proved to be a popular risk management 
tool for many producers and this provision will make it more 
affordable for producers to improve their coverage. RMA 
currently interprets the law in a way that allows federal 
subsidy for only the yield portion of revenue products. This 
change will allow the subsidy to apply to both the yield and 
price components.
    The Committee is aware that the National Potato Council has 
expressed opposition to providing revenue insurance policies 
for potatoes. The bill includes language prohibiting additional 
premium subsidies on revenue policies for potatoes. The 
Committee expects the Secretary to adhere to this provision. 
Furthermore, the Committee expects the Secretary to allow 
potato growers the opportunity to comment on the issuance of 
such potato policies, including pilot programs.

Section 104. Assigned yields

    Requires the FCIC to assign a yield if a producer does not 
have an actual production history (APH) for an agricultural 
commodity. The assigned APH takes into account lack of actual 
production histories for beginning farmers and farmers who have 
either added land or who have an established history of 
rotating crops on the same acreage within a crop year.
    By allowing FCIC to determine yields in the case of 
producers that have not had a share of the production of the 
insured crop for more than 2 crop years, that produce a 
commodity on land that has not been farmed by the producer, and 
that rotate crops, the Committee is attempting to provide 
fairness to newer producers or individuals producing new crops 
or farming new land. The Committee urges FCIC to apply a 
common-sense approach to implementation of this section. In 
assigning such yields, FCIC should ensure that producers are 
not taking undue advantage of favorable policies by obtaining 
unrealistic and unreasonably high yields primarily for the 
purpose of enrolling the commodity into the crop insurance 
program.

Section 105. Multi-year APH adjustment

    Defines a multi-year disaster as years in which a producer 
(or a successor entity through which the APH of the producer 
can be traced) has suffered a natural disaster regarding an 
agricultural commodity in at least 3 of the preceding 5 years, 
resulting in a cumulative APH reduction of a least 25 percent. 
A producer that qualifies may exclude one year of APH for every 
five years of APH established by the producer. During this 
time, the producer's APH may increase without limit up to the 
level that existed immediately preceding the multi-year 
disaster. The APH adjustment sunsets when the producer's APH 
has increased to the level that adequately insures against 
natural disasters. Requires the FCIC to assume the increased 
costs created because of this adjustment. Effective for the 
2001-2004 reinsurance years.
    In 1998, Congress passed an agricultural relief package to 
assist farmers and ranchers suffering from repeated years of 
disaster because the crop insurance system did not adequately 
manage risk for those producers. Since the crop insurance 
reform of 1994, some areas have experienced an unprecedented 
series of natural disasters. During several of the years since 
1994, many farmers have seen their crop yields drop 
significantly below normal and, as a result, their Actual 
Production Histories--the basis of crop insurance coverage--
have declined to levels below that of meaningful production 
risk management. These declines are an unintended consequence 
of the 1994 reform. The Committee stresses that these declines 
have virtually nothing to do with a farmer's management 
decisions or other factors within the control of the farmer.
    The Committee expects RMA to avoid the taxpayer 
identification problem it experienced when implementing the 
multi year disaster program in 1998, and has included specific 
legislative language to guide the agency on this matter.
    The Committee expects FCIC to ensure that producers 
understand the implications of any election under this section 
relative to the impact, if any, on insurable yields and 
premiums. With respect to the application of subparagraph (E), 
termination of exclusion authority, it is the opinion of the 
Committee that FCIC does not currently provide crop insurance 
that adequately insures against natural disasters that occur in 
multiple crop years. Before FCIC makes a determination that 
such insurance is available and adequate, the agency should 
outline how policies have changed to better insure against 
multiple crop year disasters and obtain the approval of the 
Committee.

Section 106. Noninsured crop disaster assistance program (NAP)

    Allows different varieties of a commodity to be considered 
a single commodity for purposes of NAP. The sales closing date 
for NAP coverage is March 15. Payment of a service fee is 
required that is the lessor of (1) an amount equivalent to the 
administrative fee for catastrophic risk protection or (2) $200 
for a producer in a county, not to exceed $600. A waiver of the 
fee is provided for limited resource producers. Requires 
reporting of acreage, etc. at the time of payment of the fee. 
The service fee is to be deposited into the Commodity Credit 
Corporation Fund. Authorizes the Secretary to provide 
assistance without any requirement of an area loss. Creates 
system of assigned yields for producers planting crops that are 
new to an area, allowing these new crops to be eligible for NAP 
coverage. The acreage threshold for a prevented planting NAP 
payment is reduced from 35% to 15%. Effective for the 2001-2004 
reinsurance years.
    The Committee is aware that concerns with the Noninsured 
Assistance Program (NAP) are among the strongest complaints of 
specialty crop producers. The Committee believes producers of 
noninsurable crops should have a program available to them that 
works and allows them to manage risk. It is the intent of the 
provision to provide the producers of specialty crops the same 
coverage available to crops otherwise eligible for the crop 
insurance program. By modifying the area trigger requirement 
and implementing a modest fee, the NAP program will become more 
closely aligned with CAT coverage. The Committee expects these 
changes to lead to additional crops moving from NAP to the crop 
insurance program and encourages the Secretary to take steps to 
meet this goal. It is the intent of the Committee that with 
respect to reduced coverage and temporary ineligibility, the 
provision would apply when the new specialty crop was planted 
or would be projected to be planted within a rotation practice.

                 TITLE II--RESEARCH AND PILOT PROGRAMS

Section 201. Research and pilot programs

    Consolidates the authorities for pilot programs and 
research into a new section 522 of the Federal Crop Insurance 
Act. Pilot programs and research regarding livestock are 
authorized as of October 1, 2000, and pilot programs are 
authorized to be carried out on a regional, state, or national 
basis. Funds new research and pilot programs established during 
the 2001-2004 reinsurance years--$20 million for 2001, $40 
million for 2002, $60 million for 2003, and $80 million for the 
2004, reinsurance years.
    This section includes a requirement that the FCIC contract 
with a qualified person to study whether offering insurance 
plans that cover multiple years can reduce fraud and abuse. 
Currently, federal crop and revenue insurance policies provide 
coverage for one crop year at a time. Some in the insurance 
field believe that offering plans of insurance that provide 
coverage for multiple years might reduce the potential for 
fraud and abuse by persons that participate in the federal crop 
insurance program. The Committee believes that a feasibility 
study of this idea is warranted.
    The Committee has included language to allow the 
Corporation to provide pilot programs that allow producers to 
receive premium discounts for using whole farm units or single 
crop units of insurance and which allow the crossing of State 
and county boundaries to form insurable units. The Committee 
encourages the inclusion of several states, including 
Minnesota, in any pilots involving this authority.
    In carrying out this section, the Committee expects FCIC to 
consider livestock pilot programs already under development by 
the private sector. The Committee is aware of a pilot revenue 
insurance project for pork and beef producers under development 
at Iowa State University which would use current futures market 
prices to estimate the expected gross profit farmers expect to 
earn on each animal planned for sale. Gross profits per hog 
would equal the current live hog futures price less the 13.22 
bushels of corn and 188.52 pounds of supplement required to 
feed each hog to market. Estimated gross profits per steer and 
heifer would be based on the live cattle futures price less the 
48.2 bushels of corn required to produce a slaughter-ready 
animal. Farmers would register a proposed number of slaughter-
ready hogs or cattle they plan to market during a period of 
months for coverage with an insurance agent, with cost per 
animal calculated on a per-animal rate. Livestock farmers who 
produced corn and soybeans would be allowed to combine crop and 
livestock coverage under a single policy. This product would be 
reinsured on futures markets and would not expose the Risk 
Management Agency to indemnity risk.
    In pursuing revenue insurance pilot programs for ``whole 
farm units,'' the Committee expects the Department to encourage 
development of whole farm coverage of both crop and animal 
production and marketing on a gross revenue basis. Revenue from 
all agricultural enterprises on the farm should be covered, 
including crops and livestock that are not yet otherwise 
insurable. The Committee is aware of difficulties faced by 
highly diversified operations in obtaining adequate insurance 
coverage and, therefore, it is the Committee's intent that a 
whole farm pilot program should be available in all regions of 
the country, including areas already extensively served by 
other, crop-specific revenue insurance products. The Committee 
also encourages the Department to incorporate diversification 
and conservation incentives into whole farm coverage where 
appropriate.
    The Committee is aware that the Risk Management Agency has 
used existing research and education funds to provide a grant 
to Kansas State University to fund risk management clubs 
throughout the State of Kansas. The Committee believes these 
clubs play an important role in providing information to 
producers regarding the range of risk management opportunities 
available, and the Committee expects the Secretary to continue 
funding for this important partnership.
    Current law prohibits federal polices for livestock 
insurance coverage. The pilot authority includes language to 
allow livestock policies to be conducted on a pilot basis. The 
Committee is aware that some sectors of the livestock industry 
have expressed concern with this proposal and recommends that 
the Secretary allow comment on pilot proposals regarding 
livestock insurance policies.

Section 202. Research and development contracting authority

    Authorizes the FCIC to establish contracts and grants on a 
competitive basis, and reimburse costs, associated with a pilot 
program or research. Requires the FCIC to contract with 
qualified persons to develop alternative rating methodologies. 
Priority is given to insurable commodities with the largest 
average acreage nationally and the lowest percentage of 
producers purchasing coverage (for the commodity). Authorizes 
$2.5 million for alternative rating methodology studies for the 
2001-2004 reinsurance years. Establishes research regarding a 
pasture, range, and forage program as a top priority. Requires 
research to determine whether plans of insurance that provide 
multi-year coverage would reduce fraud and abuse.
    The Committee believes that minority and small-scale 
farmers continue to be underserved by the Federal crop 
insurance program. Accordingly, the Committee expects that the 
Corporation will give priority to allocating resources to 
undertaking outreach and education projects to assist minority 
and small-scale farmers. Further, we expect that community-
based organizations with demonstrated experience in serving 
such farmers, as well as private sector organizations with 
similar experience, will be considered as eligible recipients 
for grants or cooperative agreements to conduct these outreach 
and education projects.
    In carrying out this section, the Committee encourages the 
FCIC to enter into contracts with qualified persons to review 
and analyze premium rates with emphasis on geographic areas 
where producer participation in buy up insurance coverage has 
been relatively low. The Committee also encourages RMA to enter 
into contracts to review and analyze premium rates for 
individual commodities with a priority given to soybeans due to 
that commodity's large national acreage.
    The Committee recommends that when reviewing methodologies 
for rating plans of insurance the Corporation should review the 
possibility of insuring the smallest farm units without premium 
rate increases.

Section 203. Choice of risk management options

    Establishment of pilot program. Requires the FCIC to 
establish a pilot program for the 2002 through 2004 reinsurance 
years in which a producer may, for each crop produced by the 
producer in an applicable year, elect to receive a risk 
management payment or a crop insurance subsidy. Only 
agricultural commodities that are insurable under Federal crop 
insurance are eligible for risk management payments. The 
Secretary of Agriculture is required to select commodities 
eligible for risk management payments in a manner that 
encourages maximum producer participation, provides for a 
mixture of program, specialty, and regional crops, and gives 
consideration to commodities with low crop insurance 
participation rates. The amount of a risk management payment in 
an applicable year depends on a producer's yield for the 
commodity for the applicable year. A producer must elect by the 
sales closing date for the agricultural commodity involved 
whether to receive a risk management payment for the commodity 
or to be eligible to receive crop insurance subsidies for 
additional or catastrophic risk protection coverage. A producer 
can receive a risk management payment in exchange for 
performing at least 2 qualifying risk management practices in 
the applicable year.
    Determination of risk management payment. The Secretary 
shall consider the producer's expenditure on the qualifying 
risk management practices obtained or used for the applicable 
year when determining the amount of the risk management payment 
for an agricultural commodity. A risk management payment may 
not exceed the amount equal to the average for all catastrophic 
risk protection policies for the previous year. Not more than 
$500 million from the Insurance Fund is authorized to carry out 
this pilot program for the 2002-2004 reinsurance years, of 
which not more than $200 million can be spent on the pilot in 
any one year. Expenses incurred by insurance companies while 
administering this pilot are to be paid from discretionary 
appropriations.
    Qualifying risk management practices. Describes the 12 
qualifying risk management practices. A producer must perform 
or obtain at least 2 of the following 12 options in each year a 
risk management payment is received. Two of the four categories 
must be represented each year.
            I. Crop insurance category
    1. Purchase an unsubsidized Federal plan of insurance or 
private crop insurance (e.g.--private crop hail) for an 
agricultural commodity.
            II. Marketing risk category
    2. Future or Option--Hedge price, revenue, or production 
risk by entering into at least one standard exchange-traded 
contract for a future or option on a principal agricultural 
commodity (crops or livestock) produced on the farm.
    3. Agricultural Trade Option--Hedge price, revenue, or 
production risk on at least 10% of the value of a principal 
agricultural commodity produced on the farm by purchasing an 
agricultural trade option.
    4. Cash Forward or Other Marketing Contract--Cover at least 
20% of the value of a principal agricultural commodity (crops 
or livestock) produced on the farm with a cash forward or other 
type of marketing contract.
    5. Marketing Through Cooperatives--Market 25% of a 
principal agricultural commodity produced through a cooperative 
that is owned by agricultural producers.
            III. Financial risk category
    6. Trust--Deposit at least 10% of the producer's payment 
under the Agricultural Market Transition Act into a FARRM 
account, or a similar tax deductible account.
    7. Agricultural Marketing and Risk Management Education--
Attend an agricultural marketing or risk management class. This 
includes, but is not limited to, a seminar or class conducted 
by a broker licensed by a futures exchange.
    8. Financial Risk Reduction--Reduce farm financial risk by 
reducing debt in an amount that reduces leverage or by 
increasing liquidity, as determined by the Secretary.
    9. Diversification--Reduce farm business risk by--(1) 
diversifying the farm's production by producing at least one 
new commodity on the farm; (2) significantly increasing the 
diversity of enterprises on the farm; (3) maintaining an 
integrated farming system with a substantial degree of 
diversification; or (4) transitioning to organic farming.
            IV. Farm resources risk category
    10. Conservation Practices--Implement conservation 
practices such as integrated pest management, nutrient 
management, conservation tillage, conservation buffers, or 
other conservation practices, as determined by the Secretary.
    11. Agricultural Conservation Management Plan--Employ a 
private consultant, including a farm manager, certified crop 
advisor, engineer, or other specialist approved by the 
Secretary, to assist a producer in developing a plan to 
mitigate financial risk associated with resource conservation 
through practices such as nutrient management, integrated pest 
management, soil erosion control, conservation buffer 
practices, soil residue management, water quantity or quality 
management, or other conservation practices that are 
appropriate for the farm, as determined by the Secretary.
    12. Agricultural Resource Improvements--Invest in the 
improvement or development of a capital land improvement to 
reduce production risk, such as irrigation management, 
watershed management structures, planting trees for windbreaks 
or water quality, soil quality management options, animal waste 
management structures, or other land improvements, as 
determined by the Secretary.
    The Committee realizes that some producers do not 
participate in the crop insurance program or believe the 
program does not serve their needs. The Committee believes that 
even if producers do not participate in crop insurance, they 
should be encouraged to undertake risk management activities 
that reduce a producer's risk and possible calls for disaster 
assistance legislation in the future.
    The 2001 crop year is not included due to the 
administrative actions necessary to enact the pilot and due to 
the Committee's desire to ensure that all commodities have 
equal opportunity to be included in each year of the pilot. The 
Committee intends and fully expects the Secretary to operate 
this pilot nationally on a commodity-by-commodity basis to 
include program, specialty, and regional crops. Payments are 
not intended to be offered on a whole farm basis. In addition, 
if the Secretary determines that a commodity will be eligible 
for risk management payments, the payments must be made 
available in all areas of the country where the selected 
commodity is insurable. In carrying out this section, the 
Committee expects the Secretary to include as many commodities 
in the pilot as possible.
    The Committee fully intends for producers to make a 
``choice'' in regards to their risk management decisions. When 
the Secretary determines a commodity is eligible for risk 
management payments, a producer must choose between receiving 
either a risk management payment or a federally subsided crop 
insurance policy, including either buy-up or catastrophic 
levels of protection. Under no circumstances does the Committee 
intend for a producer to receive both a risk management payment 
and a subsidized crop insurance policy on the same crop in the 
same year. This provision does not preclude a producer from 
purchasing an unsubsidized crop insurance policy and encourages 
the Secretary to recommend this course of action to producers 
who receive risk management payments. The Committee also 
intends for producers to be allowed to take payments on an 
eligible commodity and purchase crop insurance on all other 
crops.
    The Committee intends for payments to be available for all 
insurable crops, excluding livestock. The Committee expects the 
Secretary to develop a payment formula that is based upon and 
takes into consideration expenditures on the risk management 
practices obtained or used by the producer.
    The Committee expects the pilot program to be administered 
by the Risk Management Agency (RMA) through approved insurance 
providers and crop insurance agents. No other agency of the 
Department is to be involved in the administration of this 
pilot or any activities of the federal crop insurance program. 
Producers will be required to submit verification to ensure the 
required risk management activities have occurred for payments 
received. The Committee expects the Secretary to develop an 
adequate certification and verification process. The Secretary 
is also given clear authority by the Committee to conduct 
random audits, to ensure compliance, and to levy heavy 
penalties to any producer found to have purposely committed 
fraud in this program. The bill authorizes sufficient 
appropriations to conduct necessary administrative requirements 
of the pilot.
    With regard to agricultural conservation management plans, 
it is the Committee's intent that the producer may develop such 
a plan (not to be confused with NRCS conservation compliance 
plans) with assistance from the Natural Resources Conservation 
Service, Cooperative Extension Service, state agencies, farm 
and other non-governmental organizations, private crop 
consultants, or any other qualified technical assistance 
provider the producer chooses.

Section 204. Conforming amendments

    This section contains conforming amendments made necessary 
by sections 201-203.

                       TITLE III--ADMINISTRATION

Section 301. Board of directors of corporation

    Restructures the FCIC Board of Directors to include four 
active producers (selected from four geographic regions), one 
member active in crop insurance, one member active in 
reinsurance, the Under Secretary for Farm and Foreign 
Agricultural Services, the Under Secretary for Rural 
Development and the Chief Economist of USDA. Members to serve 
staggered 4-year terms. Requires that the Board chairperson be 
a nongovernmental member. Effective October 1, 2000, authorizes 
a staff experienced in quantitative mathematics and actuarial 
rating to assist the Board. Provides $0.5 million of mandatory 
funding in fiscal year 2001 for initial needs. The Office of 
Risk Management is required to transfer $0.5 million in 2001 
and $1 million annually thereafter to fund the staff. The 
current procedure for the Board to consider and approve 
submissions for private plans of insurance for Federal subsidy 
and reinsurance (currently in section 508(h) of this Act) is 
reformed. The reforms to the subsection (h) private submissions 
procedure articulate the standards that the Board is to apply 
to its review of the proposed products, and expedites the 
review and approval process. A private company that obtains 
approval from the Board for a new product is entitled to charge 
other approved insurance providers that want to sell the 
approved product a fee (see section 307).
    The legislative language devoted to the establishment of an 
executive director and supporting staff for the Board of 
Directors of the FCIC (the Board) reflects the sense of urgency 
that members of Congress feel regarding the need to improve the 
products and delivery of federal crop insurance. It is felt 
that for the Board to carry out its oversight duties in a 
manner that serves the best interests of American agriculture, 
a more timely and adequate support of Board activities is 
essential.
    Support of the Board needs to be timely, professional, and 
responsive. To accomplish this high level of support, it is 
observed that additional resources beyond the normal staff 
levels found in the Risk Management Agency (RMA) and 
independent of RMA, are essential for the Board to operate in 
an efficient and effective manner.
    Expectations of the executive director and staff include, 
but are not confined to, professional objective analysis of all 
materials presented for action and review by the Board, review 
of materials presented to the Board by outside organizations, 
and the timely delivery of adequate briefing materials in 
preparation for board meetings and other activities. In 
addition to adequate and timely analytical work, it is 
understood that with the guidance of the Board, the executive 
director and staff will interact and cooperate, as required, 
with other entities where this interaction is deemed essential 
to accomplishing the responsibilities of the Board. Examples of 
entities that should be interacted with on a regular basis 
include the management and staff of RMA, the members and staff 
of the Federal Crop Insurance Improvement Commission, and 
private sector organizations and firms representing the crop 
insurance industry.
    The suggested location for the executive director and staff 
is within the Office of the Chief Economist. The Chief 
Economist reports directly to the Secretary of Agriculture, and 
the language now provides for the appointment of the Chief 
Economist to the Board. The Chief Economist is presently 
responsible for several highly graded, specialized professional 
staffs, including the World Agricultural Outlook Board, the 
Office of Risk Assessment and Cost-Benefit Analysis, and Global 
Change Program Office, and the new staff would fit in well with 
the present organizational structure of the office. Cooperation 
between the Office of the Chief Economist and RMA is well 
established, and it is believed that the added resources 
devoted to the analysis of crop insurance, under the direct 
supervision of the Chief Economist, would enhance that 
cooperation.
    This section clarifies the new product approval process. 
The Committee has been disappointed with the lack of policies 
submitted by the private sector and approved by the FCIC Board 
of Directors and believes that innovation in the private sector 
has been stifled by an unfriendly regulatory process. The 
Committee intends to clarify that the Risk Management Agency's 
role in new product approval is to work as a partner with the 
private sector in a spirit that encourages a more market-driven 
program.
    By expanding the product approval process under section 
508(h), the Committee expects FCIC to implement a standard and 
equal process for approval of both privately and publicly 
developed policies. Through the administrative changes made 
under this section, the Committee expects that many of the 
innovative policies for new crop or livestock insurance that 
have come to its attention will be submitted and approved for 
sale.

Section 302. Good farming practices

    Currently, insurance coverage for losses due to negligence 
or malfeasance of the producer, failure to follow reseeding 
practices customary for the area, or the failure to follow good 
farming practices, is denied. The amendment made by this 
section clarifies that good farming practices include 
scientifically sound sustainable and organic farming practices.
    The Committee is aware of anecdotal reports from producers 
utilizing sustainable or organic farming systems that describe 
discriminatory treatment resulting from narrow definitions of 
``good farming practices'' that fail to adequately recognize 
non-conventional farming methods. By clarifying that ``good 
farming practices'' includes ``scientifically sound sustainable 
and organic farming practices,'' the Committee intends for the 
Department to develop guidelines that will minimize any such 
future discrimination.
    The Committee also encourages the Department to continue 
and increase efforts to involve crop insurers, lenders, and 
other farm-related businesses in educational and training 
activities exploring alternative farming systems and 
opportunities.

Section 303. Sanctions for program compliance and fraud

    A producer that provides false or misleading information 
about a crop insurance policy may be assessed a $10,000 civil 
penalty for each violation, debarred from all USDA financial 
assistance programs for up to 5 years, or both, depending on 
the severity of the violation. Agents, loss adjusters, and 
approved insurance providers that provide false or misleading 
information about a policy or the administration of a policy or 
claim may be subject to civil fines up to $10,000 per 
violation, and debarred from participating in insurance 
programs under this Act for up to 5 years, depending on the 
severity of the violation. The same penalties may apply to 
agents, loss adjusters, and approved insurance providers who 
have recurrent compliance problems.

Section 304. Oversight of agents and loss adjusters

    Requires the Corporation to develop procedures for annual 
reviews of agents and loss adjusters by the approved insurance 
provider, and to consult with the approved insurance provider 
about each annual evaluation.
    Clearly, the presence of fraud and abuse in the crop 
insurance program is a major concern to the Committee. FCIC 
should use the tools provided in sections 303 and 304 to 
improve program compliance and oversight and to punish those 
determined to have committed fraud and misrepresentation. 
However, the Committee stresses that it is often the nature of 
the insurance policy that is offered and the circumstances 
under which producers and agents can benefit from that policy 
that leads to perceived instances of fraud and abuse. 
Substantial and overly ambitious penalties will often not 
remedy abuses that are natural outgrowths of poorly developed 
and implemented plans of insurance. The Committee strongly 
urges FCIC to develop a meaningful and thorough program of 
oversight for agents and loss adjusters. The Committee also 
urges FCIC, in consultation with FSA, to improve its oversight 
of the development of insurance policies in order to prevent 
the issuance of policies that, on their face, defy common-sense 
application in particular growing areas and invite what is 
often deemed to be ``abuse.''

Section 305. Adequate coverage for agricultural commodities

    The phrase `adequately served' is defined in this section 
as meaning having a participation rate that is at least 50% of 
the national average participation rate. The Board is required 
to review available plans of insurance to determine if each 
state is adequately served, and then report its findings to 
Congress. The Board is further directed to make recommendations 
to RMA about how participation can be increased in states that 
are not adequately served.
    In order for the federal crop insurance program to serve 
all regions equitably, this provision requires the Board of the 
FCIC to conduct an annual review to assess whether available 
plans of insurance serve each commodity adequately. The study 
should specifically consider the coverage of specialty crops, 
and states with low participation like Pennsylvania.
    The Committee fully expects that the annual study submitted 
to Congress will make recommendations to develop, or contract 
for the development of, insurance plans to reach the 
commodities that are found to be underserved. For the purpose 
of this provision, a commodity is considered to be underserved 
if the state has a participation percentage that is less than 
50 percent of the national average. The goal of these annual 
reviews is to develop recommendations for the consideration of 
the Risk Management Agency and Congress to achieve the goal of 
adequate coverage.
    The Committee is concerned that crop insurance coverage is 
currently not available for continuous crop wheat in Morton, 
Stanton, Stevens, Grant, Seward, Haskell, Finney, Kearney, 
Hamilton, Greeley, Wallace, Wichita, Scott, and Lane counties 
in Kansas. The Committee fully expects the establishment of 
coverage for this area. This problem is particularly acute 
since similar coverage is available in the contiguous counties 
of Colorado and Oklahoma.

Section 306. Records and reporting

    Requires the FCIC, the Farm Service Agency, and State and 
local committees of USDA to coordinate record keeping and 
reporting requirements for crop insurance and the Noninsured 
Crop Disaster Assistance Program.
    To meet the requirements of this section, the Secretary is 
directed to use the Center for Agribusiness Excellence at 
Tarleton State University and the Center for Agribusiness and 
Agrotechnologies at Bradley University. The Manager's intent is 
that the Secretary, using FY2000 funds, contract with these two 
Centers for management and development of a system to implement 
the requirements of this section. These funds would be used to 
improve program compliance and effectiveness and eliminate 
fraud through the use of information technologies, specifically 
data warehousing and data mining technologies.
    The Committee intends for insured producers participating 
in the crop insurance program to provide records regarding crop 
acreage, acreage yields, and production to the Secretary. 
Producers currently report crop and yield information to both 
FCIC and FSA. Inconsistent data have been reported to FCIC and 
FSA and benefits have been paid on inconsistent data. The 
Committee intends for insured producers to report crop acreage, 
yield, production and other records in a manner that may be 
easily reconciled, ensuring program and insurance benefits are 
paid on consistent data. The records collected under this 
authority should be available at no cost to all federal and 
state agencies, including state subdivisions, for use in 
carrying out activities, including assisting state 
organizations in carrying out general agricultural programs 
that have a federal component (for example, boll weevil 
eradication activities). The Committee intends for producers 
requesting noninsured crop disaster assistance program benefits 
to annually file, crop acreage reports, acreage yields and 
production for each crop eligible for assistance. The annual 
collection of this information should enhance information 
available for the development of future insurance policies. As 
a result of producers filing annual reports, USDA will have the 
information provided at a time that insures appropriate program 
oversight and integrity.

Section 307. Fees for plans of insurance

    Establishes a system of fees that an approved insurance 
provider must pay to a company that developed the policy if the 
provider wants to sell the policy through Federal crop 
insurance.

Section 308. Limitation on double insurance

    Prohibits the purchase of a policy of insurance for more 
than 1 crop for the same acreage in a year, except where there 
is an established history of double-cropping on the acreage.
    The Committee recognizes that it is a legitimate farming 
practice to double-crop certain crops in specific regions of 
the country. However, unless the outlined exceptions are 
applicable, it is the Committee's intention to limit coverage 
to catastrophic risk protection on the additional crop.
    Since it is possible for the same crop to be planted on a 
farm and subject to different plans of insurance, the Committee 
intends that FCIC ensure the crop acreage and production of the 
same crop that is insured under different plans of insurance is 
separately reported, maintained, and identified. It is not the 
Committee's intention that the acreage or production may be 
prorated between the same crop with different plans of 
insurance.
    It is the intention of the Committee that in determining 
when the additional agricultural commodity is customarily 
double-cropped in the area with the first agricultural 
commodity, that FCIC consider whether it is customary to 
double-crop the acreage considering the farming and irrigation 
practices applicable to the crops in the area.
    The Committee intends that to qualify for the double-
cropping exception, both the first and additional agricultural 
commodities be normally harvested within the same crop year on 
the same acreage. The disposition of the first agricultural 
commodity, including the loss or failure of such commodity, 
should not affect the determination of whether the first and 
additional crop qualifies for the double-cropping exception.
    The Committee expects RMA to resolve a problem with double 
cropped soybeans that continues to frustrate producers in 
Illinois. Producers who plant a three year rotation of corn, 
soybeans, then wheat followed by no-till soybeans in the same 
year find themselves ineligible for crop insurance on the no-
till soybeans. RMA's current interpretation is that a producer 
may purchase crop insurance on the soybeans only if he or she 
has a 3-year crop history of only double cropped soybeans. The 
Committee urges RMA to resolve this problem expeditiously and 
in a way that continues to encourage producers to follow best 
management practices.

Section 309. Specialty crops

    Consolidates all authorities regarding specialty crops in a 
new section 523 of this Act. Authorizes the FCIC specialty 
crops coordinator to make competitive grants for research, 
reimburse research costs, or enter into contracts for the 
development of specialty crop policies. Authorizes the use of 
up to $20 million annually for the 2001-2004 reinsurance years 
to create partnerships with public and private entities with 
demonstrated abilities for developing and implementing 
specialty crop risk management options. Requires the specialty 
crops coordinator to study the feasibility of offering cost-of 
production, adjusted gross income, quality-based policies, or 
an intermediate program with higher coverage than catastrophic 
risk protection, for specialty crops. For the 2001-2004 
reinsurance years, the sales closing date for obtaining 
coverage for a specialty crop may not expire prior to 120 days 
after the release of materials on new plans of insurance for 
specialty crops. A producer of a specialty crop may purchase 
new or additional insurance coverage for the crop at any time 
during the insurance year, subject to a 30 day waiting period 
for verification.

Section 310. Federal crop insurance improvement commission

    A new ad hoc commission is established, comprised of 4 
Government officials and 5 persons from the private insurance 
industry. The Commission is to review several issues involving 
Federal crop insurance, such as:
          The extent to which approved insurance providers 
        should bear the risk of loss for federally subsidized 
        crop insurance.
          Whether the Corporation should continue to reinsure 
        coverage written by approved insurance providers; or 
        provide assistance in another form, such as by acting 
        as an excess insurer.
          The extent to which development of new insurance 
        products should be undertaken by the private sector, 
        including development of insurance products for 
        specialty crops.
          Methods to improve the Federal Crop Insurance 
        program, such as delivery of plans of insurance, loss 
        adjustment procedures, the establishment of premiums, 
        and compliance.
    The Commission is to file a final report with Congress that 
contains its findings within 2 years. $4,000,000 annually is 
authorized from the Insurance Fund to fund the Commission. 
Authority for the Commission terminates on the date that is 60 
days after the filing of the final report, or September 30, 
2003, whichever is earlier.

Section 311. Highly erodible land and wetland conservation

    This section reestablishes conservation compliance 
(compliance with sodbuster and swampbuster requirements) as a 
prerequisite for subsidy under either a plan of catastrophic 
risk protection or additional coverage.
    In reapplying the conservation requirements to crop and 
revenue insurance coverage, and in applying them to the new 
risk management payments, it is the Committee's intent that the 
Department implement these requirements in the exact same 
manner in which it currently applies them to other USDA 
programs. The Committee encourages the Department to inform 
producers of the requirements as quickly as possible, 
especially those who may not currently be implementing approved 
conservation plans.

          title iv--Effective dates; termination of authority

Section 401. Effective dates

    Establishes when various provisions of this Act become 
effective. Section 401(c)(2), voids the FCIC's Board of 
Director's decision to revise the terms of the 1999 Crop 
Revenue Coverage policy for durum wheat.
    In February, 1999, the Risk Management Agency (RMA) issued 
a manager's bulletin that revised the terms of the Crop Revenue 
Coverage (CRC) policy for durum wheat. The Committee voids this 
decision because the policy was revised after the contract 
change date had passed, after many farmers had relied on the 
policy, and without publishing the changes in the Federal 
Register, which is required by law. The Committee believes 
allowing the agency's action to stand would fundamentally 
undermine farmers' confidence in the crop insurance system. 
Farmers sued RMA and won in federal court, but this decision 
has been appealed by the Federal government. 401(c)(2) would 
provide these farmers with legal certainty, regardless of the 
outcome of any appeal, about the disputed terms of last year's 
policy. Most importantly, the provision confirms the 
Committee's endorsement of a reliable crop insurance system 
with policies that farmers can trust will not be changed after 
the government's change date. The Committee believes that once 
RMA offers a policy, it cannot unilaterally change the policy's 
terms after the change date. RMA's action surrounding this 
policy removes any certainty that producers can count on 
reliable, stable crop insurance policies. Even though the 
agency lost in federal court, RMA currently believes it can 
unilaterally downgrade and change any policy at any time. The 
Committee strongly disagrees. 401(c)(2) signals to RMA that it 
can't do to soybean, cotton, corn, rice or any other producers 
what it did to durum wheat farmers. However, the legislative 
effect of 401(c)(2) is quite limited. The provision does not 
restrict RMA's ability to broaden the terms of policies. RMA 
would always be able to make administrative changes to benefit 
farmers. Although it sends broad messages to protect other 
commodities, the provision would actually affect only last 
year's durum wheat CRC policy. It makes no changes in existing 
or future policies on this or any other crop. The Committee 
urges RMA to release the funds in the court's escrow account as 
soon as possible.

Section 402. Termination of authority

    Terminates as of September 30, 2004, all increased funding 
and associated program reforms applicable to the 2001-2004 
reinsurance years for crop insurance and risk management 
payments.

            III. Legislative History and Votes in Committee

    In 1999, the Committee held four hearings and a farm risk 
management roundtable to prepare for this legislation. 
Witnesses representing farm groups, agricultural lenders, and 
the crop insurance industry were, for the most part, in strong 
agreement that this legislation should increase premium 
subsidies to make federal crop and revenue insurance more 
affordable to farmers, particularly at the higher levels of 
coverage. Farm group witnesses from Great Plains and Midwestern 
states also supported equalizing premium subsidy rates between 
revenue and yield-only insurance coverage. While there was 
broad support for raising premium subsidies, some agricultural 
economist witnesses cautioned that such increases would provide 
the largest benefit to producers in high yield-risk regions and 
might encourage farmers to expand crop production which could, 
in turn, reduce farm prices.
    Many farm group witnesses, particularly those from Great 
Plains states, supported changes to the federal crop insurance 
program's actual production history (APH) system which is used 
to establish a producer's insurable yield for each year. These 
farm group witnesses wanted changes to eliminate reductions in 
APH yields caused by successive years of bad weather beyond a 
producer's control. Other farm group and crop insurance 
industry witnesses, who credited the APH system with helping to 
improve the program's actuarial soundness, suggested modest 
rather than large changes in APH procedures. Several farm group 
witnesses supporting authorizing insurance coverage based upon 
cost of production.
    Farm group witnesses from southern states raised concerns 
about the level of premium rates faced by producers of cotton 
and other commodities grown in the region. They strongly 
supported legislation requiring the FCIC to develop alternative 
rating methodologies. These witnesses also supported changing 
prevented planting rules, particularly with respect to the 
planting of a substitute crop, increasing the insurance 
program's flexibility to make it easier for farmers to use crop 
rotations or to switch to alternative crops, and improving 
program oversight to reduce the potential for fraud and abuse. 
An April 1999 hearing focused on compliance issues raised by a 
report issued by the Department of Agriculture's Office of the 
Inspector General. Farm group witnesses from southern states 
generally supported increased premium subsidies for yield 
coverage.
    Witnesses representing specialty crop producers supported 
an end to the requirement of an area loss before disaster 
assistance can be made to producers of non-insurable crops 
through the noninsured crop disaster assistance program (NAP). 
Specialty crop growers also testified in support of focused 
research, development, and contracting authority to speed the 
development and implementation of insurance policies designed 
to meet specialty crop producers' risk management needs.
    Farm group and crop insurance industry witnesses supported 
changes to the FCIC Board of Directors to allow for more 
private sector input and more independent authority, 
particularly with respect to the approval of new crop insurance 
products and certain other decisions. These witnesses also 
supported creating incentives and streamlining the Federal Crop 
Insurance Act's section 508(h) approval process to encourage 
the development and implementation of new private sector 
developed insurance products. Some witnesses supported 
extending federal insurance coverage to livestock producers. 
Others supported further development of the concept of insuring 
revenue on a whole farm rather than on a commodity-by-commodity 
basis. Farmer-owned cooperatives expressed support for 
legislation that would allow them to sell Federal crop 
insurance policies to their members. Private crop insurance 
agents strongly opposed this idea.
    On March 4, 1999, Senator Roberts introduced S. 529, the 
Crop Insurance for the 21st Century Act with Agriculture 
Committee Senators Baucus, Conrad, Craig, Daschle, Grassley, 
Harkin, Johnson and Kerrey as cosponsors. S. 529 raised premium 
subsidy rates for yield and revenue coverage, particularly at 
the highest levels of coverage, allowed for APH adjustments for 
multi year disasters, authorized livestock insurance, and 
provided for numerous other reforms of the Federal crop 
insurance program. On March 16, 1999, Senators Baucus and Craig 
introduced S. 629, the Crop Insurance Improvement Act of 1999 
which, among other things, eliminated current law's requirement 
of an area-wide loss before producers of noninsurable crops can 
qualify for disaster assistance payments under the NAP.
    On September 13, 1999 Senator Roberts introduced S. 1580 
which incorporated S. 529, except that the provision 
authorizing insurance coverage for livestock was limited to a 
pilot project. S. 1580 also included the Baucus and Craig 
bill's NAP provision, several provisions to encourage the 
development of specialty crop insurance products from Senator 
Graham's S. 1401, the Specialty Crop Insurance Act of 1999, and 
a new provision intended to encourage the Risk Management 
Agency to increase crop insurance participation in low 
participation states such as Pennsylvania.

                         AGRICULTURE COMMITTEE

    With the addition of Senator Santorum, a total of ten 
Agriculture Committee Senators cosponsored S. 1580.
    Senator Cochran introduced S. 1108, the Crop Insurance 
Equity Act of 1999, with Agriculture Committee Senators 
Coverdell, Helms, and Lincoln as cosponsors on May 24, 1999. S. 
1108 increased premium subsidy rates to 50% at all buyup levels 
for yield-only coverage, but not revenue coverage. Among other 
provisions, S. 1108 required RMA to develop alternative premium 
rates, reformed prevented planting rules, made APH adjustments 
for multi year disasters, increased catastrophic (CAT) coverage 
from 50% of normal yield and 55% of normal price (50/55) to 60/
70, authorized cooperative associations to sell crop insurance 
to their producer members, and limited private insurer 
administrative expense and underwriting gains on catastrophic 
policies.
    Senator Lugar introduced S. 1666, the Farmers' Risk 
Management Act of 1999 on September 29, 1999 with cosponsors 
Senators Helms, McConnell, and Fitzgerald. Senator Leahy became 
a cosponsor on October 14, 1999 and Senator Cochran became a 
cosponsor on November 11, 1999. Instead of raising crop 
insurance premium subsidies, S. 1666 directed the Secretary of 
Agriculture to offer producers with a history of insurable crop 
production, annual risk management payments for the four crops 
years covering 2001 through 2004. In exchange for a payment, 
the bill required producers to use or obtain at least two of 
eight possible risk management practices each year. These 
practices included the purchase of Federal crop insurance, 
forward contracting, hedging with an exchange-traded future or 
option contract, depositing a portion of the payment into a 
tax-deferred FARRM account, and reducing debt. Farmers who 
elected to receive a risk management payment were also eligible 
for current law premium subsidies on purchases of federal crop 
insurance. The bill provided $5.1 billion to fund risk 
management payments over four years which was expected to 
result in an annual payment rate of 1.5 percent of historical 
production value of insurable crops based on 1997-1999 average 
FCIC established market prices. The bill included several crop 
insurance reform provisions and authorized whole farm revenue 
and product innovation and competition pilot projects. The bill 
also limited the potential for private insurer underwriting 
gains and losses on CAT policies.

                             Committee Vote

    The Committee met to markup risk management/crop insurance 
legislation and other matters on March 2, 2000. Senators 
present were Lugar, Cochran, McConnell, Roberts, Grassley, 
Santorum, Fitzgerald, Harkin, Leahy, Conrad, Kerrey, Daschle, 
Johnson, Baucus, and Lincoln.
    Chairman Lugar then offered a three-year national choice 
bill covering the 2001 through 2003 crop years. Under the 
choice bill, all insurable (as of the end of 1999) commodities, 
wherever grown, excluding nursery crops and livestock were 
eligible for risk management payments. For each applicable 
year, the bill gave farmers a choice between a 1.3 percent 
annual risk management payment or an increased crop insurance 
premium subsidy. Farmers who chose a risk management payment in 
an applicable year remained eligible for current law crop 
insurance subsidy rates, excluding any special USDA producer 
premium discount. The crop insurance subsidy rates available 
under the choice bill are summarized below:

                  CROP INSURANCE PREMIUM SUBSIDY RATES UNDER THE FARMER CHOICE BILL (PERCENT)*
----------------------------------------------------------------------------------------------------------------
                                                             MPCI buyup coverage level
                                 -------------------------------------------------------------------------------
                                   50/100    55/100    60/100    65/100    70/100    75/100    80/100    85/100
----------------------------------------------------------------------------------------------------------------
Farmer chooses higher crop            55.0      50.0      50.0      50.0      50.0      50.0      36.9      27.6
 insurance subsidy..............
Farmer chooses RM payment:
    Yield-only insurance policy.      55.0      46.1      37.8      41.7      31.9      23.5      17.3      13.0
    CRC (average) revenue             42.3      35.5      29.1      32.1      24.5      18.1      13.3      10.0 
     policy**...................
----------------------------------------------------------------------------------------------------------------
*Subsidy rate per dollar of risk-based premium.
**On average at the same level of coverage, the total premium for Crop Revenue Coverage (CRC) is about 30%
  greater than for yield-only coverage.


    The Chairman's mark also included reforms to the Federal 
crop insurance program and NAP that were supported by a broad 
consensus of Committee Senators. The choice bill also included 
a provision that would have authorized crop insurance sales by 
producer-owned cooperatives to their farmer members under 
certain conditions. The Congressional Budget Office scored the 
national choice bill with mandatory budget authority of $5,809 
million and outlays of $5,850 million over fiscal years 2001-
2004. Of the total budget authority increase, CBO estimated 
$2,940 million for risk management payments, $2,533 million for 
increased crop insurance spending, primarily due to increased 
premium subsidies, and $336 million due to NAP reforms.
    Senator Roberts moved to adopt a Roberts/Kerrey substitute 
amendment to the Chairman's mark based largely upon provisions 
contained in S. 1580. The substitute amendment included S. 
1580's inverted subsidy structure with a 60 percent subsidy 
rate at the 50/100 level, NAP and crop insurance program 
reforms supported by a broad consensus of Committee Senators, 
and $500 million for a three-year risk management payment pilot 
project covering the 2002 through 2004 crops. The substitute 
amendment did not include the cooperative selling provision 
that was part of the Chairman's Mark. Following debate, the 
Committee approved the Roberts-Kerrey substitute amendment on a 
10-8 vote. Senators Roberts, Grassley, Craig, Santorum, Harkin, 
Conrad, Daschle, Kerrey, Johnson, and Baucus voted for the 
substitute amendment and Senators Lugar, Cochran, McConnell, 
Helms, Coverdell, Fitzgerald, Leahy, and Lincoln voted against 
the substitute amendment.
    Senator Lincoln then offered the cooperative selling 
provision as an amendment, but after debate, withdrew her 
amendment. A Harkin amendment which restored conservation 
compliance as an eligibility requirement for Federal crop 
insurance was adopted unanimously. The Committee voted by voice 
vote to report the bill. The Committee unanimously approved a 
motion to authorize Committee staff to make technical and 
conforming changes.

                    IV. Regulatory Impact Evaluation

    In compliance with paragaph 11(b) of rule XXVI of the 
standing rules of the Senate, the Committee makes the following 
evaluation of the regulatory impact that would be incurred in 
carrying out the Risk Management for the 21st Century Act, as 
reported.
    This legislation primarily constitutes a reform of current 
provisions of the Federal crop insurance program authorized by 
the Federal Crop Insurance Act and the noninsured crop 
assistance program (NAP) authorized by the Agricultural Market 
Transition Act. The Federal subsidy for crop insurance premiums 
is also increased.
    This legislation does not represent a regulatory measure 
that imposes a regulatory mandate that must be adhered to by 
discrete persons in the economy absent their voluntary 
participation. Persons that voluntarily participate in the 
Federal crop insurance program or NAP, and who receive benefits 
from the programs, will be required to comply with regulatory 
requirements. Such persons include agricultural producers that 
purchase crop insurance or NAP coverage, or crop insurance 
companies or agents that administer the programs. Because 
participation is voluntary, clearly the financial benefits of 
participation must exceed financial costs or regulatory burdens 
imposed by this legislation.
    Any Government program, which provides financial or other 
assistance, in the interest of fiscal restraint, must have 
clearly defined regulatory guidelines and paperwork 
requirements to insure that the taxpayer's money is 
conservatively, efficiently and effectively utilized.
    While the goal of the reforms and increased subsidies is to 
increase the percentage of agricultural production and total 
acreage used for agricultural production that is covered under 
these programs, it is impractical to estimate the number of 
persons that would be affected by the regulatory requirements. 
Except for insurance companies and agents, participation is 
measured in terms of agricultural production and total acreage 
used for agricultural production covered by crop insurance or 
NAP.
    Safeguards exist in both programs to preserve the privacy 
of persons and the confidentiality of information concerning 
them.

                      V. Budgetary Impact of Bill


                                         S.      , RISK MANAGEMENT FOR THE 21st CENTURY ACT PRELIMINARY (Not Official) ESTIMATES: SUBJECT TO CHANGE \1\
                                                                 [Change In Budget Authority & Outlays (In millions of dollars)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                        Fiscal year
                        Provision                         --------------------------------------------------------------------------------------------------------------------------------------
                                                             2000     2001      2002    2003    2004      2005      2006      2007      2008      2009      2010      01-05     01-10     01-04
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
103--New Premium Subsidy %: 60, 45, 45, 50, 50, 55, $@75,
 $@75; Coverage at 5% increments only \2\
    Budget authority.....................................        0      952       988   1,03    1,078         0         0         0         0         0         0     4,059     4,059     4,059
                                                                                         1
    Outlays..............................................        0      464       951   1,01    1,054       556        20         0         0         0         0     4,039     4,059     3,483
                                                                                         4
103--Allow Full Prem Sub for 508(h) Rev insur.:
    Budget authority.....................................        0      105       108   114       122         0         0         0         0         0         0       449       449       449
    Outlays..............................................        0       46       103   111       117        69         3         0         0         0         0       446       449       377
103--Allow Full Prem Sub for other 508(h:
    Budget authority.....................................        0       57        63   72         86         0         0         0         0         0         0       278       278       278
    Outlays..............................................        0       28        68   67         78        45         2         0         0         0         0       278       278       231
102--Prevented Planting:
    Budget authority.....................................        0        7         7    7          7         0         0         0         0         0         0        28        28        28
    Outlays..............................................        0        4         7    7          7         3         0         0         0         0         0        28        28        25
105--Multiyear DisasterAPH Adjustment:
    Budget authority.....................................        0       39        40   41         43         0         0         0         0         0         0       163       163       163
    Outlays..............................................        0       13        39   40         42        29         0         0         0         0         0       163       163       134
106--NAP amendments:
    Budget authority.....................................        0      107       110   118       123         0         0         0         0         0         0       458       458       458
    Outlays..............................................        0       56       139   115       121        59       (32)        0         0         0         0       490       458       431
201--Research & Pilot Programs:
    Budget authority.....................................        0       20        40   60         80         0         0         0         0         0         0       200       200       200
    Outlays..............................................        0       10        30   50         70        38         2         0         0         0         0       198       200       160
202--Alternative Rating Methodologies:
    Budget authority.....................................        0        1         1    0          0         0         0         0         0         0         0         2         2         2
    Outlays..............................................        0        0         1    1          0         0         0         0         0         0         0         2         2         2
203--Choice of Risk Management Options:
    Budget authority.....................................        0        0       167   167       166         0         0         0         0         0         0       500       600       600
    Outlays..............................................        0        0       167   167       166         0         0         0         0         0         0       500       600       500
301--Board of Directors:
    Budget authority.....................................        0        1         0    0          0         0         0         0         0         0         0         1         1         1
    Outlays..............................................        0        1         0    0          0         0         0         0         0         0         0         1         1         1
308--Limitation on Double Insurance:
    Budge authority......................................        0      (29)      (30)  (33)      (33)      (33)      (36)      (38)      (39)      (42)      (44)     (158)     (357)     (125)
    Outlays..............................................        0      (15)      (29)  (32)      (33)      (33)      (34)      (37)      (39)      (41)      (43)     (142)     (336)     (109)
309--Specially Crops--Closing Dates:
    Budget authority.....................................        0       42        43   44         46         0         0         0         0         0         0       175       175       175
    Outlays..............................................        0       20        41   44         45        23         2         0         0         0         0       173       175       150
309--Specialty Crops--Research & Dev. Other:
    Budge authority......................................        0       20        20   20         20         0         0         0         0         0         0        80        80        80
    Outlays..............................................        0        9        20   20         20        11         0         0         0         0         0        80        80        69
310--Crop Insurance Commission:
    Budget authority.....................................        0        5         5    5          0         0         0         0         0         0         0        15        15        15
    Outlays..............................................        0        2         5    5          3         0         0         0         0         0         0        15        15        15
401--Raise CRC Price Guarantee:
    Budget authority.....................................       20        0         0    0          0         0         0         0         0         0         0         0         0         0
    Outlays..............................................       20        0         0    0          0         0         0         0         0         0         0         0         0         0
    Total:
        Budget authority.................................       20    1,327     1,572   1,64    1,738       (33)      (36)      (38)      (39)      (42)      (44)    6,250     6,051     6,283
                                                                                         6
        Outlays..........................................       20      638     1,532   1,60    1,680       800       (37)      (37)      (39)      (41)      (43)    6,269     6,072    5,469
                                                                                         9
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Preliminary estimate based on draft version NEDOO.058, CBO will need to see final bill and report language before preparing a final estimate.
\2\ Based on subsidies for coverage at 5% increments, with subsidy percentages determined by coverage level regardless of price election.

                      VI. Changes in Existing Law

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made in 
the bill, as reported, are shown as follows: (1) Existing law 
that is proposed to be terminated is enclosed in black 
brackets; (2) New material is printed in italic; and (3) 
Existing law in which no change is proposed is shown in roman 
font or by * * *.

                        AGRICULTURAL ACT OF 1938


                  TITLE V. FEDERAL CROP INSURANCE ACT


SEC. 501. SHORT TITLE AND APPLICATION OF OTHER PROVISIONS.

    This title may be cited as the Federal Crop Insurance Act.

           *       *       *       *       *       *       *


SEC. 505. MANAGEMENT OF CORPORATION.

    [(a) The management of the Corporation shall be vested in a 
Board subject to the general supervision of the Secretary. The 
Board shall consist of the manager of the Corporation, the 
Under Secretary responsible for the Federal crop insurance 
program, one additional Under Secretary of Agriculture (as 
designated by the Secretary of Agriculture), one person 
experienced in the crop insurance business who is not otherwise 
employed by the Federal Government, and three active farmers 
who are not otherwise employed by the Federal Government. The 
Board shall be appointed by, and hold office at the pleasure 
of, the Secretary. The Secretary shall not be a member of the 
Board. The Secretary, in appointing the three active farmers 
who are not otherwise employed by the Federal Government, shall 
ensure that such members are policy holders and are from 
different geographic areas of the United States, in order that 
diverse agricultural interests in the United States are at all 
times represented on the Board.]
    (a) Board of Directors.--
          (1) In general.--The management of the Corporation 
        shall be vested in a Board of Directors, subject to the 
        general supervision of the Secretary.
          (2) Composition.--The Board shall consist of--
                  (A) 4 members who are active agricultural 
                producers with or without crop insurance, with 
                1 member appointed from each of the 4 regions 
                of the United States (as determined by the 
                Secretary);
                  (B) 1 member who is active in the crop 
                insurance business;
                  (C) 1 member who is active in the reinsurance 
                business;
                  (D) the Under Secretary for Farm and Foreign 
                Agricultural Services;
                  (E) the Under Secretary for Rural 
                Development; and
                  (F) the Chief Economist of the Department of 
                Agriculture.
          (3) Appointment and terms of private sector 
        members.--The members of the Board described in 
        subparagraphs (A), (B), and (C) of paragraph (2)--
                  (A) shall be appointed by, and hold office at 
                the pleasure of, the Secretary;
                  (B) shall not be otherwise employed by the 
                Federal Government;
                  (C) shall be appointed to staggered 4-year 
                terms, as determined by the Secretary; and
                  (D) shall serve not more than 2 consecutive 
                terms.
          (4) Chairperson.--The Board shall select a member of 
        the Board described in subparagraph (A), (B), or (C) of 
        paragraph (2) to serve as Chairperson of the Board.
          (5) Office of risk management.--The Office of Risk 
        Management shall provide assistance to the Board in 
        developing, reviewing, and recommending--
                  (A) new plans of insurance and pilot projects 
                under this title that are proposed by the 
                Office or by a private insurance provider;
                  (B) terms of the Standard Reinsurance 
                Agreement;
                  (C) rates for plans of insurance under this 
                title; and
                  (D) other issues involved in the 
                administration of Federal crop insurance, as 
                requested by the Board.
          (6) Executive director; staff.--
                  (A) Executive director.--An executive 
                director appointed by the Secretary, with the 
                concurrence of the Board, shall--
                          (i) assist the Board, as provided in 
                        subparagraph (C); and
                          (ii) report to the Secretary.
                  (B) Staff.--
                          (i) In general.--A staff of 4 
                        individuals appointed by the Executive 
                        Director shall report to the Executive 
                        Director.
                          (ii) Qualifications.--An individual 
                        described in clause (i) (except the 
                        Executive Director) shall be 
                        knowledgeable and experienced in 
                        quantitative mathematics and actuarial 
                        rating.
                  (C) Functions.--The Executive Director and 
                staff appointed under this paragraph shall--
                          (i) assist the Board in reviewing and 
                        approving policies and materials with 
                        respect to plans of insurance 
                        authorized or submitted under section 
                        508, 522, or 523;
                          (ii) provide at least monthly reports 
                        to the Board on crop insurance issues, 
                        which shall be based on comments 
                        received from producers, approved 
                        insurance providers, and other sources 
                        that the Executive Director and staff 
                        consider appropriate;
                          (iii) review policies and materials 
                        with respect to--
                                  (I) subsidized plans of 
                                insurance authorized under 
                                section 508; and
                                  (II) unsubsidized plans of 
                                insurance submitted to the 
                                Board under section 508(h);
                          (iv) make recommendations to the 
                        Board with respect to approval of the 
                        policies and materials, including 
                        recommendations with respect to the 
                        disapproval of any policies and 
                        materials that contain terms or 
                        conditions that promote fraud;
                          (v) make recommendations to the Board 
                        to encourage cooperation between United 
                        States attorneys, the Corporation, and 
                        approved insurance providers to 
                        minimize fraud in connection with an 
                        insurance plan or policy under this 
                        title;
                          (vi) review and make recommendations 
                        to the Board with respect to 
                        methodologies for rating plans of 
                        insurance under this title; and
                          (vii) perform such other functions as 
                        the Board considers appropriate.
                  (D) Funding.--
                          (i) Insurance fund.--From amounts in 
                        the insurance fund under section 
                        516(c)(1), effective for fiscal year 
                        2001, $500,000 shall be available to 
                        pay the salaries and expenses of the 
                        Executive Director and staff appointed 
                        under this paragraph.
                          (ii) Salaries and expenses.--Subject 
                        to the availability of appropriations, 
                        the Risk Management Agency shall 
                        transfer $500,000 for fiscal year 2001, 
                        and $1,000,000 for each subsequent 
                        fiscal year, at the beginning of the 
                        fiscal year to the Executive Director 
                        for the salaries and expenses of the 
                        Executive Director and staff appointed 
                        under this paragraph.

           *       *       *       *       *       *       *


SEC. 506. GENERAL POWERS.

           *       *       *       *       *       *       *


    (h) Data Collection.--[The Corporation] ``(1) In general._
The Corporation shall assemble data for the purpose of 
establishing sound actuarial bases for insurance on 
agricultural commodities.
      (2) Coordination and use of records and reports.--
          (A) Coordination.--The Secretary shall ensure that 
        recordkeeping and reporting requirements under this 
        title and section 196 of the Agricultural Market 
        Transition Act (7 U.S.C. 7333) are coordinated by the 
        Corporation and the Farm Service Agency--
                  (i) to avoid duplication of records and 
                reports;
                  (ii) to streamline procedures involved with 
                the submission of records and reports; and
                  (iii) to enhance the accuracy of records and 
                reports.
          (B) Use.--Records submitted under this title and 
        section 196 of the Agricultural Market Transition Act 
        (7 U.S.C. 7333) shall be available to agencies and 
        local offices of the Department, appropriate State and 
        Federal agencies and divisions, and approved insurance 
        providers for use in carrying out this title, that 
        section, and other agricultural programs and related 
        responsibilities.
    [(n) Penalties.--
          [(1) False information.--If a person willfully and 
        intentionally provides any false or inaccurate 
        information to the Corporation or to any insurer with 
        respect to an insurance plan or policy under this 
        title, the Corporation may, after notice and an 
        opportunity for a hearing on the record--
                  [(A) impose a civil fine of not to exceed 
                $10,000 on the person; and
                  [(B) disqualify the person from purchasing 
                catastrophic risk protection or receiving 
                noninsured assistance for a period of not to 
                exceed 2 years, or from receiving any other 
                benefit under this title for a period of not to 
                exceed 10 years.
          [(2) Assessment of penalty.--In assessing penalties 
        under this subsection, the Corporation shall consider 
        the gravity of the violation.]
    (n) Sanctions for Program Noncompliance and Fraud.--
          (1) False information.--A producer, agent, loss 
        adjuster, approved insurance provider, or other person 
        that willfully and intentionally provides any false or 
        inaccurate information to the Corporation or to an 
        approved insurance provider with respect to a policy or 
        plan of insurance under this title may, after notice 
        and an opportunity for a hearing on the record, be 
        subject to 1 or more of the sanctions described in 
        paragraph (3).
          (2) Compliance.--A person may, after notice and an 
        opportunity for a hearing on the record, be subject to 
        1 or more of the sanctions described in paragraph (3) 
        if the person is--
                  (A) a producer, agent, loss adjuster, 
                approved insurance provider, or other person 
                that willfully and intentionally fails to 
                comply with a requirement of the Corporation; 
                or
                  (B) an agent, loss adjuster, approved 
                insurance provider, or other person (other than 
                a producer) that willfully and intentionally 
                fails to comply with a requirement of the 
                Standard Reinsurance Agreement.
          (3) Authorized sanctions.--If the Secretary 
        determines that a person covered by this subsection has 
        committed a material violation under paragraph (1) or 
        (2), the following sanctions may be imposed:
                  (A) Civil fines.--A civil fine may be imposed 
                for each violation in an amount not to exceed 
                the greater of--
                          (i) the amount of the pecuniary gain 
                        obtained as a result of the false or 
                        inaccurate information provided or the 
                        noncompliance with a requirement of 
                        this title; or
                          (ii) $10,000.
                  (B) Debarment.--
                          (i) Producers.--In the case of a 
                        violation committed by a producer, the 
                        producer may be disqualified for a 
                        period of up to 5 years from receiving 
                        any monetary or nonmonetary benefit 
                        provided under--
                                  (I) this title;
                                  (II) the Agricultural Market 
                                Transition Act (7 U.S.C. 7201 
                                et seq.), including the 
                                noninsured crop disaster 
                                assistance program under 
                                section 196 of that Act (7 
                                U.S.C. 7333);
                                  (III) the Agricultural Act of 
                                1949 (7 U.S.C. 1421 et seq.);
                                  (IV) the Commodity Credit 
                                Corporation Charter Act (15 
                                U.S.C. 714 et seq.);
                                  (V) the Agricultural 
                                Adjustment Act of 1938 (7 
                                U.S.C. 1281 et seq.);
                                  (VI) title XII of the Food 
                                Security Act of 1985 (16 U.S.C. 
                                3801 et seq.);
                                  (VII) the Consolidated Farm 
                                and Rural Development Act (7 
                                U.S.C. 1921 et seq.); and
                                  (VIII) any law that provides 
                                assistance to a producer of an 
                                agricultural commodity affected 
                                by a crop loss or a decline in 
                                the prices of agricultural 
                                commodities.
                          (ii) Other persons.--In the case of a 
                        violation committed by an agent, loss 
                        adjuster, approved insurance provider, 
                        or other person (other than a 
                        producer), the violator may be 
                        disqualified for a period of up to 5 
                        years from participating in any 
                        program, or receiving any benefit, 
                        under this title.
          (4) Assessment of sanction.--The Secretary shall 
        consider the gravity of the violation of the person 
        covered by this subsection in determining--
                  (A) whether to impose a sanction under this 
                subsection; and
                  (B) the amount of the sanction to be imposed.
          (5) Disclosure of sanctions.--Each policy or plan of 
        insurance under this title shall provide notice about 
        the sanctions prescribed under paragraph (3) for 
        willfully and intentionally--
                  (A) providing false or inaccurate information 
                to the Corporation or to an approved insurance 
                provider; or
                  (B) failing to comply with a requirement of 
                the Corporation or the Standard Reinsurance 
                Agreement.
          (6) Insurance fund.--Any funds collected under this 
        subsection shall be deposited into the insurance fund 
        under section 516(c)(1).

           *       *       *       *       *       *       *

    (q) Program Compliance.--

           *       *       *       *       *       *       *

          (3) Oversight of agents and loss adjusters.--The 
        Corporation shall--
                  (A) develop procedures for an annual review 
                by an approved insurance provider of the 
                performance of each agent and loss adjuster 
                used by the approved insurance provider;
                  (B) oversee the annual review conducted by 
                each approved insurance provider; and
                  (C) consult with each approved insurance 
                provider regarding any remedial action that is 
                determined necessary as a result of the annual 
                review of an agent or loss adjuster.
          (4) Compliance reports.--Not later than the end of 
        each fiscal year, the Corporation shall submit, to the 
        Committee on Agriculture of the House of 
        Representatives, the Committee on Agriculture, 
        Nutrition, and Forestry of the Senate, and the Board, a 
        report concerning compliance by approved insurance 
        providers, agents, and loss adjusters with this title, 
        including any recommendations for legislative or 
        administrative changes that could further improve 
        compliance.

           *       *       *       *       *       *       *


SEC. 508. CROP INSURANCE.

    (a) Authority to Offer Insurance. 

           *       *       *       *       *       *       *

          (3) Exclusions.--
                  (A) In General.--Insurance provided under 
                this subsection shall not cover losses due to--
                          (i) the neglect or malfeasance of the 
                        producer;
                          (ii) the failure of the producer to 
                        reseed to the same crop in such areas 
                        and under such circumstances as it is 
                        customary to reseed; or
                          (iii) the failure of the producer to 
                        follow good farming practices, 
                        including scientifically sound 
                        sustainable and organic farming 
                        practices (as determined by the 
                        Secretary).
                  (B) Revenue coverage for potatoes.--No plan 
                of insurance provided under this title 
                (including a plan of insurance approved by the 
                Board under subsection (h)) shall cover losses 
                due to a reduction in revenue for potatoes 
                except as covered under a whole farm plan of 
                insurance, as determined by the Corporation.

           *       *       *       *       *       *       *

          [(6) Addition of new and specialty crops.--
                  [(A) Data collection.--Not later than 180 
                days after the date of enactment of this 
                paragraph, the Secretary shall issue guidelines 
                for publication in the Federal Register for 
                data collection to assist the Corporation in 
                formulating crop insurance policies for new and 
                specialty crops.
                  [(B) Addition of new crops.--Not later than 1 
                year after the date of enactment of this 
                paragraph, and annually thereafter, the 
                Corporation shall report to Congress on the 
                progress and expected timetable for expanding 
                crop insurance coverage under this title to new 
                and specialty crops.
                  [(C) Addition of direct sale perishable 
                crops.--Not later than 1 year after the date of 
                enactment of this paragraph, the Corporation 
                shall report to Congress on the feasibility of 
                offering a crop insurance program designed to 
                meet the needs of specialized producers of 
                vegetables and other perishable crops who 
                market through direct marketing channels.
                  [(D) Addition of nursery crops.--Not later 
                than 2 years after the date of enactment of 
                this subparagraph, the Corporation shall 
                conduct a study and limited pilot program on 
                the feasibility of insuring nursery crops.]
          (6) Quality adjustment policies.--
                  (A) In general.--The Corporation shall offer 
                coverage that permits a reduction in the 
                quantity of production of an agricultural 
                commodity produced during a crop year, or any 
                similar adjustment, that results from the 
                agricultural commodity not meeting the quality 
                standards established in the policy.
                  (B) Election not to receive coverage.--
                          (i) In general.--A producer may elect 
                        not to receive quality adjustment 
                        coverage.
                          (ii) Premium reduction.--In the case 
                        of an election described in clause (i), 
                        the Corporation shall provide a 
                        reduction in the premium payable by the 
                        producer for a plan of insurance in an 
                        amount equal to the premium for the 
                        quality adjustment coverage, as 
                        determined by the Corporation.
                  (C) Review of criteria and procedures.--The 
                Corporation shall--
                          (i) contract with a qualified person 
                        to analyze the quality loss adjustment 
                        procedures of the Corporation; and
                          (ii) based on the analysis, make 
                        adjustments in the quality loss 
                        adjustment procedures of the 
                        Corporation necessary to more 
                        accurately reflect local quality 
                        discounts that are applied to 
                        agricultural commodities insured under 
                        this title, taking into consideration 
                        the actuarial soundness of the 
                        adjustment and the prevention of fraud, 
                        waste, and abuse.
          (7) Prevented planting.--
                  (A) Election not to receive coverage.--
                          (i) In general.--A producer may elect 
                        not to receive coverage for prevented 
                        planting of an agricultural commodity.
                          (ii) Premium reduction.--In the case 
                        of an election described in clause (i), 
                        the Corporation shall provide a 
                        reduction in the premium payable by the 
                        producer for a plan of insurance in an 
                        amount equal to the premium for the 
                        prevented planting coverage, as 
                        determined by the Corporation.
                  (B) Equal coverage.--For each agricultural 
                commodity for which prevented planting coverage 
                is available, the Corporation shall offer an 
                equal percentage level of prevented planting 
                coverage.
                  (C) Area conditions required for payment.--
                The Corporation shall limit prevented planting 
                payments to producers in the area in which the 
                farm is located that are generally affected by 
                the conditions that prevent an agricultural 
                commodity from being planted.
                  (D) Substitute commodity.--
                          (i) Authority to plant.--Subject to 
                        clause (v), a producer that has 
                        prevented planting coverage and is 
                        eligible to receive an indemnity under 
                        the coverage may plant an agricultural 
                        commodity, other than the commodity 
                        covered by the prevented planting 
                        coverage, on the acreage originally 
                        prevented from being planted.
                          (ii) Nonavailability of insurance.--A 
                        substitute agricultural commodity 
                        planted under clause (i) for harvest in 
                        the same crop year shall not be 
                        eligible for coverage under a policy or 
                        plan of insurance under this title or 
                        for noninsured crop disaster assistance 
                        under section 196 of the Agricultural 
                        Market Transition Act (7 U.S.C. 7333).
                          (iii) Relationship to other 
                        requirements.--The producer of a 
                        substitute agricultural commodity under 
                        clause (ii) shall remain eligible for 
                        the benefits described in subsection 
                        (b)(7).
                          (iv) Effect on actual production 
                        history.--If a producer plants a 
                        substitute agricultural commodity under 
                        clause (i) for a crop year, the 
                        Corporation shall assign the producer a 
                        yield, for that crop year for the 
                        commodity that was prevented from being 
                        planted, equal to 60 percent of the 
                        producer's actual production history 
                        for that commodity for purposes of 
                        determining the producer's actual 
                        production history for subsequent crop 
                        years.
                          (v) Effect on prevented planting 
                        payment.--If a producer plants a 
                        substitute agricultural commodity under 
                        clause (i) before the latest planting 
                        date established by the Corporation for 
                        the agricultural commodity prevented 
                        from being planted, the Corporation 
                        shall not make a prevented planting 
                        payment with regard to the commodity 
                        prevented from being planted.
                  (E) Relationship to other law.--This 
                paragraph shall supersede subsection (h)(7) to 
                the extent that this paragraph is inconsistent 
                with subsection (h)(7).
                  (F) Fiscal years.--This paragraph shall apply 
                to each of fiscal years 2001 through 2004.
          (8) Adequate coverage for states.--
                  (A) Definition of adequately served.--In this 
                paragraph, the term `adequately served' means 
                having a participation rate that is at least 50 
                percent of the national average participation 
                rate.
                  (B) Review.--The Board shall review the plans 
                of insurance that are offered by approved 
                insurance providers under this title to 
                determine if each State is adequately served by 
                the plans of insurance.
                  (C) Report.--
                          (i) In general.--Not later than 30 
                        days after completion of the review 
                        under subparagraph (B), the Board shall 
                        submit to Congress a report on the 
                        results of the review.
                          (ii) Recommendations.--The report 
                        shall include recommendations to 
                        increase participation in States that 
                        are not adequately served by the plans 
                        of insurance.
    (b) Catastrophic Risk Protection.

           *       *       *       *       *       *       *

    (c) General Coverage Levels.--

           *       *       *       *       *       *       *

          [(5) Price level.--The Corporation shall establish a 
        price level for each commodity on which insurance is 
        offered that--
                  [(A) shall not be less than the projected 
                market price for the commodity (as determined 
                by the Corporation); or
                  [(B) at the discretion of the Corporation, 
                may be based on the actual market price at the 
                time of harvest (as determined by the 
                Corporation).]
          (5) Expected market price.--
                  (A) In general.--For the purposes of this 
                title, the Corporation shall establish or 
                approve the price level (referred to in this 
                title as the `expected market price') of each 
                agricultural commodity for which insurance is 
                offered.
                  (B) Amount.--The expected market price of an 
                agricultural commodity--
                          (i) except as otherwise provided in 
                        this subparagraph, shall be not less 
                        than the projected market price of the 
                        agricultural commodity, as determined 
                        by the Corporation;
                          (ii) may be based on the actual 
                        market price of the agricultural 
                        commodity at the time of harvest, as 
                        determined by the Corporation;
                          (iii) in the case of revenue and 
                        other similar plans of insurance, shall 
                        be the actual market price of the 
                        agricultural commodity, as determined 
                        by the Corporation; or
                          (iv) in the case of cost of 
                        production or similar plans of 
                        insurance, shall be the projected cost 
                        of producing the agricultural 
                        commodity, as determined by the 
                        Corporation.

           *       *       *       *       *       *       *

    (d) Premiums.--

           *       *       *       *       *       *       *

          (2) Premium amounts.--The premium amounts for 
        catastrophic risk protection under subsection (b) and 
        additional coverage under subsection (c) shall be fixed 
        as follows:

           *       *       *       *       *       *       *

                  [(C) In the case of additional coverage equal 
                to or greater than 65 percent of the recorded 
                or appraised average yield indemnified at 100 
                percent of the expected market price, or an 
                equivalent coverage, the amount of the premium 
                shall--
                          [(i) be sufficient to cover 
                        anticipated losses and a reasonable 
                        reserve; and
                          [(ii) include an amount for operating 
                        and administrative expenses, as 
                        determined by the Corporation, on an 
                        industry-wide basis as a percentage of 
                        the amount of the premium used to 
                        define loss ratio.]
                  [(C) In the case of additional coverage at 
                greater than or equal to 65 percent of the 
                recorded or appraised average yield indemnified 
                at 100 percent of the expected market price, or 
                a comparable coverage for a plan of insurance 
                that is not based on yield, but less than 75 
                percent of the recorded or appraised average 
                yield indemnified at 100 percent of the 
                expected market price, or a comparable coverage 
                for a plan of insurance that is not based on 
                yield, the amount of the premium shall--
                          (i) be sufficient to cover 
                        anticipated losses and a reasonable 
                        reserve; and
                          (ii) include an amount for operating 
                        and administrative expenses, as 
                        determined by the Corporation, on an 
                        industry-wide basis as a percentage of 
                        the amount of the premium used to 
                        define loss ratio.
                  (D) In the case of additional coverage equal 
                to or greater than 75 percent of the recorded 
                or appraised average yield indemnified at 100 
                percent of the expected market price, or a 
                comparable coverage for a plan of insurance 
                that is not based on yield, the amount of the 
                premium shall--
                          (i) be sufficient to cover 
                        anticipated losses and a reasonable 
                        reserve; and
                          (ii) include an amount for operating 
                        and administrative expenses, as 
                        determined by the Corporation, on an 
                        industry-wide basis as a percentage of 
                        the amount of the premium used to 
                        define loss ratio.

           *       *       *       *       *       *       *

    (e) Payment of Portion of Premium by Corporation.--
          [(1) In general.--For the purpose of encouraging the 
        broadest possible participation of producers in the 
        catastrophic risk protection provided under subsection 
        (b) and the additional coverage provided under 
        subsection (c), the Corporation shall pay a part of the 
        premium in the amounts provided in accordance with this 
        subsection.]
          (1) In general.--
                  (A) Mandatory payments.--For the purpose of 
                encouraging the broadest possible participation 
                of producers in the crop insurance plans of 
                insurance described in subsections (b) and (c), 
                the Corporation shall pay a part of the premium 
                in the amounts determined under this 
                subsection.
                  (B) Discretionary payments.--For the purpose 
                of encouraging the broadest possible 
                participation of producers, in the case of a 
                plan of insurance approved by the Corporation 
                under subsection (h), the Corporation may pay a 
                part of the premium as determined under this 
                subsection.
          (2) Amount of payment.--

           *       *       *       *       *       *       *

                  [(B) In the case of coverage below 65 percent 
                of the recorded or appraised average yield 
                indemnified at 100 percent of the expected 
                market price, or an equivalent coverage, but 
                greater than 50 percent of the recorded or 
                appraised average yield indemnified at 100 
                percent of the expected market price, or an 
                equivalent coverage, the amount shall be 
                equivalent to the amount of premium established 
                for catastrophic risk protection coverage and 
                the amount of operating and administrative 
                expenses established under subsection 
                (d)(2)(B).
                  [(C) In the case of coverage equal to or 
                greater than 65 percent of the recorded or 
                appraised average yield indemnified at 100 
                percent of the expected market price, or an 
                equivalent coverage, on an individual or area 
                basis, the amount shall be equivalent to an 
                amount equal to the premium established for 50 
                percent loss in yield indemnified at 75 percent 
                of the expected market price and the amount of 
                operating and administrative expenses 
                established under subsection (d)(2)(C).]
                  (B) In the case of additional coverage less 
                than or equal to 50 percent of the recorded or 
                appraised average yield indemnified at 100 
                percent of the expected market price, or a 
                comparable coverage for a plan of insurance 
                that is not based on yield, the amount shall be 
                equal to the sum of--
                          (i) 60 percent of the amount of the 
                        premium established under subsection 
                        (d)(2)(B)(i); and
                          (ii) the amount of operating and 
                        administrative expenses determined 
                        under subsection (d)(2)(B)(ii).
                  (C) In the case of additional coverage at 55 
                percent or 60 percent of the recorded or 
                appraised average yield indemnified at 100 
                percent of the expected market price, or a 
                comparable coverage for a plan of insurance 
                that is not based on yield, the amount shall be 
                equal to the sum of--
                          (i) 45 percent of the amount of the 
                        premium established under subsection 
                        (d)(2)(B)(i); and
                          (ii) the amount of operating and 
                        administrative expenses determined 
                        under subsection (d)(2)(B)(ii).
                  (D) In the case of additional coverage at 65 
                percent or 70 percent of the recorded or 
                appraised average yield indemnified at 100 
                percent of the expected market price, or a 
                comparable coverage for a plan of insurance 
                that is not based on yield, the amount shall be 
                equal to the sum of--
                          (i) 50 percent of the amount of the 
                        premium established under subsection 
                        (d)(2)(C)(i); and
                          (ii) the amount of operating and 
                        administrative expenses determined 
                        under subsection (d)(2)(C)(ii).
                  (E) In the case of additional coverage equal 
                to or greater than 75 percent of the recorded 
                or appraised average yield indemnified at 100 
                percent of the expected market price, or a 
                comparable coverage for a plan of insurance 
                that is not based on yield, the amount shall be 
                equal to the sum of--
                          (i) 55 percent of the amount of the 
                        premium established for coverage at 75 
                        percent of the recorded or appraised 
                        average yield indemnified at 100 
                        percent of the expected market price 
                        under subsection (d)(2)(D)(i); and
                          (ii) the amount of operating and 
                        administrative expenses determined 
                        under subsection (d)(2)(D)(ii).
                  (F) Subparagraphs (A) through (E) shall apply 
                to each of fiscal years 2001 through 2004.

           *       *       *       *       *       *       *

          [(4) Individual and area crop insurance coverage.--
        The Corporation shall allow approved insurance 
        providers to offer a plan of insurance to producers 
        that combines both individual yield coverage and area 
        yield coverage at a premium rate determined by the 
        provider under the following conditions:
                  [(A) The individual yield coverage shall be 
                equal to or greater than catastrophic risk 
                protection as described in subsection (b).
                  [(B) The combined policy shall include area 
                yield coverage that is offered by the 
                Corporation or similar area coverage, as 
                determined by the Corporation.
                  [(C) The Corporation shall provide 
                reinsurance on the area yield portion of the 
                combined policy at the request of the provider, 
                except that the provider shall agree to pay to 
                the producer any portion of the area yield and 
                loss indemnity payment received from the 
                Corporation or a commercial reinsurer that 
                exceeds the individual indemnity payment made 
                by the provider to the producer.
                  [(D) The Corporation shall pay a part of the 
                premium equivalent to--
                          [(i) the amount authorized under 
                        paragraph (2) (except provisions 
                        regarding operating and administrative 
                        expenses); and
                          [(ii) the amount of operating and 
                        administrative expenses authorized by 
                        the Corporation for the area yield 
                        coverage portion of the combined 
                        policy.
                  [(E) The provider shall provide all 
                underwriting services for the combined policy, 
                including the determination of individual yield 
                coverage premium rates, the terms and 
                conditions of the policy, and the acceptance 
                and classification of applicants into risk 
                categories, subject to subparagraph (F).
                  [(F) The Corporation shall approve the 
                combined policy unless the Corporation 
                determines that the policy is not actuarially 
                sound or that the interests of producers are 
                not adequately protected.]
    (f) Eligibility.--

           *       *       *       *       *       *       *

          (3) Records and reporting.--To obtain catastrophic 
        risk protection under subsection (b) or additional 
        coverage under subsection (c), a producer shall--
                  (A) [provide, to the extent required by the 
                Corporation, records acceptable to the 
                Corporation of historical acreage and 
                production of the crops for which the insurance 
                is sought] provide annually records acceptable 
                to the Secretary regarding crop acreage, 
                acreage yields, and production for each 
                agricultural commodity insured under this title 
                or accept a yield determined by the 
                Corporation; and

           *       *       *       *       *       *       *

    (g) Yield Determinations.--

           *       *       *       *       *       *       *

          (2) Yield coverage plans.--

           *       *       *       *       *       *       *

                  (B) Assigned yield.--If the producer does not 
                provide satisfactory evidence of the yield of a 
                commodity under subparagraph (A), the producer 
                shall be [assigned a yield] assigned--
                          (i) a yield that is not less than 65 
                        percent of the transitional yield of 
                        the producer (adjusted to reflect 
                        actual production reflected in the 
                        records acceptable to the Corporation 
                        for continuous years), as specified in 
                        regulations issued by the Corporation 
                        based on production history 
                        requirements[.]; or
                          (ii) a yield determined by the 
                        Corporation, in the case of--
                                  (I) a producer that has not 
                                had a share of the production 
                                of the insured crop for more 
                                than 2 crop years, as 
                                determined by the Secretary;
                                  (II) a producer that produces 
                                an agricultural commodity on 
                                land that has not been farmed 
                                by the producer; and
                                  (III) a producer that rotates 
                                a crop produced on a farm to a 
                                crop that has not been produced 
                                on the farm.

           *       *       *       *       *       *       *

                  (D) Commodity-by-commodity basis.--A producer 
                may choose between individual yield or area 
                yield coverage [or combined coverage] (as 
                provided in subsection (e)(4)), [if available,] 
                on a commodity-by-commodity basis.

           *       *       *       *       *       *       *

          (4) Transitional adjustment for disasters.--
                  (A) Definition of a producer that has 
                suffered a multi year disaster.--In this 
                paragraph, the term `a producer that has 
                suffered a multi year disaster' means a 
                producer (or a successor entity through which 
                the actual production history of the producer 
                can be traced) that has suffered a natural 
                disaster during at least 3 of the immediately 
                preceding 5 crop years that resulted in a 
                cumulative reduction of at least 25 percent in 
                the actual production history of the crop of an 
                agricultural commodity.
                  (B) Elimination of certain years of 
                production history.--Notwithstanding paragraph 
                (2), effective beginning with the 2001 crop 
                year, for the purpose of calculating the actual 
                production history for a crop of an 
                agricultural commodity, a producer that has 
                suffered a multi year disaster with respect to 
                the crop may exclude 1 year of production 
                history for each 5 years included in the actual 
                production history calculation of the crop for 
                which the producer purchased crop insurance.
                  (C) Corporation's share of changed costs.--In 
                the case of an exclusion under subparagraph 
                (B), in addition to any other authority to pay 
                any portion of premium, the Corporation shall 
                pay--
                          (i) the portion of the premium that 
                        represents the increase in premium 
                        associated with the exclusion;
                          (ii) all additional indemnities 
                        associated with the exclusion; and
                          (iii) any amounts that result from 
                        the difference in the administrative 
                        and operating expenses owed to an 
                        approved insurance provider as the 
                        result of an exclusion in actual 
                        production history under this 
                        paragraph.
                  (D) Increase in actual production history 
                after exclusions.--In the case of a producer 
                that has received an exclusion under 
                subparagraph (B), the Corporation shall not 
                limit the increase of the actual production 
                history based on the producer's actual 
                production of the crop of an agricultural 
                commodity in succeeding crop years until the 
                actual production history for the producer 
                reaches the level for the crop year immediately 
                preceding the first year of the multi year 
                disaster.
                  (E) Termination of exclusion authority.--The 
                authority to apply this paragraph to a producer 
                shall terminate with respect to the first crop 
                year in which crop insurance is available to 
                the producer that adequately insures against 
                natural disasters that occur in multiple crop 
                years, as determined by the Corporation.
                  (F) Reinsurance years.--This paragraph shall 
                apply to each of the 2001 through 2004 
                reinsurance years.
    (h) Submission of Policies and Materials to Board.--
          [(1) In general.--In addition to any standard forms 
        or policies that the Board may require be made 
        available to producers under subsection (c), a person 
        may prepare for submission or propose to the Board--
                  [(A) other crop insurance policies and 
                provisions of policies; and
                  [(B) rates of premiums for multiple peril 
                crop insurance pertaining to wheat, soybeans, 
                field corn, and any other crops determined by 
                the Secretary.
          [(2) Submission of policies.--A policy or other 
        material submitted to the Board under this subsection 
        may be prepared without regard to the limitations 
        contained in this title, including the requirements 
        concerning the levels of coverage and rates and the 
        requirement that a price level for each commodity 
        insured must equal the expected market price for the 
        commodity as established by the Board. In the case of 
        such a policy, the payment by the Corporation of a 
        portion of the premium of the policy may not exceed the 
        amount that would otherwise be authorized under 
        subsection (e).
          [(3) Review and approval by the board.--A policy or 
        other material submitted to the Board under this 
        subsection shall be reviewed by the Board and, if the 
        Board finds that the interests of producers are 
        adequately protected and that any premiums charged to 
        the producers are actuarially appropriate, shall be 
        approved by the Board for reinsurance and for sale to 
        producers as an additional choice at actuarially 
        appropriate rates and under appropriate terms and 
        conditions. The Corporation may enter into more than 1 
        reinsurance agreement with the approved insurance 
        provider simultaneously to facilitate the offering of 
        the new policies.
          [(4) Guidelines for submission and review.--The 
        Corporation shall issue regulations to establish 
        guidelines for the submission, and Board review, of 
        policies or other material submitted to the Board under 
        this subsection. At a minimum, the guidelines shall 
        ensure the following:
                  [(A) A proposal submitted to the Board under 
                this subsection shall be considered as 
                confidential commercial or financial 
                information for purposes of section 552(b)(4) 
                of title 5, United States Code, until approved 
                by the Board. A proposal disapproved by the 
                Board shall remain confidential commercial or 
                financial information.
                  [(B) The Board shall provide an applicant 
                with the opportunity to present the proposal to 
                the Board in person if the applicant so 
                desires.
                  [(C) The Board shall provide an applicant 
                with notification of intent to disapprove a 
                proposal not later than 30 days prior to making 
                the disapproval. An applicant that receives the 
                notification may modify the application of the 
                applicant. Any modification shall be considered 
                an original application for purposes of this 
                paragraph.
                  [(D) Specific guidelines shall prescribe the 
                timing of submission of proposals under this 
                subsection and timely consideration by the 
                Board so that any approved proposal may be made 
                available to all persons reinsured by the 
                Corporation in a manner permitting the persons 
                to participate, if the persons so desire, in 
                offering such a proposal in the first crop year 
                in which the proposal is approved by the Board 
                for reinsurance, premium subsidy, or other 
                support offered by this title.
          [(5) Required publication.--Any policy, provision of 
        a policy, or rate approved under this subsection shall 
        be published as a notice in the Federal Register and 
        made available to all persons contracting with or 
        reinsured by the Corporation under the terms and 
        conditions of the contract between the Corporation and 
        the person originally submitting the policy or other 
        material.]
          (1) In general.--In addition to any standard forms or 
        policies that the Board may require be made available 
        to producers under subsection (c), a person may propose 
        to the Board--
                  (A) loss of yield or revenue insurance 
                coverage on an individual, area, or a 
                combination of individual and area basis, for 1 
                or more agricultural commodities;
                  (B) rates of premium for a proposed or 
                existing policy; and
                  (C) underwriting systems for a proposed or 
                existing policy.
          (2) Submission of proposals.--
                  (A) In general.--Subject to subparagraph (B) 
                and paragraph (3), a proposal submitted to the 
                Board under this subsection may be prepared 
                without regard to the limitations of this 
                title, including limitations--
                          (i) concerning actuarial soundness;
                          (ii) concerning levels of coverage;
                          (iii) concerning rates of premium;
                          (iv) that the price level for 
                        coverage for each insured commodity 
                        must equal the expected market price 
                        for the commodity as established by the 
                        Board; and
                          (v) that an approved insurance 
                        provider shall provide coverage under a 
                        policy throughout a State for all 
                        commodities if the approved insurance 
                        provider elects to provide any coverage 
                        in the State.
                  (B) Maximum allowable subsidy.--The payment 
                by the Corporation of a portion of the premium 
                of the policy approved by the Board under this 
                subsection may not exceed the amount that would 
                otherwise be authorized under subsection (e).
          (3) Standards.--
                  (A) In general.--The Board shall approve a 
                proposal under this subsection for subsidy and 
                reinsurance if the Board finds that the 
                proposal adequately ensures that--
                          (i) the interests of producers of 
                        commodities are adequately protected;
                          (ii) premiums charged to producers 
                        are actuarially appropriate;
                          (iii) the underwriting system 
                        included in the proposal is appropriate 
                        and adequate; and
                          (iv) the proposal is reinsured under 
                        this title, is reinsured through 
                        private reinsurance, or is self-
                        insured;
                  (B) Rates of premium.--A proposed rate of 
                premium (including the part of premium paid by 
                the Corporation) shall be considered to be 
                actuarially appropriate if the rate is 
                sufficient to cover projected losses and 
                expenses, reasonable reserve, and the amount of 
                operating and administrative expenses 
                determined under subsection (d)(2).
                  (C) Proposed underwriting plans.--A proposed 
                underwriting plan--
                          (i) may be on an area or individual 
                        farm basis; and
                          (ii) shall, at a minimum, specify 
                        factors such as yield history for the 
                        farm or region, soils and resource 
                        quality for the farm, and farm 
                        production practices.
                  (D) Reinsurance.--
                          (i) Federal reinsurance.--The 
                        Corporation shall, to the maximum 
                        extent practicable, make reinsurance 
                        available to an approved insurance 
                        provider under this subsection.
                          (ii) Private or federal 
                        reinsurance.--An approved insurance 
                        provider may--
                                  (I) obtain private 
                                reinsurance for the proposal;
                                  (II) obtain reinsurance for 
                                the proposal under this title; 
                                or
                                  (III) self-insure the 
                                proposal.
                  (E) Actuarially appropriate.--The Board shall 
                prescribe standards for whether premium rates 
                are actuarially appropriate considering the 
                risk inherent in the proposed product.
          (4) Review and approval by board.--With respect to 
        any policy or other material submitted to the Board 
        after October 1, 2000, under this subsection, the 
        following guidelines shall apply:
                  (A) In general.--The policy or other material 
                shall be reviewed by the Board in accordance 
                with subparagraphs (C) and (D).
                  (B) Multiple insurance agreements.--The 
                Corporation may enter into more than 1 
                reinsurance agreement simultaneously with the 
                approved insurance provider to facilitate the 
                offering of the new policy.
                  (C) Procedures for submission and review.--
                The Corporation shall promulgate regulations 
                that establish procedures for the submission 
                and review by the Board of proposals submitted 
                to the Board under this subsection, including--
                          (i) the standards applicable to a 
                        proposal under paragraph (3) (including 
                        documentation required to establish 
                        that a proposal satisfies the 
                        standards);
                          (ii) procedures concerning the time 
                        limitations provided under this 
                        paragraph; and
                          (iii) procedures that provide an 
                        applicant the opportunity to present 
                        the proposal to the Board in person.
                  (D) Review by the board.--
                          (i) Period for approval.--
                        Notwithstanding any other provision of 
                        law, a proposal submitted to the Board 
                        shall be considered to be approved 
                        unless the Board disapproves the 
                        proposal by the date that is 60 
                        business days after the later of--
                                  (I) the date of submission of 
                                the completed proposal to the 
                                Board; or
                                  (II) the date on which the 
                                applicant provides to the Board 
                                notice of intent to modify the 
                                proposal under clause (ii)(IV).
                          (ii) Notice of disapproval.--
                                  (I) In general.--Not later 
                                than 15 days before the date on 
                                which the Board intends to 
                                announce disapproval of a 
                                proposal, the Board shall 
                                provide the applicant, by 
                                registered mail, with notice of 
                                intent to disapprove the 
                                proposal.
                                  (II) Right to modify.--An 
                                applicant that is notified 
                                under subclause (I) may modify 
                                the proposal.
                                  (III) Original application.--
                                For the purposes of this 
                                clause, any modified proposal 
                                shall be considered to be an 
                                original proposal.
                                  (IV) Notice of intent to 
                                modify.--Not later than 5 
                                business days after receipt of 
                                a notice under subclause (I), 
                                an applicant that intends to 
                                modify the proposal shall so 
                                notify the Board.
                  (E) Timing.--In establishing procedures under 
                this subsection, the Board shall prescribe a 
                reasonable deadline for the submission of 
                proposals that approved insurance providers 
                expect to market during the reinsurance year.
                  (F) Confidentiality.--
                          (i) In general.--A proposal submitted 
                        to the Board under this subsection 
                        (including any information generated 
                        from the proposal) shall be considered 
                        to be confidential commercial or 
                        financial information for the purposes 
                        of section 552(b)(4) of title 5, United 
                        States Code.
                          (ii) Standard of confidentiality.--
                        Except as provided in clauses (iii) and 
                        (iv), if information concerning a 
                        proposal could be withheld by the 
                        Secretary under the standard for 
                        privileged or confidential information 
                        pertaining to trade secrets and 
                        commercial or financial information 
                        under section 552(b)(4) of title 5, 
                        United States Code, the information 
                        shall not be released to the public.
                          (iii) Exception for purchasers of 
                        plans of insurance.--Clause (ii) shall 
                        not apply in the case of an approved 
                        insurance provider that elects to pay a 
                        fee to sell a plan of insurance 
                        developed by another provider under 
                        paragraph (5).
                          (iv) Approved proposals.--In lieu of 
                        publication in the Federal Register, a 
                        general summary of the content of the 
                        proposal shall be made available to 
                        other approved insurance providers at 
                        the time at which the proposal is 
                        approved by the Board, consisting of a 
                        description of--
                                  (I) the identity of the 
                                approved insurance provider;
                                  (II) the coverage provided; 
                                and
                                  (III) the area to be covered 
                                by the approved proposal.
          (5) Fees for plans of insurance.--
                  (A) Fees for existing plans of insurance.--
                          (i) In general.--Effective beginning 
                        with the 2001 reinsurance year, if an 
                        approved insurance provider elects to 
                        sell a plan of insurance that was 
                        developed by another approved insurance 
                        provider and the plan of insurance was 
                        approved by the Board before January 1, 
                        2000, the approved insurance provider 
                        that developed the plan of insurance 
                        shall have the right to receive a fee 
                        from the approved insurance provider 
                        that elects to sell the plan of 
                        insurance.
                          (ii) Amount.--The amount of the fee 
                        that is payable by an approved 
                        insurance provider for a plan of 
                        insurance under clause (i) shall be--
                                  (I) for each of the first 5 
                                crop years that the plan is 
                                sold, $2.00 for each policy 
                                under the plan that is sold by 
                                the approved insurance 
                                provider;
                                  (II) for each of the next 3 
                                crop years that the plan is 
                                sold, $1.00 for each policy 
                                under the plan that is sold by 
                                the approved insurance 
                                provider; and
                                  (III) for each crop year 
                                thereafter that the plan is 
                                sold, 50 cents for each policy 
                                under the plan that is sold by 
                                the approved insurance 
                                provider.
                  (B) Fees for new plans of insurance.--
                          (i) In general.--Effective beginning 
                        with the 2001 reinsurance year, if an 
                        approved insurance provider elects to 
                        sell a plan of insurance that was 
                        developed by another approved insurance 
                        provider, the plan of insurance was 
                        approved by the Board under this 
                        subsection on or after January 1, 2000, 
                        and the plan of insurance was not 
                        available at the time at which the plan 
                        of insurance was approved by the Board, 
                        the approved insurance provider that 
                        developed the plan of insurance shall 
                        have the right to receive a fee from 
                        the approved insurance provider that 
                        elects to sell the plan of insurance.
                          (ii) Amount.--
                                  (I) In general.--Subject to 
                                subclause (II), the amount of 
                                the fee that is payable by an 
                                approved insurance provider for 
                                a plan of insurance under 
                                clause (i) shall be an amount 
                                that is--
                                          (aa) determined by 
                                        the approved insurance 
                                        provider that developed 
                                        the plan; and
                                          (bb) approved by the 
                                        Board.
                                  (II) Approval.--The Board 
                                shall not approve the amount of 
                                a fee under clause (i) if the 
                                amount of the fee unnecessarily 
                                inhibits the use of the plan of 
                                insurance, as determined by the 
                                Board.
                  (C) Payments.--The Corporation shall 
                annually--
                          (i) collect from an approved 
                        insurance provider the amount of any 
                        fees that are payable by the approved 
                        insurance provider under subparagraphs 
                        (A) and (B); and
                          (ii) credit any fees that are payable 
                        to an approved insurance provider under 
                        subparagraphs (A) and (B).
                  (D) Exceptions.--In the case of a policy 
                developed by an approved insurance provider 
                that does not conduct business in a State--
                          (i) the approved policy may be 
                        marketed in the State by another 
                        approved insurance provider if the 
                        approved insurance provider marketing 
                        the policy pays any fee for marketing 
                        the policy imposed by the developing 
                        provider; and
                          (ii) the developing provider shall 
                        not deny payment of a fee by another 
                        provider to maintain full marketing 
                        rights of the approved policy.
          [(6) Pilot cost of production risk protection plan.--
                  [(A) In general.--The Corporation shall 
                offer, to the extent practicable, a cost of 
                production risk protection plan of insurance 
                that indemnifies producers (including new 
                producers) for insurable losses as provided in 
                this paragraph.
                  [(B) Pilot basis.--The cost of production 
                risk protection plan shall--
                          [(i) be established as a pilot 
                        project for each of the 1996 and 1997 
                        crop years; and
                          [(ii) be carried out in a number of 
                        counties that is determined by the 
                        Corporation to be adequate to provide a 
                        comprehensive evaluation of the 
                        feasibility, effectiveness, and demand 
                        among producers for the plan.
                  [(C) Insurable loss.--An insurable loss shall 
                be incurred by a producer if the gross income 
                of the producer (as determined by the 
                Corporation) is less than an amount determined 
                by the Corporation, as a result of a reduction 
                in yield or price resulting from an insured 
                cause.
                  [(D) Definition of new producer.--As used in 
                this paragraph, the term ``new producer'' means 
                a person that has not been actively engaged in 
                farming for a share of the production of the 
                insured crop for more than 2 crop years, as 
                determined by the Secretary.]
          [(7)] (6) Additional prevented planting policy 
        coverage.--
                  (A) In general.--Beginning with the 1995 crop 
                year, the Corporation shall offer to producers 
                additional prevented planting coverage that 
                insures producers against losses in accordance 
                with this paragraph.
                  (B) Approved insurance providers.--Additional 
                prevented planting coverage shall be offered by 
                the Corporation through approved insurance 
                providers.
                  (C) Timing of loss.--A crop loss shall be 
                covered by the additional prevented planting 
                coverage if--
                          (i) crop insurance policies were 
                        obtained for--
                                  (I) the crop year the loss 
                                was experienced; and
                                  (II) the crop year 
                                immediately preceding the year 
                                of the prevented planting loss; 
                                and
                          (ii) the cause of the loss occurred--
                                  (I) after the sales closing 
                                date for the crop in the crop 
                                year immediately preceding the 
                                loss; and
                                  (II) before the sales closing 
                                date for the crop in the year 
                                in which the loss is 
                                experienced.
        [(8) Pilot program of assigned yields for new 
        producers.--
                  [(A) Program required.--For each of the 1995 
                and 1996 crop years, the Corporation shall 
                carry out a pilot program to assign to eligible 
                new producers higher assigned yields than would 
                otherwise be assigned to the producers under 
                subsection (g). The Corporation shall include 
                in the pilot program 30 counties that are 
                determined by the Corporation to be adequate to 
                provide a comprehensive evaluation of the 
                feasibility, effectiveness, and demand among 
                new producers for increased assigned yields.
                  [(B) Increased assigned yields.--In the case 
                of an eligible new producer participating in 
                the pilot program, the Corporation shall assign 
                to the new producer a yield that is equal to 
                not less than 110 percent of the transitional 
                yield otherwise established by the Corporation.
                  [(C) Eligible new producer.--The Secretary 
                shall establish a definition of new producer 
                for purposes of determining eligibility to 
                participate in the pilot program.]
          [(9)] (7) Revenue insurance pilot program.--
                  (A) In general.--Not later than December 31, 
                1996, the Secretary shall carry out a pilot 
                program in a limited number of counties, as 
                determined by the Secretary, for crop years 
                1997 through 2001, under which a producer of 
                wheat, feed grains, soybeans, or such other 
                commodity as the Secretary considers 
                appropriate may elect to receive insurance 
                against loss of revenue, as determined by the 
                Secretary.
                  (B) Administration.--Revenue insurance under 
                this paragraph shall--
                          (i) be offered through reinsurance 
                        arrangements with private insurance 
                        companies;
                          (ii) offer at least a minimum level 
                        of coverage that is an alternative to 
                        catastrophic crop insurance;
                          (iii) be actuarially sound; and
                          (iv) require the payment of premiums 
                        and administrative fees by an insured 
                        producer.
          [(10) Time limits for response to submission of new 
        policies.--
                  [(A) In general.--The Board shall establish a 
                reasonable time period within which the Board 
                shall approve or disapprove a proposal from a 
                person regarding a new policy submitted in 
                accordance with this subsection.
                  [(B) Effect of failure to meet time limits.--
                Except as provided in subparagraph (C), if the 
                Board fails to provide a response to a proposal 
                described in subparagraph (A) in accordance 
                with subparagraph (A), the new policy shall be 
                deemed to be approved by the Board for purposes 
                of this subsection for the initial reinsurance 
                year designated for the new policy in the 
                request.
                  [(C) Exceptions.--Subparagraph (B) shall not 
                apply to a proposal submitted under this 
                subsection if the Board and the person 
                submitting the request agree to an extension of 
                the time period.]

           *       *       *       *       *       *       *

    [(m) Research.--
          [(1) In general.--Except as provided in paragraph 
        (2), the Corporation may conduct research, surveys, 
        pilot programs, and investigations relating to crop 
        insurance and agriculture-related risks and losses 
        including insurance on losses involving reduced forage 
        on rangeland caused by drought and by insect 
        infestation, livestock poisoning and disease, 
        destruction of bees due to the use of pesticides, and 
        other unique special risks related to fruits, nuts, 
        vegetables, aquacultural species, forest industry needs 
        (including appreciation), and other agricultural 
        products as determined by the Board.
          [(2) Exception.--No action may be undertaken with 
        respect to a risk under paragraph (1) if insurance 
        protection against the risk is generally available from 
        private companies.
          [(3) Evaluation.--After the completion of any pilot 
        program under this subsection, the Corporation shall 
        evaluate the pilot program and submit to the Committee 
        on Agriculture of the House of Representatives and the 
        Committee on Agriculture, Nutrition, and Forestry of 
        the Senate, a report of the operations of the pilot 
        program, including the evaluation by the Corporation of 
        the pilot program and the recommendations of the 
        Corporation with respect to implementing the program on 
        a national basis.]
    [(n)] (m) Limitation on Multiple Benefits for Same Loss.--

           *       *       *       *       *       *       *

          (3) Limitation on double insurance.--The Corporation 
        may offer plans of insurance or reinsurance for only 1 
        agricultural commodity produced on specific acreage 
        during a crop year, unless--
                  (A) there is an established practice of 
                double-cropping in an area, as determined by 
                the Corporation;
                  (B) the additional plan of insurance is 
                offered with respect to an agricultural 
                commodity that is customarily double-cropped in 
                the area; and
                  (C) the producer has a history of double 
                cropping or the specific acreage has 
                historically been double-cropped.

           *       *       *       *       *       *       *


[SEC. 515. ADVISORY COMMITTEE FOR FEDERAL CROP INSURANCE.

    [(a) Establishment.--The Secretary may establish within the 
Department an advisory committee to be known as the ``Advisory 
Committee for Federal Crop Insurance''.
    [(b) Primary Responsibility.--The primary responsibility of 
the Advisory Committee shall be to advise the Secretary on the 
implementation of this title and on other issues related to 
crop insurance, as determined by the Manager of the 
Corporation.
    [(c) Membership.--The Advisory Committee shall be composed 
of the Manager of the Corporation, the Secretary (or a designee 
of the Secretary), and not fewer than 12 members representing 
organizations and agencies involved in the provision of crop 
insurance under this title. Not fewer than 3 of the members of 
the Advisory Committee shall be representatives of the 
specialty crops industry. The organizations or agencies 
represented by members on the Advisory Committee may include 
insurance companies, insurance agents, farm producer 
organizations, experts on agronomic practices, and banking and 
lending institutions.
    [(d) Administrative Provisions.--
          [(1) Terms.--Members of the Advisory Committee (other 
        than the Manager of the Corporation and the Secretary) 
        shall be appointed by the Secretary for a term of up to 
        2 years from nominations made by the organizations and 
        agencies specified in subsection (c). The terms of the 
        members (other than the Manager of the Corporation and 
        the Secretary) shall be staggered.
          [(2) Chairperson.--The Advisory Committee shall be 
        chaired by the Manager of the Corporation.
          [(3) Meetings.--The Advisory Committee shall meet at 
        least annually. The meetings of the Advisory Committee 
        shall be publicly announced in advance and shall be 
        open to the public. Appropriate records of the 
        activities of the Advisory Committee shall be kept and 
        made available to the public on request.
    [(e) Reports.--Not later than June 30 of each year, the 
Advisory Committee shall submit to the Secretary a report 
specifying the conclusions and recommendations of the Advisory 
Committee regarding--
          [(1) the progress toward implementation of this 
        title;
          [(2) the actuarial soundness of the Federal crop 
        insurance program;
          [(3) the rate of producer participation in both 
        catastrophic risk protection under section 508(b) and 
        additional coverage under section 508(c); and
          [(4) the progress toward improved crop insurance 
        coverage for new and specialty crops.
    [(f) Termination of Authority.--The authority provided by 
this section shall terminate on September 30, 1998.]

SEC. 515. FEDERAL CROP INSURANCE IMPROVEMENT COMMISSION.

    (a) Definitions.--In this section:
          (1) Commission.--The term ``Commission'' means the 
        Federal Crop Insurance Improvement Commission 
        established by subsection (b).
          (2) Specialty crop.--The term ``specialty crop'' 
        means an agricultural commodity other than a contract 
        commodity (as defined in section 102 of the 
        Agricultural Marketing Transition Act (7 U.S.C. 7202)).
    (b) Establishment of Commission.--There is established a 
Commission to be known as the ``Federal Crop Insurance 
Improvement Commission''.
    (c) Membership.--
          (1) In general.--The Commission shall be composed of 
        the following 9 members:
                  (A) The Under Secretary for Farm and Foreign 
                Agricultural Services of the Department.
                  (B) The manager of the Corporation.
                  (C) The Chief Economist of the Department or 
                a person appointed by the Chief Economist.
                  (D) An employee of the Office of Management 
                and Budget, appointed by the Director of the 
                Office of Management and Budget.
                  (E) A representative of the National 
                Association of Insurance Commissioners, 
                experienced in insurance regulation, appointed 
                by the National Association of Insurance 
                Commissioners.
                  (F) Representatives of 3 approved insurance 
                providers (the 3 approved insurance providers 
                being elected by majority vote of all approved 
                insurance providers), appointed by the 3 
                approved insurance providers.
                  (G) A representative of a private nonprofit 
                organization designated by the manager of the 
                Corporation--
                          (i) that is organized and has 
                        operated for at least 5 consecutive 
                        years as an insurance advisory and 
                        statistical agent organization for crop 
                        insurance written in the United States;
                          (ii) that is licensed and approved as 
                        a statistical agent by substantially 
                        all States in which federally reinsured 
                        crop insurance is sold; and
                          (iii) the activities of which have 
                        included--
                                  (I) the accumulation and 
                                analysis of loss expenses and 
                                other crop insurance 
                                statistics;
                                  (II) the development of forms 
                                for crop insurance policies; 
                                and
                                  (III) the development of 
                                procedures for loss adjustment;
          (2) Time of appointment.--The members of the 
        Commission shall be appointed not later than 60 days 
        after the date of enactment of the Risk Management for 
        the 21st Century Act.
          (3) Term.--A member of the Commission shall serve for 
        the life of the Commission.
    (d) Duties.--The Commission shall study the following 
subjects:
          (1) The extent to which approved insurance providers 
        should bear the risk of loss for federally subsidized 
        crop insurance.
          (2) Whether the Corporation should--
                  (A) continue to provide financial assistance 
                for the benefit of agricultural producers by 
                reinsuring coverage written by approved 
                insurance providers; or
                  (B) provide assistance in another form, such 
                as by acting as an excess insurer.
          (3) The extent to which development of new insurance 
        products should be undertaken by the private sector, 
        including development of insurance products for 
        specialty crops.
          (4) The use by the Corporation of private sector 
        resources under section 507(c).
          (5) The progress of the Corporation in reducing 
        administrative and operating costs of approved 
        insurance providers under section 508(k)(5).
          (6) The identification of methods, and of 
        organizational, statutory, and structural changes, to 
        enhance and improve--
                  (A) delivery of reasonably priced crop 
                insurance products to agricultural producers;
                  (B) loss adjustment procedures;
                  (C) good farming practices;
                  (D) the establishment of premiums; and
                  (E) compliance with this title (including 
                regulations issued under this title, the terms 
                and conditions of insurance coverage, and 
                adjustments of losses).
    (e) Commission Operations.--
          (1) Chairperson; voting.--The Under Secretary for 
        Farm and Foreign Agricultural Services of the 
        Department of Agriculture shall--
                  (A) serve as Chairperson of the Commission; 
                and
                  (B) vote in the case of a tie.
          (2) Meetings.--
                  (A) In general.--The Commission shall meet 
                regularly, but not less than 6 times per year.
                  (B) Time.--A meeting may be called--
                          (i) at any time, by the Chairperson; 
                        or
                          (ii) notwithstanding section 10(f) of 
                        the Federal Advisory Committee Act (5 
                        U.S.C. App.), by any 3 members of the 
                        Commission, if those members give 
                        notice to the Commission not later than 
                        10 days before the date of the meeting.
          (3) Disclosure.--
                  (A) In general.--To the extent that the 
                records, papers, or other documents received, 
                prepared, or maintained by the Commission are 
                subject to public disclosure, the documents 
                shall be available for public inspection and 
                copying at the Office of Risk Management.
                  (B) Exceptions.--Section 10(a) of the Federal 
                Advisory Committee Act (5 U.S.C. App.) shall 
                not apply to--
                          (i) a meeting of the Commission; or
                          (ii) any disclosure of records, 
                        reports, transcripts, minutes, 
                        appendixes, working papers, drafts, 
                        studies, agenda, or other similar 
                        documents containing such information 
                        as is not required under section 10(b) 
                        of that Act.
                  (C) Applicability.--The exceptions described 
                in subparagraph (B) shall not exempt the 
                Commission from any requirement of--
                          (i) section 10(a)(2) of the Federal 
                        Advisory Committee Act (5 U.S.C. App.) 
                        (to the extent of giving public notice 
                        of its meetings);
                          (ii) section 10(a)(3) of that Act (to 
                        the extent of allowing interested 
                        persons to appear and to present or 
                        file statements); or
                          (iii) section 10(c) of that Act.
          (4) Compensation.--
                  (A) In general.--Except as provided in 
                subparagraph (B), a member of the Commission 
                who is employed by the Department or by another 
                agency, department, or office of the Federal 
                Government shall receive no additional 
                compensation for the services of the employee 
                as a member of the Commission.
                  (B) Expenses.--A member of the Commission may 
                be allowed necessary traveling and subsistence 
                expenses when engaged in business of the 
                Commission.
                  (C) Non-federal members.--A member of the 
                Commission who is not employed by the Federal 
                Government, when on the business of the 
                Commission away from the home or regular place 
                of business of the member, shall be paid--
                          (i) compensation for the services of 
                        the member at the daily equivalent of 
                        the annual rate of basic pay prescribed 
                        for level IV of the Executive Schedule 
                        under section 5315 of title 5, United 
                        States Code; and
                          (ii) necessary traveling and 
                        subsistence expenses (or a per diem 
                        allowance in lieu of subsistence 
                        expenses) as authorized by section 5703 
                        of title 5, United States Code, for 
                        persons employed intermittently in the 
                        Federal Government service.
          (5) Miscellaneous accommodations.--
                  (A) Office space.--The Under Secretary for 
                Farm and Foreign Agricultural Services (or, on 
                delegation by the Under Secretary for Farm and 
                Foreign Agricultural Services, the manager of 
                the Corporation) shall arrange for the 
                Commission to occupy offices and meeting rooms 
                at the offices of the Department in the 
                District of Columbia, in accordance with 
                section 5(b)(5) of the Federal Advisory 
                Committee Act (5 U.S.C. App.).
                  (B) Support services.--The Department shall 
                provide support services for the Commission in 
                accordance with section 12 of the Federal 
                Advisory Committee Act (5 U.S.C. App.).
          (6) Staff.--
                  (A) In general.--The Commission may employ 
                staff and retain the services of professionals 
                such as accountants, actuaries, attorneys, 
                economists, and management consultants to 
                assist the Commission in carrying out its 
                duties under this section.
                  (B) Compensation.--In accordance with 
                subparagraph (C), the Commission--
                          (i) may compensate staff hired and 
                        professionals retained under 
                        subparagraph (A) on such terms and in 
                        such amounts as are customary and 
                        reasonable within the private sector; 
                        and
                          (ii) shall not be limited in any 
                        respect to terms, amounts, and 
                        limitations related to compensation 
                        that would apply if the Commission were 
                        retaining contractors to or for a 
                        governmental entity.
                  (C) Limitation on compensation.--The 
                aggregate of all staff and professional 
                compensation shall not exceed $4,000,000 per 
                year.
                  (D) Reimbursement.--A member of the 
                Commission may be reimbursed for the costs of 
                professional services obtained by the member to 
                assist in the work of the member for the 
                Commission, except that--
                          (i) no reimbursement (other than 
                        travel and subsistence expenses) shall 
                        be allowed with respect to any services 
                        rendered by any person otherwise 
                        employed by the Federal Government;
                          (ii) a majority of the Commission 
                        shall approve in advance the retention 
                        by a member of professional services, 
                        including the terms of compensation of 
                        the professional;
                          (iii) the services to be reimbursed 
                        shall relate exclusively to the work of 
                        the Commission;
                          (iv) the work product of any 
                        professional hired under this paragraph 
                        shall be available to the Commission 
                        and all professionals engaged by the 
                        Commission;
                          (v) no reimbursement may be made 
                        without approval by a majority of the 
                        Commission; and
                          (vi) the aggregate amount of all such 
                        services for all members of the 
                        Commission under this subparagraph 
                        shall not exceed $1,000,000 for each 
                        fiscal year.
          (7) Source of funds.--All expenses of the Commission, 
        including payments made under paragraphs (4) and (6), 
        shall be paid from the insurance fund established under 
        section 516.
    (f) Final Report.--
          (1) In general.--Not later than 2 years after the 
        date of enactment of the Risk Management for the 21st 
        Century Act, the Commission shall submit to the 
        Committee on Agriculture of the House of 
        Representatives and the Committee on Agriculture, 
        Nutrition, and Forestry of the Senate a final report on 
        the study under subsection (d).
          (2) Copies.--The Commission shall provide copies of 
        the final report to--
                  (A) the Secretary;
                  (B) the Board; and
                  (C) the Comptroller General of the United 
                States.
          (3) Interim reports.--To expedite completion of the 
        work of the Commission, the Commission may submit 1 or 
        more interim reports or reports on 1 or more of the 
        subjects to be studied.
    (g) Termination.--The Commission shall terminate on the 
earlier of--
          (1) 60 days after the date on which the Commission 
        submits the final report under subsection (f); or
          (2) September 30, 2004.

SEC. 516. FUNDING.

    (a) Authorization of Appropriations.--
          (1) [Discretionary expenses.--There are authorized to 
        be appropriated for fiscal year 1999 and each 
        subsequent fiscal year such sums as are necessary to 
        cover the salaries and expenses of the Corporation.] 
        There are authorized to be appropriated for fiscal year 
        1999 and each subsequent fiscal year such sums as are 
        necessary to cover--
                  (A) the salaries and expenses of the 
                Corporation; and
                  (B) the expenses of approved insurance 
                providers incurred in carrying out section 
                522(c).
          (2) Mandatory expenses.--There are authorized to be 
        appropriated such sums as are necessary to cover for 
        each of the 1999 and subsequent reinsurance years--
                  (A) the administrative and operating expenses 
                of the Corporation for the sales commissions of 
                agents; [and]
                  (B) premium subsidies, including the 
                administrative and operating expenses of an 
                approved insurance provider for the delivery of 
                policies with additional coverage[.];
                  (C) risk management payments authorized under 
                section 522(c) in an amount not to exceed 
                $500,000,000 for the period of fiscal years 
                2002 through 2004, of which not more than 
                $200,000,000 may be expended for any 1 fiscal 
                year; and
                  (D) all necessary amounts to fund the 
                operations of the Commission authorized under 
                section 515.
    (b) Payment of Corporation Expenses From Insurance Fund.--
          (1) Expenses generally.--

           *       *       *       *       *       *       *

                  (B) administrative and operating expenses of 
                the Corporation necessary to pay the sales 
                commissions of agents; [and]
                  (C) all administrative and operating expense 
                reimbursements due under a reinsurance 
                agreement with an approved insurance 
                provider[.];
                  (D) the salaries and expenses of the 
                Executive Director and staff appointed under 
                section 505(a)(6) for fiscal year 2001, but not 
                to exceed $500,000 for the fiscal year; and
                  (E) payment of fees in accordance with 
                section 508(h)(5)(C).
          (2) Research and development expenses.--
                  (A) In general.--For each of the 1999 and 
                subsequent reinsurance years, the Corporation 
                may pay from the insurance fund established 
                under subsection (c) research and development 
                expenses of the Corporation, but not to [exceed 
                $3,500,000 for each fiscal year] exceed--
                          (i) in the case of each of fiscal 
                        years 2001 and 2002, $4,500,000;
                          (ii) in the case of each of fiscal 
                        years 2003 and 2004, $3,750,000; and
                          (iii) in the case of each subsequent 
                        fiscal year, $3,500,000.

           *       *       *       *       *       *       *

          (3) Funds for commission.--For each of fiscal years 
        2001 through 2004, the Corporation shall pay from the 
        insurance fund established under subsection (c) such 
        sums as are necessary to fund the operation of the 
        Commission authorized under section 515.
    (c) Insurance Fund.--
          (1) In general.--[There is established an insurance 
        fund, for the deposit of premium income and amounts 
        made available under subsection (a)(2), to be available 
        without fiscal year limitation.] There is established 
        the insurance fund, which shall include (to remain 
        available without fiscal year limitation)--
                  (A) premium income and fees;
                  (B) amounts made available under subsection 
                (a)(2); and
                  (C) civil fines collected under section 
                506(n)(3)(A).

           *       *       *       *       *       *       *


SEC. 518. AGRICULTURAL COMMODITY.

    ``Agricultural commodity'', as used in this title, means 
wheat, cotton, flax, corn, dry beans, oats, barley, rye, 
tobacco, rice, peanuts, soybeans, sugar beets, sugar cane, 
tomatoes, grain sorghum, sunflowers, raisins, oranges, sweet 
corn, dry peas, freezing and canning peas, forage, apples, 
grapes, potatoes, timber and forests, nursery crops, citrus, 
and other fruits and vegetables, nuts, tame hay, native grass, 
aquacultural species (including, but not limited to, any 
species of finfish, mollusk, crustacean, or other aquatic 
invertebrate, amphibian, reptile, or aquatic plant propagated 
or reared in a controlled or selected environment), or any 
other agricultural commodity, excluding livestock and stored 
grain, determined by the Board under [subsection (a) or (m) of 
section 508 of this title] section 508(a), 522, or 523, or any 
one or more of such commodities, as the context may indicate.

           *       *       *       *       *       *       *


SEC. 522. RESEARCH AND PILOT PROGRAMS.

    (a) General Provisions.--
          (1) In general.--Except as otherwise provided in this 
        subsection, the Corporation may conduct research, 
        surveys, pilot programs, and investigations relating to 
        crop insurance and agriculture-related risks and losses 
        based on proposals developed by the Corporation or by 
        an approved insurance provider to evaluate whether the 
        proposal or new risk management tool is suitable for 
        the marketplace and addresses the needs of producers of 
        agricultural commodities.
          (2) Private coverage.--Under this section, the 
        Corporation shall not conduct any activity that 
        provides insurance protection against a risk if 
        insurance protection against the risk is generally 
        available from private companies.
          (3) Covered activities.--The activities described in 
        paragraph (1) include insurance on losses involving--
                  (A) reduced forage on rangeland caused by 
                drought or insect infestation;
                  (B) livestock poisoning and disease;
                  (C) destruction of bees due to the use of 
                pesticides;
                  (D) unique special risks related to fruits, 
                nuts, vegetables, and specialty crops in 
                general, aquacultural species, and forest 
                industry needs (including appreciation);
                  (E) loss of timber due to drought, flood, 
                fire, or other natural disaster;
                  (F) other agricultural products as determined 
                by the Board; and
                  (G) after October 1, 2000, insurance coverage 
                for livestock.
          (4) Scope of pilot programs.--The Corporation may--
                  (A) offer a pilot program authorized under 
                this title on a regional, State, or national 
                basis after considering the interests of 
                affected producers and the interests of, and 
                risks to, the Corporation;
                  (B) operate the pilot program, including any 
                modifications of the pilot program, for a 
                period of up to 4 years;
                  (C) extend the time period for the pilot 
                program for additional periods, as determined 
                appropriate by the Corporation; and
                  (D) provide pilot programs that would allow 
                producers--
                          (i) to receive premium discounts for 
                        using whole farm units or single crop 
                        units of insurance; and
                          (ii) to cross State and county 
                        boundaries to form insurable units.
          (5) Evaluation.--After the completion of any pilot 
        program under this section, the Corporation shall 
        evaluate the pilot program and submit to the Committee 
        on Agriculture of the House of Representatives and the 
        Committee on Agriculture, Nutrition, and Forestry of 
        the Senate, a report on the operations of the pilot 
        program, including the evaluation by the Corporation of 
        the pilot program and the recommendations of the 
        Corporation with respect to implementing the program on 
        a national basis.
          (6) Funding.--The amount of funds used to carry out 
        research and pilot programs that are established after 
        the date of enactment of this section (other than 
        subsection (b)(2)) shall not exceed--
                  (A) in the case of fiscal year 2001, 
                $20,000,000;
                  (B) in the case of fiscal year 2002, 
                $40,000,000;
                  (C) in the case of fiscal year 2003, 
                $60,000,000; and
                  (D) in the case of fiscal year 2004, 
                $80,000,000.
          (7) Fiscal years.--Paragraphs (3)(E), (3)(G), (4), 
        and (6) shall apply to each of fiscal years 2001 
        through 2004.
          (8) Relation to other laws.--
                  (A) In general.--The terms and conditions of 
                any policy or plan of insurance offered under 
                this section that is reinsured by the 
                Corporation shall not--
                          (i) be subject to the jurisdiction of 
                        the Commodity Futures Trading 
                        Commission or the Securities and 
                        Exchange Commission; or
                          (ii) be considered to be accounts, 
                        agreements (including any transaction 
                        that is of the character of, or is 
                        commonly known to the trade as, an 
                        ``option'', ``privilege'', 
                        ``indemnity'', ``bid'', ``offer'', 
                        ``put'', ``call'', ``advance 
                        guaranty'', or ``decline guaranty''), 
                        or transactions involving contracts of 
                        sale of a commodity for future 
                        delivery, traded or executed on a 
                        contract market for the purposes of the 
                        Commodity Exchange Act (7 U.S.C. 1 et 
                        seq.).
                  (B) Effect on CFTC and commodity exchange 
                act.--Nothing in this paragraph affects the 
                jurisdiction of the Commodity Futures Trading 
                Commission or the applicability of the 
                Commodity Exchange Act (7 U.S.C. 1 et seq.) to 
                any transaction conducted on a contract market 
                under that Act by an approved insurance 
                provider to offset the approved insurance 
                provider's risk under a plan or policy of 
                insurance under this section.
    (b) Research and Development Contracting Authority.--
          (1) In general.--Subject to section 523(a), to obtain 
        the best research and analysis concerning any 
        significant issue pertaining to crop insurance, 
        including outreach and education, pilot programs, or 
        the development of a new plan of insurance, the 
        Corporation may use only the authority provided by this 
        section and funds made available under section 
        516(b)(2)(A) to--
                  (A) contract on a competitive basis with 
                qualified persons;
                  (B) reimburse research costs associated with 
                product development; and
                  (C) reimburse costs associated with the 
                reassessment and modification of plans of 
                insurance.
          (2) Alternative rating methodologies.--
                  (A) In general.--The Corporation shall enter 
                into contracts with qualified persons to study 
                and develop alternative methodologies for 
                rating plans of insurance for catastrophic risk 
                protection and higher levels of additional 
                coverage under subsections (b) and (c), 
                respectively, of section 508, and rates for the 
                plans of insurance, that take into account--
                          (i) producers that elect not to 
                        participate in the Federal crop 
                        insurance program; and
                          (ii) producers that elect to obtain 
                        only catastrophic risk protection.
                  (B) Priority.--The studies conducted under 
                this paragraph shall provide priority to 
                agricultural commodities with--
                          (i) the largest average acreage 
                        nationwide; and
                          (ii) the lowest percentage of 
                        producers that purchase additional 
                        coverage.
                  (C) Funding.--
                          (i) In general.--The Corporation 
                        shall fund the studies conducted under 
                        this paragraph from funds in the 
                        insurance fund available under section 
                        516(b)(2)(A).
                          (ii) Amount.--There are authorized 
                        for the studies conducted under this 
                        paragraph--
                                  (I) in the case of each of 
                                fiscal years 2001 and 2002, 
                                $1,000,000; and
                                  (II) in the case of each of 
                                fiscal years 2003 and 2004, 
                                $250,000.
                  (D) Fiscal years.--This paragraph shall apply 
                to each of fiscal years 2001 through 2004.
          (3) Research and development priorities.--The 
        Corporation shall establish, as 1 of the highest 
        research and development priorities of the Corporation, 
        the development of a pasture, range, and forage program 
        to promote land stewardship.
          (4) Study of multi year coverage.--
                  (A) In general.--The Corporation shall 
                contract with a qualified person to conduct a 
                study to determine whether offering plans of 
                insurance that provide coverage for multiple 
                years would reduce fraud and abuse by persons 
                that participate in the Federal crop insurance 
                program.
                  (B) Report.--Not later than 1 year after the 
                date of enactment of this section, the 
                Corporation shall submit to the Committee on 
                Agriculture of the House of Representatives and 
                the Committee on Agriculture, Nutrition, and 
                Forestry of the Senate a report that describes 
                the results of the study conducted under 
                subparagraph (A).
    (c) Choice of Risk Management Options.--
          (1) Definitions.--In this subsection:
                  (A) Agricultural commodity.--The term 
                ``agricultural commodity'' means each 
                agricultural commodity specified in section 
                518--
                          (i) for which catastrophic risk 
                        protection or additional coverage is 
                        available under this title, other than 
                        solely this section; and
                          (ii) that is selected by the 
                        Secretary in a manner that--
                                  (I) encourages the maximum 
                                number of participants in the 
                                program under this subsection;
                                  (II) provides a mixture of 
                                program, specialty, and 
                                regional crops; and
                                  (III) gives consideration to 
                                agricultural commodities with 
                                low crop insurance 
                                participation rates.
                  (B) Applicable crop.--The term ``applicable 
                crop'' means each of the 2002 through 2004 
                crops of an agricultural commodity produced by 
                a producer.
                  (C) Applicable year.--The term ``applicable 
                year'' means the year in which--
                          (i) the applicable crop is produced 
                        on the farm of a producer; and
                          (ii) the producer elects to receive a 
                        risk management payment or crop 
                        insurance premium subsidy under this 
                        subsection.
                  (D) Regulated exchange.--The term ``regulated 
                exchange'' means a board of trade (as defined 
                in section 1a of the Commodity Exchange Act (7 
                U.S.C. 1a)) that is designated as a contract 
                market under section 2(a)(1)(B) of that Act (7 
                U.S.C. 2a).
          (2) Risk management payments.--
                  (A) Offer.--The Corporation shall offer 
                either to make either risk management payments 
                or to provide crop insurance premium subsidies 
                for each of the 2002 through 2004 crops of an 
                agricultural commodity in accordance with 
                subparagraph (B).
                  (B) Terms.--Not later than the sales closing 
                date for obtaining coverage for an agricultural 
                commodity for each applicable year, an eligible 
                producer may elect to receive, with respect to 
                the agricultural commodity--
                          (i) a risk management payment under 
                        this subsection; or
                          (ii) a crop insurance premium 
                        subsidy, including a catastrophic risk 
                        protection subsidy, under this 
                        subsection.
          (3) Risk management payment.--
                  (A) In general.--In the case of a producer 
                that elects to receive a risk management 
                payment for an applicable crop of an 
                agricultural commodity under this subsection, 
                the Corporation shall make a risk management 
                payment to the producer that covers the 
                agricultural commodity produced by the producer 
                for the applicable crop.
                  (B) Basis for payment.--The amount of a risk 
                management payment shall be determined in 
                accordance with paragraph (5).
          (4) Qualifying risk management practices.--To be 
        eligible for a risk management payment under this 
        subsection for an applicable crop of an agricultural 
        commodity, a producer shall obtain or use for the 
        applicable crop a qualifying risk management practice 
        from at least 2 of the following categories:
                  (A) Crop insurance category.--A producer may 
                purchase coverage for an agricultural commodity 
                under a private plan of insurance or a Federal 
                plan of insurance that is not subsidized.
                  (B) Marketing risk category.--
                          (i) Future or option.--A producer may 
                        enter into a future or option for an 
                        agricultural commodity produced on the 
                        farm of the producer for the applicable 
                        crop on a regulated exchange that is 
                        (as determined by the Corporation)--
                                  (I)(aa) in the case of a 
                                future, at least 1 regulated 
                                futures contract (as defined in 
                                section 1256(g) of the Internal 
                                Revenue Code of 1986); and
                                  (bb) in the case of an 
                                option, at least 1 listed 
                                option (as defined in section 
                                1256(g) of that Code); and
                                  (II) a hedging transaction 
                                (as defined in section 
                                1256(e)(2) of that Code) 
                                involving an agricultural 
                                commodity that is used to 
                                reduce production, price, or 
                                revenue risk.
                          (ii) Agricultural trade option.--A 
                        producer may purchase, on other than a 
                        regulated exchange, an agricultural 
                        trade option for the applicable crop of 
                        an agricultural commodity produced on 
                        the farm of the producer that (as 
                        determined by the Corporation)--
                                  (I) provides coverage for at 
                                least 10 percent of the 
                                estimated monetary value of the 
                                agricultural commodity;
                                  (II) is an equity option (as 
                                defined in section 1256(g) of 
                                the Internal Revenue Code of 
                                1986); and
                                  (III) is a hedging 
                                transaction (as defined in 
                                section 1256(e)(2) of that 
                                Code) involving an agricultural 
                                commodity that is used to 
                                reduce production, price, or 
                                revenue risk.
                          (iii) Cash forward or other marketing 
                        contract.--A producer may enter into a 
                        cash forward or other type of marketing 
                        contract for at least 20 percent of the 
                        monetary value of an agricultural 
                        commodity produced on the farm of the 
                        producer for the applicable crop, as 
                        determined by the Secretary.
                          (iv) Marketing through 
                        cooperatives.--A producer may market at 
                        least 25 percent of an agricultural 
                        commodity produced by the producer 
                        through a cooperative that is owned by 
                        agricultural producers.
                  (C) Financial risk category.--
                          (i) Trust.--A producer may make a 
                        deposit of an amount equal to at least 
                        10 percent of the payments of the 
                        producer for the applicable year under 
                        the Agricultural Market Transition Act 
                        (7 U.S.C. 7201 et seq.) into a trust 
                        authorized by statute for eligible 
                        farming businesses that may be 
                        established to accept tax deductible 
                        contributions.
                          (ii) Agricultural marketing and risk 
                        management education.--A producer may 
                        attend and complete in the applicable 
                        year an agricultural marketing or risk 
                        management class or seminar approved by 
                        the Corporation.
                          (iii) Financial risk reduction.--A 
                        producer may reduce farm financial risk 
                        by reducing debt in an amount that 
                        reduces leverage or by increasing 
                        liquidity, as determined by the 
                        Secretary.
                          (iv) Diversification.--A producer may 
                        address production or financial risk 
                        by--
                                  (I) diversifying production 
                                on the farm of the producer by 
                                producing at least 1 additional 
                                commodity on the farm;
                                  (II) significantly increasing 
                                farm enterprise diversification 
                                in the applicable year, as 
                                determined by the Secretary;
                                  (III) maintaining an 
                                integrated farming system with 
                                a substantial degree of 
                                diversification, as determined 
                                by the Secretary; or
                                  (IV) implementing a 
                                transition to organic farming.
                  (D) Farm resources risk category.--
                          (i) Conservation practices.--A 
                        producer may implement new or existing 
                        conservation practices consisting of--
                                  (I) nutrient management;
                                  (II) integrated pest 
                                management;
                                  (III) conservation tillage;
                                  (IV) conservation buffers; or
                                  (V) other conservation 
                                practices that are appropriate 
                                for the farm, as determined by 
                                the Secretary.
                          (ii) Agricultural conservation 
                        management plan.--A producer may 
                        develop a plan to mitigate financial 
                        risk associated with resource 
                        conservation through practices 
                        consisting of--
                                  (I) nutrient management;
                                  (II) integrated pest 
                                management;
                                  (III) soil erosion control;
                                  (IV) conservation buffers;
                                  (V) soil residue management;
                                  (VI) water quantity or 
                                quality management; or
                                  (VII) other conservation 
                                practices that are appropriate 
                                for the farm, as determined by 
                                the Secretary.
                          (iii) Agricultural resource 
                        improvements.--A producer may invest in 
                        the improvement or development of 1 or 
                        more of the following capital land 
                        improvements on the farm of the 
                        producer to reduce production risk:
                                  (I) Irrigation management.
                                  (II) Watershed management 
                                structures.
                                  (III) Planting trees for 
                                windbreaks or water quality.
                                  (IV) Soil quality management 
                                options.
                                  (V) Animal waste management 
                                structures.
                                  (VI) Other land improvements, 
                                as determined by the Secretary.
                  (E) Other category.--A producer may engage in 
                any other risk management practice approved by 
                the Secretary.
          (5) Determination of risk management payment.--
                  (A) In general.--The Secretary shall 
                determine the amount of a risk management 
                payment for an agricultural commodity produced 
                on the farm of a producer for an applicable 
                crop taking into consideration the expenditure 
                by the producer on the risk management 
                practices obtained or used by the producer.
                  (B) Maximum payment.--No payment shall be 
                made in excess of an amount equal to the 
                average of the previous year's liability for 
                all catastrophic risk protection policies.
                  (C) Funding.--
                          (i) In general.--Subject to clause 
                        (ii), there are authorized to be 
                        expended to carry out this subsection 
                        from the insurance fund under section 
                        516(b)(2)(C) not more than $500,000,000 
                        for the period fiscal years 2002 
                        through 2004 .
                          (ii) Annual limitation.--Not more 
                        than $200,000,000 may be expended in 
                        any fiscal year to carry out this 
                        subsection.
          (6) Administrative provisions.--
                  (A) Certification.--A producer shall submit 
                to the crop insurance agent or approved 
                insurance provider a risk management practices 
                form that certifies, in accordance with 
                standards prescribed by the Secretary, the 
                qualifying risk management practices and 
                associated costs that were obtained or used by 
                the producer during the applicable year.
                  (B) Compliance.--The Corporation may perform 
                random audits of producers that obtain a risk 
                management payment to ensure that the producers 
                obtained or used the qualifying risk management 
                practices described in the form.
                  (C) Violation of terms of risk management 
                payment.--If a producer has accepted a risk 
                management payment or crop insurance premium 
                subsidy for an applicable year and the producer 
                fails to comply with subparagraph (A), or to 
                carry out a qualifying risk management option 
                elected by the producer under paragraph (4), 
                with respect to the applicable year, the 
                producer--
                          (i) shall refund to the Corporation 
                        an amount equal to the risk management 
                        payment; and
                          (ii) may be subject to debarment from 
                        loans and payments for a period of not 
                        to exceed 5 years, as provided in 
                        section 506(n)(3)(B).
                  (D) Assignment and sharing of benefits.--
                          (i) Assignment of benefits.--
                        Assignment of a benefit provided under 
                        this subsection shall be carried out as 
                        provided in section 8(g) of the Soil 
                        Conservation and Domestic Allotment Act 
                        (16 U.S.C. 590h(g)).
                          (ii) Notice.--The producer making the 
                        assignment, or the assignee, shall 
                        provide the Corporation with notice, in 
                        such manner as the Corporation may 
                        require, of any assignment.
                          (iii) Sharing of benefits.--The 
                        Corporation shall provide for the 
                        sharing of benefits under this 
                        subsection among all producers that are 
                        at risk in the production of an 
                        applicable crop on a fair and equitable 
                        basis.
          (7) Fiscal years.--This subsection shall apply to 
        each of fiscal years 2002 through 2004.

SEC. 523. SPECIALTY CROPS.

    (a) Research Regarding the Development of New or Revised 
Crop Insurance Policies.--To encourage the development of new 
or revised crop insurance policies and other materials for 
specialty crops by qualified private entities, and the 
submission of those insurance policies and other materials to 
the Corporation under section 508(h), the Specialty Crops 
Coordinator may--
          (1) make grants on a competitive basis for the 
        research and development of plans of insurance for 
        under served specialty crops;
          (2) reimburse research costs associated with product 
        development; and
          (3) enter into contracts on a competitive basis for 
        the research and development of plans of insurance for 
        under served specialty crops.
    (b) Partnerships for Development of Risk Management Tools 
for Specialty Crops.--
          (1) Purpose.--The purpose of this subsection is to 
        authorize the Specialty Crops Coordinator, on behalf of 
        the Corporation, to enter into partnerships with 
        qualified public and private entities for the purpose 
        of increasing the availability of risk management tools 
        for producers of specialty crops.
          (2) Authority.--
                  (A) In general.--For each of fiscal years 
                2001 through 2004, the Corporation may use not 
                more than $20,000,000 from funds in the 
                insurance fund under section 516(c)(1) to enter 
                into partnerships with the Cooperative State 
                Research, Education, and Extension Service, the 
                Agricultural Research Service, the National 
                Oceanic and Atmospheric Administration, and 
                other appropriate public and private entities 
                with demonstrated capabilities in developing 
                and implementing risk management and marketing 
                options for specialty crops.
                  (B) Exclusion.--Amounts necessary to carry 
                out subparagraph (A) shall not be in addition 
                to the limitation on research and development 
                expenses established in section 516(b)(2)(A).
          (3) Objectives.--The Corporation may enter into a 
        partnership under this subsection to--
                  (A) enhance the notice, and timeliness of 
                notice of weather conditions, that could 
                negatively affect specialty crop yields, 
                quality, and final product use in order to 
                allow producers to take preventive actions to 
                increase end-product profitability and 
                marketability and to reduce the possibility of 
                crop insurance claims;
                  (B) develop a multifaceted approach to pest 
                management to decrease inputs, decrease the 
                development of pest resistance, and increase 
                the effectiveness of pest prevention 
                applications;
                  (C) develop a multifaceted approach to 
                fertilization to decrease inputs, decrease 
                excessive nutrient loading to the environment, 
                and increase application efficiency;
                  (D) develop or improve techniques for 
                planning, breeding, growing, maintaining, 
                harvesting, storage, and shipping that will 
                address quality and quantity challenges for 
                specialty crops and livestock associated with 
                year-to-year and regional variations;
                  (E) provide assistance to State foresters or 
                equivalent officials for the prescribed use of 
                burning on private forest land for the 
                prevention, control, and suppression of fire; 
                and
                  (F) develop other risk management tools that 
                specialty crop producers can use to further 
                increase their economic and production 
                stability.
    (c) Time Periods for Purchase of Coverage for Specialty 
Crops.--
          (1) Sales closing date.--The sales closing date for 
        obtaining coverage for a specialty crop under this 
        title may not expire before the end of the 120-day 
        period beginning on the date of the final release of 
        materials for policies from the Risk Management Agency 
        and the Specialty Crops Coordinator.
          (2) Purchase during insurance period.--A producer of 
        a specialty crop may purchase new coverage for the 
        specialty crop, or increase coverage levels, at any 
        time during the insurance period, subject to a 30-day 
        waiting period for the coverage to take effect to 
        permit an inspection to verify acceptability by the 
        insurance provider.
    (d) Studies of New Specialty Crop Insurance Policies.--
          (1) In general.--The Corporation and the Specialty 
        Crops Coordinator authorized under section 507(g) shall 
        jointly conduct studies of the feasibility of 
        developing new insurance policies for specialty crops, 
        including policies based on the cost of production or 
        adjusted gross income, quality-based policies, or an 
        intermediate program with a higher coverage and cost 
        than the catastrophic risk protection offered on the 
        date of enactment of this section.
          (2) Submission of results.--Not later than 1 year 
        after the date of enactment of this section, and 
        annually thereafter, the Corporation and the Specialty 
        Crops Coordinator shall submit to Congress a report 
        containing the results of the studies required under 
        this subsection.
    (e) Fiscal Years.--Subsections (b) and (c) shall apply to 
each of fiscal years 2001 through 2004.
                              ----------                              


                   AGRICULTURAL MARKET TRANSITION ACT


SEC.101. SHORT TITLE AND PURPOSE.

           *       *       *       *       *       *       *


SEC. 196. ADMINISTRATION AND OPERATION OF NONINSURED CROP ASSISTANCE 
                    PROGRAM.

    (a) Operation and Administration of Program.--

           *       *       *       *       *       *       *

          (2) Eligible crops.--

           *       *       *       *       *       *       *

                  (C) Combination of similar types or 
                varieties.--At the option of the Secretary, all 
                types or varieties of a crop or commodity, 
                described in subparagraphs (A) and (B), may be 
                considered to be a single eligible crop under 
                this section.
    (b) Application for Noninsured Crop Disaster Assistance.--
          (1) Timely application.--To be eligible for 
        assistance under this section, a producer shall submit 
        an application for noninsured crop disaster assistance 
        at a local office of the Department. The application 
        shall be in such form, contain such information, and be 
        submitted [at such time as the Secretary may require] 
        not later than March 15.
          (2) Records.--[A producer shall provide records, as 
        required by the Secretary, of crop acreage, acreage 
        yields, and production.] To be eligible for assistance 
        under this section, a producer shall provide annually 
        to the Secretary records of crop acreage, acreage 
        yields, and production for each crop, as required by 
        the Secretary.
          (3) Acreage reports.--A producer shall provide annual 
        reports on acreage planted or prevented from being 
        planted, as required by the Secretary, by the 
        designated acreage reporting date for the crop and 
        location as established by the Secretary.
    (c) Loss Requirements.--
          [(1) Required area loss.--A producer of an eligible 
        crop shall not receive noninsured crop disaster 
        assistance unless the average yield for that crop, or 
        an equivalent measure in the event yield data are not 
        available, in an area falls below 65 percent of the 
        expected area yield, as established by the Secretary.
          [(2) Prevented planting.--Subject to paragraph (1), 
        the Secretary shall make a prevented planting 
        noninsured crop disaster assistance payment if the 
        producer is prevented from planting more than 35 
        percent of the acreage intended for the eligible crop 
        because of drought, flood, or other natural disaster, 
        as determined by the Secretary.
          [(3) Reduced yields.--Subject to paragraph (1), the 
        Secretary shall make a reduced yield noninsured crop 
        disaster assistance payment to a producer if the total 
        quantity of the eligible crop that the producer is able 
        to harvest on any farm is, because of drought, flood, 
        or other natural disaster as determined by the 
        Secretary, less than 50 percent of the expected 
        individual yield for the crop, as determined by the 
        Secretary, factored for the interest of the producer 
        for the crop.]
          (1) Cause.--To be eligible for assistance under this 
        section, a producer of an eligible crop shall have 
        suffered a loss of a noninsured commodity as the result 
        of a cause described in subsection (a)(3).
          (2) Assistance.--On making a determination described 
        in subsection (a)(3), the Secretary shall provide 
        assistance under this section to producers of an 
        eligible crop that have suffered a loss as a result of 
        the cause described in subsection (a)(3).
          (3) Prevented planting.--The Secretary shall make a 
        prevented planting noninsured crop disaster assistance 
        payment to a producer if the producer is prevented from 
        planting more than 15 percent of the acreage intended 
        for the eligible crop because of a cause described in 
        subsection (a)(3), as determined by the Secretary.
          (4) Area trigger.--The Secretary may provide 
        assistance to individual producers without any 
        requirement of an area loss.
    (d) Payment.--The Secretary shall make available to a 
producer eligible for noninsured assistance under this section 
a payment computed by multiplying--
          (1) the quantity that is less than 50 percent (except 
        as provided in subsection (j)) of the established yield 
        for the crop determined under subsection (e); by

           *       *       *       *       *       *       *

    (j) New Eligible Crops.--
          (1) In general.--Subject to paragraph (2), if a 
        producer produces an eligible crop that is new to an 
        area (as determined by the Secretary), a payment for 
        the producer shall be computed by substituting the 
        following percentages of yields for the percentages of 
        yields specified in subsection (d)(1):
                  (A) In the case of the first crop year of the 
                eligible crop produced by the producer, 35 
                percent of the established yield for the crop 
                determined under subsection (e).
                  (B) In the case of each of the second through 
                fourth years of the eligible crop produced by 
                the producer--
                          (i) 45 percent of the established 
                        yield for the crop determined under 
                        subsection (e); or
                          (ii) if the producer received a 
                        payment under this section for the 
                        first crop year of the eligible crop 
                        produced by the producer, 35 percent of 
                        the established yield for the crop 
                        determined under subsection (e).
          (2) Temporary ineligibility.--If a producer of an 
        eligible crop described in paragraph (1) receives a 
        payment under this section in both the first and second 
        crop years of the eligible crop, the producer shall be 
        ineligible for a payment under this section until the 
        producer has successfully produced the crop for at 
        least 3 consecutive crop years with no loss reported, 
        as determined by the Secretary.
    (k) Service Fee.--
          (1) In general.--To be eligible to receive assistance 
        for an eligible crop for a crop year under this 
        section, a producer shall pay to the Secretary (at the 
        time at which the producer provides reports under 
        subsection (b)(3)) a service fee for the eligible crop 
        in an amount that is equal to the lesser of--
                  (A) the equivalent of the per policy fee for 
                catastrophic risk protection available under 
                section 508(b)(5) of the Federal Crop Insurance 
                Act (7 U.S.C. 1508(b)(5)); or
                  (B) $200 per producer per county, but not to 
                exceed a total of $600 per producer.
          (2) Waiver.--The Secretary shall waive the service 
        fee required under paragraph (1) in the case of a 
        limited resource farmer, as defined by the Secretary.
          (3) Use.--The Secretary shall deposit service fees 
        collected under this subsection in the Commodity Credit 
        Corporation Fund.

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                              ----------                              


                       FOOD SECURITY ACT OF 1985


                               Subtitle A


SEC. 1211. PROGRAM INELIGIBILITY.

           *       *       *       *       *       *       *


          (3) during the crop year--

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                  (C) a payment under section 401 or 402 of the 
                Agricultural Credit Act of 1978 (16 U.S.C. 2201 
                and 2202); [or]
                  (D) a payment, loan, or other assistance 
                under section 3 or 8 of the Watershed 
                Protection and Flood Prevention Act (16 U.S.C. 
                1003 and 1006a)[.]; or
                  (E) crop or revenue insurance, or a risk 
                management payment, under the Federal Crop 
                Insurance Act (7 U.S.C. 1501 et seq).

                    Subtitle C--Wetland Conservation


SEC. 1221. PROGRAM INELIGIBILITY.

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    (b) Ineligibility for Certain Loans and Payments.--If a 
person is determined to have committed a violation under 
subsection (a) during a crop year, the Secretary shall 
determine which of, and the amount of, the following loans and 
payments for which the person shall be ineligible:

           *       *       *       *       *       *       *

          (3) During the crop year:

           *       *       *       *       *       *       *

                  (E) Crop or revenue insurance, or a risk 
                management payment, under the Federal Crop 
                Insurance Act (7 U.S.C. 1501 et seq).

                                  
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