[Federal Register Volume 61, Number 45 (Wednesday, March 6, 1996)]
[Rules and Regulations]
[Pages 8851-8858]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-5383]



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 Rules and Regulations
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  Federal Register / Vol. 61, No. 45 /  Wednesday, March 6, 1996 / 
Rules and Regulations  

[[Page 8851]]


DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Part 457

RIN 0563-AB24


Common Crop Insurance Regulations; Malting Barley Price and 
Quality Endorsement Crop Insurance Provisions

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Final rule.

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

SUMMARY: The Federal Crop Insurance Corporation (``FCIC'') hereby 
issues additional regulations for provisions to insure malting barley. 
This action will add a second endorsement, the Malting Barley Price and 
Quality Endorsement, under which malting barley may be insured. The 
current malting barley endorsement will remain in effect for the 1996 
crop only and, effective with the 1997 crop year, will be replaced by 
the new Malting Barley Price and Quality Endorsement. The intended 
effect of this rule is to improve the insurance coverage now available 
for producers who grow malting barley under contract and provide a new 
option that will allow producers without contracts (open market 
producers) to obtain insurance for their malting barley.

EFFECTIVE DATE: March 4, 1996.

ADDRESSES: For information concerning submission of comments on 
information collection, see SUPPLEMENTARY INFORMATION.

FOR FURTHER INFORMATION CONTACT: For further information and a copy of 
the Cost-Benefit Analysis to the Malting Barley Price and Quality 
Endorsement Crop Insurance provisions, contact Diana Moslak, United 
States Department of Agriculture, Federal Crop Insurance Corporation, 
Washington, D.C. 20250. Telephone (202) 720-0713.

SUPPLEMENTARY INFORMATION:

Executive Order 12866 and Departmental Regulation 1512-1

    This action has been reviewed under United States Department of 
Agriculture (``USDA'') procedures established by Executive Order 12866 
and Departmental Regulation 1512-1. This action constitutes a review as 
to the need, currency, clarity, and effectiveness of these regulations 
under those procedures. The sunset review date established for these 
regulations is July 1, 2000.
    This rule has been determined to be ``significant'' for the 
purposes of Executive Order 12866 and, therefore, has been reviewed by 
the Office of Management and Budget (``OMB'').

Cost-Benefit Analysis

    A Cost-Benefit Analysis has been completed and is available to 
interested persons at the address listed above. In summary, the 
analysis finds that the expected benefits of this action outweigh the 
costs. The new Malting Barley Price and Quality Endorsement will 
simplify program operations, benefit FCIC and reinsured companies, and 
enhance the insurance coverage for malting barley producers.

Paperwork Reduction Act of 1995

    Following publication of the proposed rule, the public was afforded 
60 days to submit written comments, data, and opinions on information 
collection requirements previously approved by OMB under OMB control 
number 0563-0003 through September 30, 1998. No public comments were 
received.

Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandate Reform Act of 1995 (UMRA), Pub. L. 
104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, FCIC 
generally must prepare a written statement, including a cost-benefit 
analysis, for proposed and final rules with ``Federal mandates'' that 
may result in expenditures to State, local, or tribal governments, in 
the aggregate, or to the private sector, of $100 million or more in any 
one year. When such a statement is needed for a rule, section 205 of 
the UMRA generally requires FCIC to identify and consider a reasonable 
number of regulatory alternatives and adopt the least costly, more 
cost-effective or least burdensome alternative that achieves the 
objectives of the rule.
    This rule contains no Federal mandates (under the regulatory 
provisions of Title II of the UMRA) for State, local, and tribal 
governments or the private sector. Thus, this rule is not subject to 
the requirements of sections 202 and 205 of the UMRA.

Executive Order 12612

    It has been determined under section 6(a) of Executive Order 12612, 
Federalism, that this rule does not have sufficient federalism 
implications to warrant the preparation of a Federalism Assessment. The 
provisions contained in this rule will not have a substantial direct 
effect on states or their political subdivisions, or on the 
distribution of power and responsibilities among the various levels of 
government.

Regulatory Flexibility Act

    This regulation will not have a significant impact on a substantial 
number of small entities. The impact of obtaining or delivering these 
policies will not vary significantly from that required to obtain or 
deliver the present policy. Therefore, this action is determined to be 
exempt from the provisions of the Regulatory Flexibility Act (5 U.S.C. 
Sec. 605 ) and no Regulatory Flexibility Analysis was prepared.

Federal Assistance Program

    This program is listed in the Catalog of Federal Domestic 
Assistance under No. 10.450.

Executive Order 12372

    This program is not subject to the provisions of Executive Order 
12372 which require intergovernmental consultation with state and local 
officials. See the Notice related to 7 CFR part 3015, subpart V, 
published at 48 FR 29115, June 24, 1983.

Executive Order 12778

    The Office of the General Counsel has determined that these 
regulations meet the applicable standards provided in subsections 2(a) 
and 2(b)(2) of Executive Order 12778. The provisions of this rule will 
preempt state and local laws to the extent such state and local laws 
are inconsistent herewith. The 

[[Page 8852]]
administrative appeal provisions at 7 CFR part 11, must be exhausted 
before action for judicial review may be brought.

Environmental Evaluation

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

National Performance Review

    This regulatory action is being taken as part of the National 
Performance Review program to eliminate unnecessary or duplicative 
regulations and improve those that remain in force.

Background

    On Monday, December 11, 1995, FCIC published a proposed rule in the 
Federal Register at 60 FR 63457 to amend the Common Crop Insurance 
Regulations (7 CFR part 457) by revising 7 CFR 457.103, Malting Barley 
Option Provisions, effective for the 1996 and succeeding crop years. 
However, the December 31, 1995, date by which contract changes must be 
made for the 1996 crop year passed before the provisions could be 
published as a final rule. Therefore, for the 1996 crop year only, FCIC 
will make both the current Malting Barley Endorsement (Sec. 457.103) 
and this new Malting Barley Price and Quality Endorsement 
(Sec. 457.118) available. The new endorsement will make insurance 
coverage available to malting barley producers who do not hold a 
production contract with a malting or brewing company, and to improve 
coverage for those producers who do have such a contract. Beginning 
with the 1997 crop year, the Malting Barley Price and Quality 
Endorsement will replace the current Malting Barley Endorsement.
    Following publication of the proposed rule, the public was afforded 
15 days to submit written comments, data, and opinions. FCIC received 
33 comments. The comments received and FCIC responses are as follows:
    Comment: One comment received from a State Commissioner of 
Agriculture recommended adding the following to the supplementary 
information in the preamble: ``FCIC must offer producers the right to 
mediation as required under Pub. L. No. 103-354, as part of the 
informal administrative appeal process.''
    Response: FCIC agrees that mediation may be required in some 
instances but that requirement is contained in the appeal regulations.
    Comment: Three comments were received regarding the length of the 
comment period for the proposed rule. One received from the legal 
counsel of a reinsured company stated that FCIC's proposed rulemaking 
is in violation of the Administrative Procedure Act. Two comments, one 
from the insurance industry and one from a State Commissioner of 
Agriculture, indicated that the comment period was too short.
    Response: FCIC published its proposed regulation with a shortened 
comment period in order to allow sufficient time to consider all 
comments and publish the final rule with sufficient time before the 
sales closing date to permit the sale of the insurance policies and 
training of insurance providers. Further, interested parties were kept 
apprised of the proposed changes to the malting barley program, and the 
date of its publication, in order to facilitate their ability to 
provide meaningful comments within the short time period. No violation 
of the Administrative Procedure Act has occurred.
    Comment: One comment received from the insurance industry 
recommended that implementation of this rule be delayed until the 1997 
crop year. The comment indicated that it is too late to implement the 
proposed program changes for the 1996 crop year because: (1) The 
Standard Reinsurance Agreement (SRA) is already in place and approved; 
(2) Agent training is completed in many areas, and procedures for 1996 
are in place; and (3) Little time for training and marketing will be 
available. The comment states that changing the endorsement for the 
1996 crop year will require FCIC to allow companies to make changes to 
the SRA fund and percentage elections; and that reimbursement of 
company costs associated with marketing, training, and reissuance of 
procedures will need to be addressed under the 1996 SRA.
    Response: There is nothing in the SRA that precludes FCIC from 
changing the terms of an insurance contract prior to the contract 
change date or offering new insurance products after implementation of 
the current years' SRA. FCIC is offering the new Malting Barley Price 
and Quality Endorsement as a new insurance product to be sold in 
conjunction with the currently available malting barley endorsement. 
Nothing requires any company to sell the endorsement. The Company may 
do so if it believes that making the option available is good business.
    Comment: One comment received from a barley industry organization 
indicated that the new endorsement will offer an important option to 
many North Dakota open-market barley producers. The comment further 
stated that these producers now will be afforded the opportunity to 
insure against quality losses at representative prices.
    Response: FCIC agrees.
    Comment: One comment received from the Farm Service Agency (FSA) 
asked if the endorsement will be available in all counties that 
currently have a feed barley insurance program or only in counties that 
currently have malting barley insurance.
    Response: The new endorsement will initially be available only in 
counties that currently have a malting barley insurance program in 
place.
    Comment: One comment received from the insurance industry indicated 
it would be advantageous for producers to elect Option A or B on a 
yearly basis rather than the initial selection being continuous. The 
comment stated that insureds with Option B will think they have an 
endorsement in effect even if they fail to execute a malting barley 
contract.
    Response: This recommendation would result in unnecessary 
additional paperwork and administrative expense each crop year. The 
endorsement is clear that there is no coverage when the producer fails 
to obtain a malting barley contract. Further, a producer can cancel an 
Option and select another, provided it is done prior to the sales 
closing date. Also, there are large malt barley growing areas in which 
there is very little, if any, contracted production. Requiring 
producers to affirmatively select option A each year is unnecessary in 
these areas. No changes in the proposed provisions have been made.
    Comment: One comment received from a State Commissioner of 
Agriculture suggested adding the following language to section 2 of the 
endorsement: ``Producers who sign up for coverage Option A at the time 
of the sales closing date, and subsequently enter into a contract with 
some or all of their malting barley production will retain the Option A 
malting barley coverage. The malting barley production guarantee for 
the producer then will be the same as the coverage guaranteed under the 
Option A insurance contract.'' The comment indicated that malting 
barley contracts can be entered into in the late spring and that 
growers with Option A coverage should not forego their insurance 
coverage if they do enter into such a contract.
    Response: FCIC agrees with the comment. Section 2 and language in 
the heading of Option A have been amended accordingly.
    Comment: Two comments were received, one from FSA and one from 

[[Page 8853]]
    the insurance industry, that recommended clarifying whether the 
additional value price election percentage can vary from that selected 
for feed barley or if the percentages must be the same.
    Response: It is intended that producers be allowed to select a 
price election percentage for malting barley that varies from that 
selected for feed barley. FCIC agrees that clarification is needed and 
has amended the provisions in section 3 accordingly.
    Comment: One comment received from the insurance industry indicated 
that the provision requiring a producer to select an additional value 
price election at the time of application would work the first year of 
insurance, but would be a problem in succeeding years. The comment also 
asked what procedure would be followed to change price elections from 
year to year.
    Response: Under any crop insurance policy, the producer is required 
to select a price election. There is greater uncertainty under Option B 
because the price upon which the election is based is not established 
prior to the sales closing date. However, there is too great a risk of 
adverse selection associated with permitting producers to select their 
price elections after their prices have been established by contract. 
The maximum price election is stated in Option B. Procedures to change 
price elections from year to year will be the same as those in effect 
for other crops. No change has been made to the proposed provision.
    Comment: One comment received from a State Commissioner of 
Agriculture recommended providing prevented planting coverage under the 
terms of the endorsement.
    Response: Determining a producer's intentions would make prevented 
planting difficult to administer. Under other insurance products, all 
terms of the contract are known on or before the sales closing date. 
However, under this endorsement, a producer may not know if the malting 
barley will be under contract, the number of acres insurable under the 
endorsement or the price until the acreage reporting date. This 
uncertainty makes it difficult to establish an actuarially sound 
premium rate. Therefore, FCIC finds it appropriate to provide prevented 
planting coverage on the basis of the feed barley production guarantee 
and price election. If reliable methods to administer a prevented 
planting program can be devised, then the endorsement can later be 
amended. No change to the proposed provision has been made.
    Comment: One comment received from a producer organization 
indicated that the proposed ``cap'' of 200% of the maximum additional 
value price election shown on the Special Provisions is too low to 
cover the contract prices received for malting barley. The comment 
suggested ``capping'' the additional value price election under Option 
B at $2.00 per bushel.
    Response: FCIC agrees and has revised the provisions as 
recommended.
    Comment: One comment received from the insurance industry 
recommended changing the time by which a producer must submit a claim 
for indemnity to the earlier of the date of final disposition of all 
production or May 31 of the calendar year following the year the crop 
is normally harvested.
    Response: FCIC agrees that the time of disposition of all 
production should be considered and has amended the provisions in 
section 7 accordingly.
    Comment: Two comments received from the insurance industry 
indicated concern regarding the extended date for settling claims. One 
comment stated that keeping claims open until May 31 places the 
insurance provider well into the following crop year when early losses 
are being worked, and increases the likelihood of errors. This comment 
also recommended using a system of discount factors to allow claims to 
be worked at harvest time. The other comment indicated that the 
settlement date will delay needed benefits to producers and complicate 
settlement under the Standard Reinsurance Agreement.
    Response: Losses will have initially been adjusted as soon as 
possible after the notice of loss. It is only when there is production 
that fails to meet the quality criteria that the claim remains open. If 
the claim remains open, adjustment only occurs if, and when, the 
producer is able to sell such production. If such production is later 
sold, there is little or no economic loss to producers. Even though 
settlement of claims may be delayed, the use of discount factors or 
settlement of claims at harvest time is not actuarially sound since it 
will allow the producer to receive payments to which he may not be 
entitled. Further, since the May 31 deadline still falls under the same 
Standard Reinsurance Agreement, settlement should not be complicated by 
this delay. Therefore, no change has been made to the proposed 
provisions.
    Comment: One comment received from the insurance industry indicated 
that some producers may contract the production from some acreage but 
also grow additional acreage for open-market sales. The comment 
indicated that it would be difficult to track the acreage separately 
and that the problem might be rectified by allowing the uncontracted 
acreage to be insured under Option A.
    Response: The endorsement already requires producers who grow both 
contracted and non-contracted production within the same crop year to 
insure such production under Option A. As indicated in the comment, it 
is difficult to track the specific acreage from which malting barley 
production is harvested. Therefore, no change is required.
    Comment: Two comments received from the insurance industry 
recommended using the same Actual Production History (APH) database for 
both feed and malting barley. One of the comments recommended using a 
temporary yield in the malting barley APH database to avoid a one year 
difference in the databases between malting and feed barley. This 
comment also recommended making reference to the APH crop year in 
section 1 of Option A to avoid confusion.
    Response: FCIC considered using temporary yields in malting barley 
databases but elected not to do so because of the extra paperwork and 
administrative expense involved with replacing the temporary yields 
each year. FCIC agrees that adding a reference to APH in section 1 of 
Option A may help clarify record requirements and has amended the 
section accordingly.
    Comment: One comment received from the insurance industry 
recommended that the malting barley APH database reflect only acreage 
from which malting barley was actually sold. The comment indicated that 
a guarantee based on the total acreage planted to malting varieties and 
the production sold for malting purposes would misrepresent potential 
production.
    Response: Since all acreage planted to approved malting varieties 
is insured and the production available for sale, it must be considered 
in the database. Otherwise, FCIC would be providing insurance for 
changes in the market, which is not an insured cause of loss. No 
changes have been made to the proposed provisions.
    Comment: One comment received from a State Commissioner of 
Agriculture recommended changing the number of yearly records of sale 
of malting barley that are required from at least four years to three 
out of the previous five years. The comment further recommended that 
``acceptable records'' be defined.
    Response: Allowing the producer to select the years for which 
production 

[[Page 8854]]
records are provided might result in the poorest production years not 
being reflected in the data base. This would result in excessive 
production guarantees, losses, and loss ratios. Specific production 
record requirements are statutory and will be contained in procedural 
handbooks. No change has been made to the proposed provision.
    Comment: One comment received from a State Commissioner of 
Agriculture recommended removing provisions that limit the malting 
barley production guarantee to that determined for feed barley. The 
comment recommends using only the malting barley records to determine 
coverage under Option A, and only the contracted amount of production 
to determine coverage under Option B.
    Response: The production guarantee is intended to determine that 
portion of the expected production that will be insured. Producers 
should not receive a guarantee in excess of what the acreage could 
reasonably be expected to produce. Under Option A, the best indicator 
of the expected production is using the APH for feed barley because it 
takes into consideration all the actual production from the insured 
acreage, whether or not sold as malting barley. Under Option B, the 
producer's insurance is limited to contracted acreage or production. 
However, the contracted amount may differ from the actual production of 
the acreage. Therefore, the actual production must be taken into 
consideration. No change has been made to the proposed provisions.
    Comment: One comment received from the insurance industry 
recommended changing the date by which a producer must submit a copy of 
the malting barley contract from the acreage reporting date to the 
sales closing date. The comment stated that adverse selection would be 
reduced by changing this requirement to an earlier date.
    Response: In many cases, malting barley contracts are not completed 
until April or May. Changing the contract submission date to the March 
15 sales closing date would cause many growers who normally complete 
contracts after this date to be ineligible for coverage under Option B. 
No change has been made in the proposed provisions.
    Comment: One comment received from the insurance industry stated 
that the insurance guarantee under Option B would be underestimated 
when a grower plants more acreage to approved malting varieties than 
the number of acres grown under contract.
    Response: Option B is not available to producers who grow more 
acreage of malting barley than is under contract. Option A should be 
used by producers who grow all open-market production or a combination 
of contracted and open-market production.
    Comment: One comment received from the insurance industry asked if 
an additional data base would have to be established for malting 
barley.
    Response: Separate production data bases will be required for any 
acreage planted to approved malting barley varieties and acreage 
planted for feed barley.
    Comment: One comment received from the FSA recommended expanding 
the premium computation contained in Option B, section 3(b) 
(redesignated as 3(c) in the final rule) to include the factors to be 
applied, whether or not a separate liability is to be calculated, and 
the applicable premium rate (feed barley or a separate rate).
    Response: The comment misinterprets the term ``premium'' in this 
subsection. As used in Option B, section 3(c), the term refers to an 
additional dollar amount (above the base) paid to the producer for 
barley production meeting contractual requirements rather than the 
premium amount charged for insurance. The provision has been clarified 
by using the term ``premium price per bushel.''
    Comment: One comment received from the FSA recommended that the 
definition of unit be clarified to indicate that units by share will be 
available. The comment stated that the proposed provisions indicate 
that basic units will not be available.
    Response: All acreage of malting barley is insurable under a single 
unit; basic units are not available. All insurable shares in the 
malting barley will be designated on the acreage report for the single 
unit. No changes have been made in the proposed provisions.
    Comment: One comment received from a State Commissioner of 
Agriculture recommended that producers have the option of designating, 
on an acre by acre basis, either feed barley insurance coverage or 
malting barley insurance coverage. The comment further suggested that 
producers have the option of designating separate insurance units.
    Response: To prevent selecting against the insurance provider, all 
acreage planted to approved malting varieties must be insured as 
malting barley. Allowing malting barley insurance only on acreage 
selected by the producers would allow them to designate malting barley 
insurance only on acreage where they have had difficulty producing 
barley meeting malting barley standards and, thus, receiving a larger 
indemnity than would be available for feed barley. Allowing units would 
create situations in which growers could deliver 100 percent or more of 
the malting barley guarantee and still receive an indemnity for a 
malting barley loss on one or more units. This not only violates an 
accepted principle of insurance that the insured should not profit by a 
loss, it also makes it difficult to develop an adequate premium rate 
for the coverage. No changes in the provisions have been made.
    Comment: One comment received from a State Commissioner of 
Agriculture recommended removing the requirement that potential 
unharvested production be counted against the insurance guarantee. The 
comment indicated that the intent of provisions in section 4(a)(2) of 
Option B is unclear.
    Response: This section may be unclear because of a drafting error. 
Section 4(a)(2) of Option B should not begin with the word ``either.'' 
This correction has been made. This section is intended to require that 
all harvested production and all production that is not harvested be 
considered when determining the amount of production to count against 
the production guarantee.
    Comment: One comment received from the FSA pointed out a 
typographical error in the second sentence of section 7 (redesignated 
as section 6 in this final rule) in Option B. The sentence should read 
as follows: Assume that each unit contains....
    Response: The correction has been made.
    Comment: One comment received from the insurance industry asked for 
clarification of the 2,100 bushel guarantee reference in section 7 
(redesignated as section 6 in this final rule) of Option B.
    Response: This provision has been revised to clarify how an 
indemnity will be paid.
    Comment: One comment received from the crop insurance industry 
indicated that the producer's share needs to be added to the provisions 
regarding calculation of the claim amount.
    Response: FCIC agrees and has amended the provisions as 
recommended.
    In addition to the changes indicated above, FCIC has determined 
that it is necessary to:
    (1) Modify the definition of ``Malting barley contract'' for the 
purpose of clarification;
    (2) Add provisions in section 9 to indicate that production of 
approved malting varieties and any production of 

[[Page 8855]]
feed barley varieties must not be commingled prior to the insurance 
provider making all necessary determinations for the purposes of this 
coverage; Failure to keep production separate may result in denial of 
indemnity under the endorsement;
    (3) Delete the definition of ``Value per bushel.'' This definition 
was used to describe how production not meeting quality standards 
contained in the endorsement was to be valued if such production was 
ultimately sold as malting barley. The definition is unnecessary 
because the value of such production will simply be the sale price per 
bushel of the damaged production;
    (4) Add provisions in section 4(b) of both Options A and B to allow 
conditioning costs to be subtracted from the value of production that 
could not be sold for malting purposes without conditioning; and
    (5) Relocate provisions regarding delayed settlement of claims from 
section 5 of both Options to section 7 of the provisions that apply to 
both Options. These provisions were identical in the proposed rule and 
should not be duplicated. Provisions 6 and 7 of both Options have been 
redesignated as sections 5 and 6, respectively.
    Good cause is shown to make this rule effective upon publication in 
the Federal Register and without the 30-day period required by the 
Administrative Procedure Act. This rule substantially improves the 
malting barley insurance coverage. Public interest requires the agency 
to act immediately to make this endorsement available for the 1996 crop 
year. The rule expands coverage availability to producers who do not 
hold a production contract with a malting or brewing company and 
improves coverage for those producers who do have such a contract, 
Therefore, good cause is shown to make this final rule effective in 
less than 30 days after publication.

List of Subjects in 7 CFR Part 457

    Crop insurance, Malting Barley Price and Quality Endorsement Crop 
Provisions.

Final Rule

    Pursuant to the authority contained in the Federal Crop Insurance 
Act, as amended (7 U.S.C. Sec. 1501 et seq.), the Federal Crop 
Insurance Corporation hereby amends the Common Crop Insurance 
Regulations (7 CFR part 457) by adding a new Sec. 457.118, effective 
for the 1996 and succeeding crop years, to read as follows:

PART 457--[AMENDED]

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

    Authority: 7 U.S.C. 1506(1), 1506(p).

    2. 7 CFR part 457 is amended by adding a new Sec. 457.118 to read 
as follows:


Sec. 457.118  Malting Barley Crop Insurance.

    The malting barley crop insurance provisions for the 1996 and 
succeeding crop years are as follows:

United States Department of Agriculture Federal Crop Insurance 
Corporation Small Grains Crop Insurance Malting Barley Price and 
Quality Endorsement

(This is a continuous endorsement. Refer to section 2 of the Common 
Crop Insurance Policy.)
    In return for your payment of premium for the coverage contained 
herein, this endorsement will be attached to and made part of the 
Common Crop Insurance Policy (Sec. 457.8) and Small Grains Crop 
Provisions (Sec. 457.101), subject to the terms and conditions 
described herein.
    1. You must have the Common Crop Insurance Policy (Sec. 457.8) 
and the Small Grains Crop Insurance Provisions (Sec. 457.101) in 
force to elect to insure malting barley under this endorsement.
    2. You must select either Option A or Option B on or before the 
sales closing date. Failure to select either Option A or Option B, 
or if you elect Option B but fail to have a malting barley contract 
in effect by the acreage reporting date, will result in no coverage 
under this endorsement for the applicable crop year. If you elect 
coverage under Option A, and subsequently enter into a malting 
barley contract, your coverage will continue under the terms of 
Option A. Your selection (Option A or B) will continue from year to 
year unless you cancel or change your selection on or before the 
sales closing date.
    3. You must select either an additional value price election or 
a percentage of the maximum additional value price election on or 
before the sales closing date. The percentage of the maximum 
additional value price election you select does not have to be the 
same as that selected under the Small Grains Crop Provisions for 
feed barley. In the event that you choose a percentage of the 
maximum additional value price election, we will multiply that 
percentage by the maximum additional value price election specified 
in Option A or B to determine the additional value price election 
that pertains to your contract.
    4. The additional premium amount for this coverage will be 
determined by multiplying your malting barley production guarantee 
per acre by your selected additional value price election, times the 
premium rate stated in the Actuarial Table, times the acreage 
planted to approved malting barley varieties, times your share at 
the time coverage begins.
    5. In addition to the reporting requirements contained in 
section 6 of the Common Crop Insurance Policy (Sec. 457.8), you must 
provide the information required by the Option you select.
    6. In lieu of the provisions regarding units and unit division 
in the Common Crop Insurance Policy (Sec. 457.8) and the Small 
Grains Crop Provisions (Sec. 457.101), all barley acreage in the 
county that is planted to malting varieties that is insurable under 
the Small Grains Crop Provisions for feed barley and your selected 
Option must be insured under this endorsement and will be considered 
as one unit regardless of whether such acreage is owned, rented for 
cash, or rented for a share of the crop. The producer's shares in 
the malting barley acreage to be insured under this endorsement must 
be designated on the acreage report.
    7. In lieu of the provisions in the Common Crop Insurance Policy 
(Sec. 457.8) that requires us to pay your loss within 30 days after 
we reach agreement with you, whenever any production fails one or 
more of the quality criteria specified herein, the claim may not be 
settled until the earlier of:
    (a) The date you sell, feed, donate, or otherwise utilize such 
production for any purpose; or
    (b) May 31 of the calendar year immediately following the 
calendar year in which the insured malting barley is normally 
harvested.
    If the production meets all quality criteria contained herein or 
grades U.S. No. 4 or lower in accordance with the grades and grade 
requirements for the subclasses Six-rowed and Two-rowed barley, and 
for the class Barley in accordance with the Official United States 
Standards for Grain, the claim will be settled within 30 days in 
accordance with the Common Crop Insurance Policy (Sec. 457.8).
    8. This endorsement does not provide additional prevented 
planting coverage. Such coverage is only provided in accordance with 
the provisions of the Small Grain Crop Provisions for feed barley.
    9. Production from all acreage insured under this endorsement 
and any production of feed barley varieties must not be commingled 
prior to our making all determinations necessary for the purposes of 
this insurance. Failure to keep production separate may result in 
denial of your claim for indemnity.
    10. Definitions:
    (a) APH--Actual production history as determined in accordance 
with 7 CFR part 400, subpart G.
    (b) Approved malting variety--A variety of barley specified as 
such in the Special Provisions.
    (c) Brewery--A facility where malt beverages are commercially 
produced for human consumption.
    (d) Contracted production--A quantity of barley the producer 
agrees to grow and deliver, and the buyer agrees to accept, under 
the terms of the malting barley contract.
    (e) Licensed grain grader--A person authorized by the U.S. 
Department of Agriculture to inspect and grade barley under the U.S. 
Standards for malt barley.
    (f) Malting barley contract--An agreement in writing between the 
producer and a brewery or a business enterprise that produces or 
sells malt or processed mash to a brewery, or a business enterprise 
owned by such brewery or business, that contains the 

[[Page 8856]]
amount of contracted production, the purchase price, or a method to 
determine such price, and other such terms that establish the 
obligations of each party to the agreement.
    (g) Objective test--A determination made by a qualified person 
using standardized equipment that is widely used in the malting 
industry, and following a procedure approved by the American Society 
of Brewing Chemists when determining percent germination or protein 
content; grading performed by following a procedure approved by the 
Federal Grain Inspection Service when determining quality factors 
other than percent germination or protein content; or by the Food 
and Drug Administration when determining concentrations of 
mycotoxins or other substances or conditions that are identified as 
being injurious to human or animal health.
    (h) Subjective test--A determination made by a person using 
olfactory, visual, touch or feel, masticatory, or other senses 
unless performed by a licensed grain grader; or that uses non-
standardized equipment; or that does not follow a procedure approved 
by the American Society of Brewing Chemists, the Federal Grain 
Inspection Service, or the Food and Drug Administration.
    (i) Unit--All insurable acreage of approved malting varieties in 
the county on the date coverage begins for the crop year.

Option A--(Available for Producers of Production Contracted After the 
Sales Closing Date, Non-Contracted Production, or a Combination of 
Contracted and Non-Contracted Production)

    This option provides coverage for malting barley production and 
quality losses at a price per bushel greater than that offered under 
the Small Grains Crop Provisions.
    1. To be eligible for coverage under this option, you must 
provide us acceptable records of your sales of malting barley and 
the number of acres planted to malting varieties for at least the 
four crop years in your APH database prior to the crop year 
immediately preceding the current crop year. For example, to 
determine your production guarantee for the 1996 crop year, records 
must be provided for the 1991 through the 1994 crop years, if 
malting barley varieties were planted in each of those crop years. 
Failure to provide acceptable records or reports as required herein 
will make you ineligible for coverage under this endorsement. You 
must provide these records to us no later than the production 
reporting date specified in the Common Crop Insurance Policy 
(Sec. 457.8).
    2. Your malting barley production guarantee per acre will be the 
lesser of:
    (a) The production guarantee for feed barley for acreage planted 
to approved malting varieties calculated in accordance with the 
Small Grains Crop Provisions and APH regulations; or
    (b) A production guarantee calculated in accordance with APH 
procedures using the malting barley sales and acreage records 
provided by you.
    3. The additional value price per bushel elected cannot exceed 
the maximum price designated in the Special Provisions.
    4. The amount of production to count against your malting barley 
production guarantee will be determined as follows:
    (a) Production to count will include all:
    (1) Appraised production determined in accordance with sections 
11(c)(1) (i) and (ii) of the Small Grains Crop Provisions;
    (2) Harvested production and potential unharvested production 
that meets, or would meet if properly handled;
    (i) Tolerances established by the Food and Drug Administration 
or other public health organization of the United States for 
substances or conditions, including mycotoxins, that are identified 
as being injurious to human health; and
    (ii) The following quality standards, as applicable:

------------------------------------------------------------------------
                                   Six-rowed malting   Two-rowed malting
                                   barley (percent)    barley (percent) 
------------------------------------------------------------------------
Protein (dry basis).............  14.0 maximum......  14.0 maximum      
Plump kernels...................  65.0 minimum......  75.0 minimum      
Thin kernels....................  10.0 maximum......  10.0 maximum      
Germination.....................  95.0 minimum......  95.0 minimum      
Blight damaged..................  4.0 maximum.......  4.0 maximum       
Injured by mold.................  5.0 maximum.......  5.0 maximum       
Mold damaged....................  0.4 maximum.......  0.4 maximum       
Sprout damaged..................  1.0 maximum.......  1.0 maximum       
Injured by frost................  5.0 maximum.......  5.0 maximum       
Frost damaged...................  0.4 maximum.......  0.4 maximum       
------------------------------------------------------------------------

    (3) Harvested production that does not meet the quality 
standards contained in section 4(a)(2) of this Option, but is 
accepted by a buyer for malting purposes. For such production, the 
production to count may be reduced or the price used to settle the 
claim may be adjusted in accordance with sections 4 (b), (c), and 
(d) of this Option.
    (b) The quantity of production that initially fails any quality 
standard contained in section 4(a)(2), but is sold as malting barley 
(except production included in section 4(c)), may be reduced as 
described in this subsection, provided the failure of such 
production to meet these standards is due to insurable causes. The 
production to count of production sold under section 4(a)(3) will be 
determined by:
    (1) Adding the maximum barley price election under the Small 
Grains Crop Provisions and the maximum additional value price;
    (2) Dividing the result of paragraph (1) by the price per bushel 
received for the damaged production; and
    (3) Multiplying the result of paragraph (2) (not to exceed 
1.000) by the number of bushels of damaged production.
    (c) The production to count for production that initially fails 
any quality standard contained in section 4 (a)(2), sold as malting 
barley, but is conditioned before the sale will not be reduced under 
section 4(b). Such production will be considered separately from all 
other production to count. (See section 5(d).)
    (d) The additional value price election per bushel used to 
determine the value of the production to count for production that 
initially fails any quality standard contained in section 4(a)(2), 
but is sold as malting barley, may be reduced by the cost incurred 
for any conditioning required to improve the quality of production 
so that it is marketable as malting barley, provided the failure of 
such production to meet these standards is due to insurable causes.
    (e) No reduction in the production to count or the additional 
value price election will be allowed for moisture content, damage 
due to uninsured causes; costs or reduced value associated with 
drying, handling, processing, or quality factors other than those 
contained in section 4(a)(2) of this Option; or any other costs 
associated with normal handling and marketing of malting barely.
    (f) All grade and quality determinations must be based on the 
results of objective tests. No indemnity will be paid for any loss 
established by subjective tests. We may obtain one or more samples 
of the insured crop and have tests performed at an official grain 
inspection location established under the U.S. Grain Standards Act 
or laboratory of our choice to verify the results of any test. In 
the event of a conflict in the test results, our results will 
determine the amount of production to count.
    5. In the event of loss or damage covered by this policy, we 
will settle your claim by:
    (a) Multiplying the insured acreage times your malting barley 
production guarantee per acre;
    (b) Multiplying the result in subsection (a) of this section 
times your additional value price election per bushel;
    (c) Multiplying the number of bushels of production to count 
determined in accordance with sections 4(a) and (b) of this Option 
times your elected additional value price per bushel;
    (d) Multiplying the production to count determined under section 
4(c) of this Option times the additional value price per bushel 
determined in section 4(d) of the Option;
    (e) Adding the results of subsections (c) and (d) of this 
section;
    (f) Subtracting the result of subsection (e) of this section 
from the result in subsection (b); and
    (g) Multiplying the result of subsection (f) of this section 
times your share.
    6. For example, assume you insure two units of barley under the 
Small Grains Crop Provisions in which you have a 100% share and that 
are planted to approved malting varieties. Assume the following:
    (a) Each unit contains 40 acres;
    (b) You have sold an average of 20 bushels per acre of malting 
barley for each of the last 6 years;
    (c) You have selected the 70 percent coverage level;
    (d) Your production guarantee under the Small Grains Crop 
Provisions and the APH regulations for feed barley is 30 bushels per 
acre;
    (e) Your total production from all units under the Small Grains 
Crop Provisions is 

[[Page 8857]]
1,000 bushels, all of which fails to meet the quality standards 
specified by this Option. Two hundred bushels are sold for malting 
purposes after conditioning. Conditioning costs are $0.05 per 
bushel; and
    (f) Your additional value price election is $0.40 per bushel.
    Your malting barley production guarantee is 1120.0 bushels (the 
lesser of 20 or 30 x 70 percent coverage level  x 80 acres). The 
value of your production guarantee is $448.00 (1120 bushels  x $0.40 
per bushel). Your production to count is 200 bushels. The value of 
your production to count is $70.00 (200 bushels  x $0.35 ($0.40--
$0.05)). Your indemnity for the malting barley unit is $378.00 
(($448.00--$70.00)  x 100 percent share). Any remaining loss is paid 
under the Small Grains Crop Provisions for feed barley.

Option B--(Available for Producers of Contracted Production Only)

    This option provides coverage for malting barley production and 
quality losses at a price per bushel greater than that offered under 
the Small Grains Crop Provisions provided you have a malting barley 
contract.
    1. If you elect this option you must provide us a copy of your 
malting barley contract on or before the acreage reporting date. All 
terms and conditions of the contract, including the contract price 
or futures contract premium price, must be specified in the contract 
and be effective on or before the acreage reporting date. If you 
fail to timely provide the contract, or any terms are omitted, we 
may elect to determine the relevant information necessary for 
insurance under this Option (B), or deny liability. Only contracted 
production or acreage is covered by this Option (B).
    2. Your malting barley guarantee per acre will be the lesser of:
    (a) The production guarantee for feed barley for acreage planted 
to approved malting barley varieties calculated in accordance with 
the Small Grains Crop Provisions and APH regulations; or
    (b) The number of bushels obtained by:
    (1) Dividing the number of bushels of contracted production by 
the number of acres planted to approved malting varieties in the 
current crop year; and
    (2) Multiplying the result by the percentage for the coverage 
level you elected under the Small Grains Crop Provisions.
    3. The additional value price election per bushel will be the 
lesser of, as applicable:
    (a) The guaranteed sale price per bushel established in the 
malting barley contract (without regard to discounts or incentives 
that may apply) minus the maximum price election for feed barley; or
    (b) The premium price per bushel (without regard to discounts or 
incentives) if the sale price is based on a future market price as 
specified in the malting barley contract.
    Under no circumstances will the additional value price election 
per bushel exceed $2.00 per bushel.
    4. The amount of production to count against your malting barley 
production guarantee will be determined as follows:
    (a) Production to count will include all:
    (1) Appraised production determined in accordance with sections 
11(c)(1) (i) and (ii) of the Small Grains Crop Provisions;
    (2) Harvested production and potential unharvested production 
that meets, or would meet if properly handled, the minimum 
acceptance standards contained in the malting barley contract for 
protein, plump kernels, thin kernels, germination, blight damage, 
mold injury or damage, sprout damage, frost injury or damage, and 
mycotoxins or other substances or conditions identified by the Food 
and Drug Administration or other public health organization of the 
United States as being injurious to human health, or the following 
quality standards as applicable:

------------------------------------------------------------------------
                                   Six-rowed malting   Two-rowed malting
                                        barley              barley      
                                 ---------------------------------------
                                       (percent)           (percent)    
------------------------------------------------------------------------
Protein (dry basis).............  14.0 maximum......  14.0 maximum      
Plump kernels...................  65.0 minimum......  75.0 minimum      
Thin kernels....................  10.0 maximum......  10.0 maximum      
Germination.....................  95.0 minimum......  95.0 minimum      
Blight damaged..................  4.0 maximum.......  4.0 maximum       
Injured by mold.................  5.0 maximum.......  5.0 maximum       
Mold damaged....................  0.4 maximum.......  0.4 maximum       
Sprout damaged..................  1.0 maximum.......  1.0 maximum       
Injured by frost................  5.0 maximum.......  5.0 maximum       
Frost damaged...................  0.4 maximum.......  0.4 maximum       
------------------------------------------------------------------------

    (3) Harvested production that does not meet the quality 
standards contained in section 4(a)(2) of this Option, but is 
accepted by a buyer for malting purposes. For such production, the 
production to count may be reduced or the price used to settle the 
claim may be adjusted in accordance with sections 4 (b), (c), and 
(d) of this Option.
    (b) The quantity of production that initially fails any quality 
standard contained in section 4(a)(2), but is sold as malting barley 
(except production included in section 4(c)), may be reduced as 
described in this subsection, provided the failure of such 
production to meet these standards is due to insurable causes. The 
production to count of production sold under section 4(a)(3) will be 
determined by:
    (1) Adding the maximum barley price election under the Small 
Grains Crop Provisions and the maximum additional value price;
    (2) Dividing the result of paragraph (1) by the price per bushel 
received for the damaged production; and
    (3i) Multiplying the result of paragraph (2) (not to exceed 
1.000) by the number of bushels of damaged production.
    (c) The production to count for production that initially fails 
any quality standard contained in section 4(a)(2), sold as malting 
barley, but is conditioned before the sale will not be reduced under 
section 4(b). Such production will be considered separately from all 
other production to count. (See section 5(d).)
    (d) The additional value price election per bushel used to 
determine the value of the production to count for production that 
initially fails any quality standard contained in section 4(a)(2), 
but is sold as malting barley, may be reduced by the cost incurred 
for any conditioning required to improve the quality of production 
so that it is marketable as malting barley, provided the failure of 
such production to meet these standards is due to insurable causes.
    (e) No reduction in the production to count or the additional 
value price election will be allowed for moisture content, damage 
due to uninsured causes; costs or reduced value associated with 
drying, handling, processing, or quality factors other than those 
contained in section 4(a)(2) of this Option; or any other costs 
associated with normal handling and marketing of malting barely.
    (f) All grade and quality determinations must be based on the 
results of objective tests. No indemnity will be paid for any loss 
established by subjective tests. We may obtain one or more samples 
of the insured crop and have tests performed at an official grain 
inspection location established under the U.S. Grain Standards Act 
or laboratory of our choice to verify the results of any test. In 
the event of a conflict in the test results, our results will 
determine the amount of production to count.
    5. In the event of loss or damage covered by this policy, we 
will settle your claim by:
    (a) Multiplying the insured acreage times your malting barley 
production guarantee per acre;
    (b) Multiplying the result in subsection (a) of this section 
times your additional value price election per bushel;
    (c) Multiplying the number of bushels of production to count 
determined in accordance with sections 4 (a) and (b) of this Option 
times your elected additional value price per bushel;
    (d) Multiplying the production to count determined under section 
4(c) of this Option times the additional value price per bushel 
determined in section 4(d) of the Option;
    (e) Adding the results of subsections (c) and (d) of this 
section;
    (f) Subtracting the result of subsection (e) of this section 
from the result in subsection (b); and
    (g) Multiplying the result of subsection (f) of this section 
times your share.
    6. For example, assume you insure two units of barley under the 
Small Grains Crop Provisions in which you have a 100% share and that 
are planted to approved malting varieties. Assume the following:
    (a) Each unit contains 40 acres;
    (b) You have a contract for the sale of 2500 bushels of malting 
barley;
    (c) You have selected the 70 percent coverage level;
    (d) Your production guarantee under the Small Grains Crop 
Provisions and the APH regulations for feed barley is 35 bushels per 
acre;
    (e) Your total production from all units under the Small Grains 
Crop Provisions is 1,000 bushels, all of which fails to meet the 
quality standards specified by this Option. 

[[Page 8858]]
Two hundred bushels are sold for malting purposes after conditioning. 
Conditioning cost $0.05 per bushel; and
    (f) Your additional value price election is $0.60 per bushel.
    Your malting barley production guarantee is 1750.0 bushels (the 
lesser of 35 or 21.875 (2500 contracted bushels 80 acres x 
70 percent coverage) x 80 acres). The value of your production 
guarantee is $1050.00 (1750 bushels x $0.60 per bushel). Your 
production to count is 200 bushels. The value of your production to 
count is $110.00 (200 bushels x $0.55 ($0.60--$0.05)). Your 
indemnity for the malting barley unit is $940.00 (($1050.00--
$110.00) x 100 percent share). Any remaining loss is paid under the 
Small Grains Crop Provisions for feed barley.

    Done in Washington, D.C., on March 1, 1996.
Kenneth D. Ackerman,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 96-5383 Filed 3-4-96; 1:01 pm]
BILLING CODE 3410-FA-P