[Federal Register Volume 63, Number 189 (Wednesday, September 30, 1998)]
[Proposed Rules]
[Pages 52198-52200]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-26257]


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DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Part 457

RIN 0563-AB62


Common Crop Insurance Regulations; Cotton and ELS Cotton Crop 
Insurance Provisions

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Proposed rule.

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SUMMARY: The Federal Crop Insurance Corporation (FCIC) proposes to 
amend the Cotton Crop Insurance Provisions and the Extra Long Staple 
(ELS) Cotton Crop Insurance Provisions for the 1999 and succeeding crop 
years to: Provide a replant payment if the insured crop is damaged by 
excess moisture, hail, or blowing sand or soil and is replanted; revise 
the quality adjustment formula used to calculate the amount of 
production to count for cotton and ELS cotton; and provide a prevented 
planting coverage level of 50 percent of the insured's production 
guarantee for timely planted acreage. The intended effect of this 
action is to create a policy that best meets the needs of the insured.

DATES: Written comments and opinions on this proposed rule will be 
accepted until close of business October 13, 1998, and will be 
considered when the rule is to be made final.

ADDRESSES: Interested persons are invited to submit written comments to 
the Director, Product Development Division, Federal Crop Insurance 
Corporation, U.S. Department of Agriculture, 9435 Holmes Road, Kansas 
City, MO 64131. A copy of each response will be available for public 
inspection and copying from 7:00 a.m. to 4:30 p.m., CDT, Monday through 
Friday, except holidays, at the above address.

FOR FURTHER INFORMATION CONTACT: For further information and a copy of 
the cost-benefit analysis to the Common Crop Insurance Regulations; 
Cotton and ELS Cotton Crop Insurance Provisions, contact Stephen Hoy, 
Insurance Management Specialist, Research and Development, Product 
Development Division, Federal Crop Insurance Corporation, at the Kansas 
City, MO, address listed above, telephone (816) 926-7730.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    The Office of Management and Budget (OMB) has determined this 
proposed rule to be significant and, therefore, has been reviewed by 
OMB.

Cost-Benefit Analysis

    A Cost-Benefit Analysis has been completed and is available to 
interested persons at the Kansas City address listed above. In summary, 
the analysis finds that the proposed rule makes major changes to the 
Cotton and ELS Cotton Crop Insurance Provisions which would benefit 
producers by increasing existing Multiple-Peril Crop Insurance 
coverage. Specifically, the rule: (1) Provides a replant payment for 
cotton and ELS cotton damaged or destroyed by excess moisture, hail, or 
blowing sand or soil; (2) modifies the quality adjustment procedure 
used when mature white cotton or mature ELS cotton has been damaged by 
insured causes; and (3) increases the prevented planting coverage 
payment rate to 50 percent for cotton and ELS cotton.
    These proposed changes are expected to add $36 to $43 million to 
aggregate losses and premiums. Producer premium subsidies and 
administrative subsidies are proportions of the actuarially based 
premiums; thus increases in premiums lead to increases in outlays for 
subsidies. The total increase in Government outlays due to provisions 
of this regulation, including the full effect of prevented planting 
coverage, is expected to be $32 to $38 million. About $21 to $25 
million would be for producer premium subsidies, $8 to $10 million for 
administrative subsidies, and about $3 million for underwriting costs.

Paperwork Reduction Act of 1995

    The provisions contained in this rule contain information 
collections that require clearance by the Office of Management and 
Budget (OMB).
    This rule proposes to amend the information collection requirements 
previously approved by OMB under OMB control number 0563-0053 through 
October 31, 2000. This rule provides a replant payment if the insured 
crop is damaged by excess moisture, hail, or blowing sand or soil and 
is replanted. Information will need to be collected with respect to the 
number of acres replanted in order to calculate a replant payment. In 
addition, the proposed rule revises the provision used to determine the 
amount of production to count for cotton and ELS cotton that is 
eligible for quality adjustment, and proposes a prevented planting 
coverage of 50 percent for cotton and ELS cotton for 1999 and 
subsequent crop years. All of the forms cleared under OMB control 
number 0563-0053 represent the minimum information necessary to 
determine eligibility and losses qualifying for a payment due to cotton 
and ELS cotton coverage.
    Due to the necessity of implementing the rule beginning with the 
1999 crop year, the Agency has requested emergency clearance of the 
information collections associated with this rule from OMB by September 
8, 1998. A Federal Register notice soliciting public comment in 
conjunction with a regular information collection approval package

[[Page 52199]]

was published in the Federal Register on September 25, 1998.

Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform of 1995 (UMRA), Public Law 
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. This rule contains no Federal 
mandates (under the regulatory provisions of title II of the UMRA) for 
State, local, and tribal governments or the private sector. Therefore, 
this rule is not subject to the requirements of sections 202 and 205 of 
the UMRA.

Executive Order 12612

    It has been determined under section 6(a) of Executive Order No. 
12612, Federalism, that this rule does not have sufficient federalism 
implications to warrant the preparation of a Federalism Assessment. The 
provisions contained in this rule will not have a substantial direct 
effect on States or their political subdivisions or on the distribution 
of power and responsibilities among the various levels of government.

Regulatory Flexibility Act

    This regulation will not have a significant economic impact on a 
substantial number of small entities. New provisions included in this 
rule will not impact small entities to a greater extent than large 
entities. All producers, regardless of size, are eligible for the 
replant payment and will be required to report the number of acres 
replanted and the cause of loss. The amount of work required of the 
insurance companies delivering and servicing these policies will 
increase somewhat from the amount of work currently required. However, 
insurance providers will be compensated for any increase because 
additional premium will be charged for the expanded coverage, and 
insurance providers are compensated through a percentage of the net 
book premium. Therefore, this action is determined to be exempt from 
the provisions of the Regulatory Flexibility Act (5 U.S.C. 605), and no 
Regulatory Flexibility Analysis was prepared.

Federal Assistance Program

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

Executive Order 12372

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

Executive Order 12988

    This proposed rule has been reviewed in accordance with Executive 
Order 12988 on civil justice reform. The provisions of this rule will 
not have a retroactive effect. The provisions of this rule will preempt 
State and local laws to the extent such State and local laws are 
inconsistent herewith. The administrative appeal provisions published 
at 7 CFR part 11 must be exhausted before any action against FCIC for 
judicial review may be brought.

Environmental Evaluation

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

National Performance Review

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

Background

    FCIC proposes to amend the Common Crop Insurance Regulations (7 CFR 
part 457) by revising 7 CFR 457.104 and 7 CFR 457.105 effective for the 
1999 and succeeding crop years. The principal changes to the provisions 
for insuring cotton and ELS cotton are as follows:
    1. Section 9--Add a new section 9 to provide a replant payment for 
cotton and ELS cotton damaged by excess moisture, hail, or blowing sand 
or soil to the extent that the remaining stand will not produce at 
least 90 percent of the production guarantee for the acreage and it is 
practical to replant (sections that succeed the new replant payment 
section are renumbered to accommodate this change). The current Cotton 
Crop Provisions and ELS Cotton Crop Provisions do not provide a replant 
payment if the crop is damaged to the extent that replanting is 
necessary. Concerns were expressed to FCIC that the absence of a 
replant payment for cotton, which requires the producer to replant the 
crop without compensation, is inconsistent with other major 
commodities. Failure to replant means that insurance does not attach.
    Replanting coverage will be limited to crop damage caused by excess 
moisture, hail, or blowing sand or soil. While these are not the only 
natural perils that cause cotton to be replanted, they are perils that 
often cause replanting in the cotton growing areas. Planting during or 
after a dry period (sometimes termed ``dusting-in'') may result in the 
need to replant if the cotton seed does not germinate; however, this 
practice will not be covered under the replant provision. Limiting 
replant payments to excess moisture, hail, and blowing sand or soil 
will have a lesser impact on premium rate increases than what may 
result if additional perils that occur with greater frequency, such as 
dry weather, were included. This proposed rule provides meaningful 
replanting coverage for cotton producers while maintaining a sound 
insurance program, particularly in areas where ``dusting-in'' is a 
common practice.
    2. Section 11--Change the adjustment for quality when mature white 
cotton or mature ELS cotton has been damaged by insured causes. The 
current provisions specify that the quality adjustment factor is 
calculated using 75 percent of the price quotation for the applicable 
growth area for cotton of the color and leaf grade, staple length, and 
micronaire reading (for ELS cotton the grade, staple length, and 
micronaire reading) contained in the Special Provisions for this 
purpose (price quotation ``B''). This rule revises the quality 
adjustment factor by using 100 percent of the price quotation ``B.'' 
Using 100 percent of price quotation ``B'' to calculate the quality 
adjustment factor for cotton and ELS cotton makes the production to 
count calculation comparable to most other crops that have adjustments 
for quality. The requirement that price quotation ``A'' must be less 
than 75 percent of price quotation ``B'' to be eligible for quality 
adjustment is not changed. In addition, ELS cotton price quotations 
``A'' and ``B'' will be determined from the Daily Spot Cotton Quotation 
rather than the Weekly Cotton Market Review to more accurately reflect 
the value of ELS cotton production.
    3. Section 12 of the Cotton Crop Provisions and section 13 of the 
ELS Cotton Crop Provisions--Change the prevented planting coverage to 
50 percent of the insured's production guarantee for timely planted 
acreage. Prevented planting coverage is designed to reimburse producers 
for the costs incurred during the preplant period if the intended crop 
cannot be planted. FCIC relied on an analysis performed by the Economic 
Research Service (ERS) as the basis for establishing 45 percent as the 
prevented planting coverage rate for cotton and ELS cotton for the 1998 
crop year.

[[Page 52200]]

    Concerns were expressed to FCIC that the prevented planting 
percentage for cotton is not comparable to other crops even though pre-
planting costs per acre for cotton are similar to other crops, such as 
corn; therefore, the prevented planting percentage should be increased. 
However, policy compatibility is not relevant to the amount offered. 
The only question is the sufficiency of the payment for the purpose 
stated. Concerns were also expressed that the price election used to 
determine the recommended prevented planting percentage in the ERS 
study was not reflective of the actual price election for cotton in 
past years. After further analyses using updated price elections, FCIC 
determined that a prevented planting coverage level of 50 percent of 
the insured's production guarantee for timely planted acreage could be 
offered for cotton beginning with the 1999 crop year. If the insured 
has limited or additional levels of coverage and pays an additional 
premium, the prevented planting coverage level may be increased to 55 
or 60 percent.
    This policy will be rated appropriately for the coverage provided.

List of Subjects in 7 CFR Part 457

    Crop insurance, Cotton, ELS cotton.

Proposed Rule

    Accordingly, as set forth in the preamble, the Federal Crop 
Insurance Corporation, proposes to amend 7 CFR part 457 as follows:

PART 457--COMMON CROP INSURANCE REGULATIONS; REGULATIONS FOR THE 
1998 AND SUBSEQUENT CROP YEARS

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

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

    2. In Sec. 457.104 redesignate sections 9 through 11 of the 
insurance provisions as 10 through 12, add a new section 9, and revise 
redesignated sections 11(d) and 12(b) to read as follows:


Sec. 457.104  Cotton Crop Insurance Provisions.

* * * * *

9. Replanting Payments

    (a) In accordance with section 13 of the Basic Provisions, a 
replanting payment is allowed if the insured crop is damaged by 
excess moisture, hail, or blowing sand or soil to the extent that 
the remaining stand will not produce at least 90 percent of the 
production guarantee for the acreage and it is practical to replant.
    (b) The maximum amount of the replanting payment for the unit 
will be the lesser of:
    (1) Twenty dollars ($20.00) per acre multiplied by the number of 
acres replanted, multiplied by your insured share; or
    (2) Ten percent (10%) of the production guarantee per acre 
multiplied by your price election, multiplied by the number of acres 
replanted, multiplied by your insured share.
    (c) When the cotton is replanted using a practice or type that 
is uninsurable as an original planting, the liability for the unit 
will be reduced by the amount of the replanting payment. The premium 
amount will not be reduced.
* * * * *

11. Settlement of Claim

* * * * *
    (d) Mature white cotton may be adjusted for quality when 
production has been damaged by insured causes. Unless otherwise 
provided by the Special Provisions, such production to count will be 
reduced if the price quotation for cotton of like quality (price 
quotation ``A'') for the applicable growth area is less than 75 
percent of price quotation ``B.'' Price quotation ``B'' is defined 
as the price quotation for the applicable growth area for cotton of 
the color and leaf grade, staple length, and micronaire reading 
designated in the Special Provisions for this purpose. Price 
quotations ``A'' and ``B'' will be the price quotations contained in 
the Daily Spot Cotton Quotations published by the USDA Agricultural 
Marketing Service on the date the last bale from the unit is 
classed. If not available on the date the last bale was classed, the 
price quotations will be determined on the date the last bale from 
the unit was delivered to the warehouse, as shown on the insured's 
account summary obtained from the gin. If eligible for quality 
adjustment, the amount of production to be counted will be 
determined by multiplying the number of pounds of production 
eligible for such adjustment by the factor derived from dividing 
price quotation ``A'' by price quotation ``B.''
* * * * *

12. Prevented Planting

* * * * *
    (b) Your prevented planting coverage will be 50 percent of your 
production guarantee for timely planted acreage. If you have limited 
or additional levels of coverage, as specified in 7 CFR part 400, 
subpart T, and pay an additional premium, you may increase your 
prevented planting coverage to a level specified in the actuarial 
documents.

    3. In Sec. 457.105 redesignate sections 9 through 12 of the 
insurance provisions as 10 through 13, add a new section 9, and revise 
redesignated sections 11(d) and 13(b) to read as follows:


Sec. 457.105  ELS Cotton Crop Insurance Provisions.

* * * * *

9. Replanting Payments

    (a) In accordance with section 13 of the Basic Provisions, a 
replanting payment is allowed if the insured crop is damaged by 
excess moisture, hail, or blowing sand or soil to the extent that 
the remaining stand will not produce at least 90 percent of the 
production guarantee for the acreage, and it is practical to 
replant.
    (b) The maximum amount of the replanting payment for the unit 
will be the lesser of:
    (1) Twenty dollars ($20.00) per acre multiplied by the number of 
acres replanted, multiplied by your insured share; or
    (2) Ten percent (10%) of the production guarantee per acre 
multiplied by your price election, multiplied by the number of acres 
replanted, multiplied by your insured share.
    (c) When the cotton is replanted using a practice or type that 
is uninsurable as an original planting, the liability for the unit 
will be reduced by the amount of the replanting payment. The premium 
amount will not be reduced.
* * * * *

11. Settlement of Claim

* * * * *
    (d) Mature ELS cotton production may be adjusted for quality 
when production has been damaged by insured causes. Unless otherwise 
provided by the Special Provisions, such production to count will be 
reduced if the price quotation for ELS cotton of like quality (price 
quotation ``A'') for the applicable growth area is less than 75 
percent of price quotation ``B.'' Price quotation ``B'' is defined 
as the price quotation for the applicable growth area for ELS cotton 
grade, staple length, and micronaire reading designated in the 
Special Provisions for this purpose. Price quotations ``A'' and 
``B'' will be the price quotations contained in the Daily Spot 
Cotton Quotations published by the USDA Agricultural Marketing 
Service on the date the last bale from the unit is classed. If not 
available on the date the last bale was classed, the price 
quotations will be determined on the date the last bale from the 
unit was delivered to the warehouse, as shown on the insured's 
account summary obtained from the gin. If eligible for quality 
adjustment, the amount of production to be counted will be 
determined by multiplying the number of pounds of production 
eligible for such adjustment by the factor derived from dividing 
price quotation ``A'' by price quotation ``B.''
* * * * *

13. Prevented Planting

* * * * *
    (b) Your prevented planting coverage will be 50 percent of your 
production guarantee for timely planted acreage. If you have limited 
or additional levels of coverage, as specified in 7 CFR part 400, 
subpart T, and pay an additional premium, you may increase your 
prevented planting coverage to a level specified in the actuarial 
documents.

    Signed in Washington, DC, on September 28, 1998.
Kenneth D. Ackerman,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 98-26257 Filed 9-28-98; 1:51 pm]
BILLING CODE 3410-08-P