[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