[Federal Register Volume 69, Number 60 (Monday, March 29, 2004)]
[Proposed Rules]
[Pages 16181-16186]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-6938]


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DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Part 457


Common Crop Insurance Regulations; Apple Crop Insurance 
Provisions

AGENCY: Federal Crop Insurance Corporation, USDA.

[[Page 16182]]


ACTION: Proposed rule with request for comments.

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SUMMARY: The Federal Crop Insurance Corporation (FCIC) proposes to 
amend the Apple Crop Insurance Provisions. The intended effect of this 
action is to provide policy changes and clarify existing policy 
provisions to better meet the needs of the insureds and to restrict the 
effect of the current Apple Crop Insurance Regulations to the 2004 and 
prior crop years.

DATES: Written comments and opinions on this proposed rule will be 
accepted until close of business April 28, 2004 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, Risk Management Agency, 
United States Department of Agriculture, 6501 Beacon Drive, Stop 0812, 
Room 421, Kansas City, MO 64133-4676. Comments titled ``Apple Crop 
Provisions'' may be sent via the Internet to [email protected], 
or the Federal eRulemaking Portal: http://www.regulations.gov. Follow 
the online instructions for submitting comments. A copy of each 
response will be available for public inspection and copying from 7 
a.m. to 4:30 p.m., CDT, Monday through Friday except holidays, at the 
above address.

FOR FURTHER INFORMATION CONTACT: Gary Johnson, Risk Management 
Specialist, Research and Development, Product Development Division, 
Risk Management Agency, 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 that this 
rule is not significant for the purpose of Executive Order 12866 and, 
therefore, it has not been reviewed by OMB.

Paperwork Reduction Act of 1995

    Pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 
35), the collections of information in this rule have been approved by 
OMB under control number 0563-0053 through February 28, 2005.

Regulatory Flexibility Act

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

Federal Assistance Program

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

Executive Order 12372

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

Executive Order 12988

    This rule has been reviewed in accordance with Executive Order 
12988 on civil justice reform. The provisions of this rule will not 
have a retroactive effect. The provisions of this rule will preempt 
State and local laws to the extent such State and local laws are 
inconsistent herewith. With respect to any action taken by FCIC under 
the terms of the crop insurance policy, the administrative appeal 
provisions published at 7 CFR part 11 or 7 CFR 400.169, as applicable, 
must be exhausted before any action for judicial review of any 
determination or action by FCIC may be brought.

Environmental Evaluation

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

Background

    FCIC proposes to amend the Common Crop Insurance Regulations (7 CFR 
part 457) by amending Sec.  457.158 Apple Crop Insurance Provisions 
effective for the 2005 and succeeding crop years. The changes to the 
provisions for insuring apples are as follows:
    1. Section 1--Add definitions for the terms ``apple production,'' 
``fresh apple production,'' ``processed apple production,'' ``damaged 
apple production,'' ``mature,'' and ``type''. The definition of 
``harvest'' has been revised to clarify that apples collected from the 
ground that cannot be sold for human consumption will not be considered 
harvested. The definition of ``marketable'' has been revised to conform 
to the new standards for apples considered damaged.
    2. Section 2--Revise section 2 to incorporate the provisions 
previously contained in section 14 for clarity and to conform to the 
elimination of some of the options previously available under the 
policy.
    3. Section 3--Move the requirement to report acreage by varietal 
group to the acreage reporting date to be consistent with the 
requirement that the insured report their types on the acreage report.
    4. Section 4--The contract change date in California has been 
changed to October 1 to conform to the changes in the insurance period 
for California.
    5. Section 5--Add provisions to clarify that an insurance provider 
may not cancel an insured's policy when an insured cause of loss has 
occurred after insurance attached, but prior to the cancellation and 
termination date.
    6. Section 6--Revise the reporting requirements to require the 
insured to report and designate all acreage grown for fresh apples and 
all acreage grown for processing apples, by varietal group, by the 
acreage reporting date to ensure that the proper price is used to value 
the production.
    7. Section 9--Add provisions to specify that if the insured policy 
is canceled or terminated for any crop year after insurance attached 
for that crop year, but on or before the cancellation and termination 
dates, whichever is later, then insurance will be considered to not 
have attached for that year and no premium, administrative fee, or 
indemnity will be due. Add provisions to allow a different insurance 
period for California because the varieties grown there are typically 
harvested later than other varieties.
    8. Section 10--Revise the provision to specify that unavoidable 
hail, wind, sunburn, and russeting caused by frost or freeze will now 
be a covered cause

[[Page 16183]]

of loss without the need to purchase a specific option.
    9. Section 12--Clarify that value of the production guarantee is 
also calculated by variety as well as type.
    10. Replaced provisions of the previous sections 13 (Optional 
Coverage for Quality Adjustment) and section 14 (Option C--Prices and 
Units by Varietal Group) with a new section 14 (Optional Coverage for 
Fresh Fruit Quality Adjustment) to provide quality adjustments for all 
perils. This modification eliminates several options under the current 
program and simplifies the apple crop insurance program. In addition, 
an example was added for clarification of the Optional Coverage for 
Fresh Quality Adjustment.

List of Subjects in 7 CFR Part 457

    Crop insurance, Apple, Reporting and record keeping requirements.

Proposed Rule

    Accordingly, as set forth in the preamble, the Federal Crop 
Insurance Corporation proposes to amend 7 CFR part 457, Common Crop 
Insurance Regulations, for the 2005 and succeeding crop years as 
follows:

PART 457--COMMON CROP INSURANCE REGULATIONS

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

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

    2. Revise Sec.  457.158 to read as follows:


Sec.  457.158  Apple crop insurance provisions.

    The Apple Crop Insurance Provisions for the 2005 and succeeding 
crop years are as follows:
1. Definitions
    Apple production. All production of fresh apples and processing 
apples from the insurable acreage.
    Area A. A geographic area that includes Montana, Wyoming, Utah, New 
Mexico and all states west thereof.
    Area B. A geographic area that includes all states not included in 
Area A, except for Colorado.
    Area C. Colorado.
    Bin. A container that contains a minimum of 875 pounds of apples or 
another quantity if so designated in the Special Provisions.
    Box. A container that contains 35 pounds of apples or another 
quantity if so designated in the Special Provisions.
    Bushel. In all states except Colorado, 42 pounds of apples. In 
Colorado, 40 pounds of apples.
    Damaged apple production.
    A. With respect to losses calculated under section 12 only, the 
percentage of fresh or processing apple production that fails to grade 
U.S. No. 1 Processing or better in accordance with the United States 
Standards for Grades of Apples for processing, or such other standard 
contained on the Special Provisions, within each lot, bin, bushel or 
box, as applicable; or
    B. With respect to losses calculated under sections 12 and 14--The 
percentage of fresh apple production that fails to grade U.S. Fancy or 
better in accordance with the United States Standards for Grades of 
Apples, or such other standard contained on the Special Provisions, 
within each lot, bin, bushel or box, as applicable.
    Direct marketing. Sale of the insured crop directly to consumers 
without the intervention of an intermediary such as a wholesaler, 
retailer, packer, processor, shipper, buyer or broker. Examples of 
direct marketing include selling through an on-farm or roadside stand, 
or a farmer's market, and permitting the general public to enter the 
field for the purpose of picking all or a portion of the crop.
    Fresh apples. Apple production reported from acreage that is 
intended to be marketed for fresh consumption and is reported as fresh 
on the acreage report and grades U.S. Fancy or better in accordance 
with the United States Standards for Grades of Apples, or such other 
standard contained on the Special Provisions.
    Harvest. The picking of mature apples from the trees or collecting 
of mature apples from the ground. Mature apples that are collected from 
the ground but cannot be sold for human consumption will not be 
considered harvested.
    Lot. A quantity of production that can be separated from other 
quantities of production by grade characteristics, load, location or 
other distinctive features.
    Marketable. Apple production that is not damaged apple production.
    Mature. Having reached the full natural growth or development, at 
which time harvest normally takes place.
    Non-contiguous. Any two or more tracts of land whose boundaries do 
not touch at any point, except that land separated only by a public or 
private right-of-way, waterway, or an irrigation canal will be 
considered as contiguous.
    Processing apples. Apple production from acreage that is intended 
to be marketed for processing and is reported as processing on the 
acreage report, and grades U.S. No.1 Processing or better in accordance 
with the United States Standards for Grades of Apples for Processing, 
or such other standard contained on the Special Provisions.
    Production guarantee (per acre). The quantity of apples in bushels, 
bins, or boxes, determined by multiplying the approved APH yield per 
acre by the coverage level percentage you elect.
    Russeting. The same meaning as the definition of ``russeting'' 
contained in the United States Standards for Grades of Apples, or such 
other standard contained on the Special Provisions.
    Sunburn. The same meaning as the definition of ``sunburn'' 
contained in the United States Standards for Grades of Apples, or such 
other standard contained on the Special Provisions.
    Type. Either fresh or processing apples.
    Varietal group. Apple varieties with similar characteristics that 
are grouped for insurance purposes as specified in the Special 
Provisions.
2. Unit Division
    (a) In addition to the requirements of section 34(b) of the Basic 
Provisions, optional units may be established if each optional unit is:
    (1) Located on non-contiguous land; and
    (2) By varietal group;
    (b) Optional units may only be established if the following 
conditions are met:
    (1) You have not elected to insure your apples under the 
Catastrophic Risk Protection (CAT) Endorsement; and
    (2) You have maintained separate production records for each 
optional unit and you can identify the acreage upon which the apples 
are produced.
3. Insurance Guarantees, Coverage Levels, and Prices for Determining 
Indemnities
    In addition to the requirements of section 3 of the Basic 
Provisions:
    (a) You may select only one price election for all the apples in 
the county insured under this policy unless the Special Provisions 
provide different price elections by type or varietal group, in which 
case you may select one price election for each apple type or varietal 
group designated in the Special Provisions. The price elections you 
choose for each type or varietal group must have the same percentage 
relationship to the maximum price offered by us for each type or 
varietal group. For example, if you choose 100 percent of the maximum 
price election for one type or varietal group, you must also choose 100 
percent of the maximum price election for all other types or varietal 
groups.
    (b) You must report, by the production reporting date designated in 
section 3 of the Basic Provisions, by type or varietal group if 
applicable:

[[Page 16184]]

    (1) Any damage, removal of trees, change in practices, or any other 
circumstance that may reduce the expected yield below the yield upon 
which the insurance guarantee is based, and the number of affected 
acres;
    (2) The number of bearing trees on insurable and uninsurable 
acreage;
    (3) The age of the trees and the planting pattern; and
    (4) For the first year of insurance for acreage interplanted with 
another perennial crop, and anytime the planting pattern of such 
acreage has changed:
    (i) The age of the interplanted crop, and type if applicable;
    (ii) The planting pattern; and
    (iii) Any other information that we request in order to establish 
your approved yield.
    (c) We will reduce the yield used to establish your production 
guarantee as necessary, based on our estimate of the effect of the 
following: interplanted perennial crop; removal of trees; damage; 
change in practices and any other circumstance on the yield potential 
of the insured crop. If you fail to notify us of any circumstance that 
may reduce your yields from previous levels, we will reduce your 
production guarantee as necessary at any time we become aware of the 
circumstance.
    (d) You may not increase your elected or assigned coverage level or 
the ratio of your price election to the maximum price election if a 
cause of loss that could or would reduce the yield of the insured crop 
has occurred prior to the time that you request the increase.
4. Contract Changes
    In accordance with section 4 of the Basic Provisions, the contract 
change date is October 31 preceding the cancellation for California and 
August 31 preceding the cancellation date for all other states.
5. Cancellation and Termination Dates
    (a) In accordance with section 2 of the Basic Provisions, the 
cancellation and termination dates are January 31 in California and 
November 20 in all other states.
    (b) If your apple policy is canceled or terminated by us for any 
crop year, in accordance with the terms of the policy, after insurance 
attached for that crop year, but on or before the cancellation and 
termination dates whichever is later, insurance will be considered to 
not have attached for that crop year and no premium, administrative 
fee, or indemnity will be due for such crop year.
    (c) We may not cancel your policy when an insured cause of loss has 
occurred after insurance attached, but prior to the cancellation date. 
However, your policy can be terminated if a cause for termination 
contained in sections 2 or 27 of the Basic Provisions exists.
6. Report of Acreage
    In addition to the requirements contained in the section 6 of the 
Basic Provisions, you must report and designate all acreage by type and 
varietal group by the acreage reporting date.
7. Insured Crop
    In accordance with section 8 of the Basic Provisions, the crop 
insured will be all the apples in the county for which a premium rate 
is provided by the actuarial table:
    (a) In which you have a share;
    (b) That are grown on tree varieties that:
    (1) Are adapted to the area; and
    (2) Are in area A and have produced at least an average of 10 bins 
of apples per acre; or
    (3) Are in area B and have produced at least an average of 150 
bushels of apples per acre; or
    (4) Are in area C and have produced at least an average of 200 
bushels of apples per acre; and
    (c) That are grown in an orchard that, if inspected, is considered 
acceptable by us.
8. Insurable Acreage
    In lieu of the provisions in section 9 of the Basic Provisions that 
prohibit insurance from attaching to a crop planted with another crop, 
apples interplanted with another perennial crop are insurable unless we 
inspect the acreage and determine that it does not meet the 
requirements contained in your policy.
9. Insurance Period
    (a) In accordance with the provisions of section 11 of the Basic 
Provisions:
    (1) For the year of application in California, coverage begins on 
February 1 of the calendar year the insured crop normally blooms. In 
all other states, coverage begins November 21 of the calendar year 
prior to the calendar year the insured crop normally blooms, except 
that, if your application is received by us after January 12 but prior 
to February 1 in California, or after November 1 but prior to November 
21 in all other states, insurance will attach on the 20th day after 
your properly completed application is received in our local office, 
unless we inspect the acreage during the 20 day period and determine 
that it does not meet insurability requirements. You must provide any 
information that we require for the crop or to determine the condition 
of the apple acreage.
    (2) For each crop year subsequent to the year of application, that 
the policy remains continuously in force, coverage begins on the day 
immediately following the end of the insurance period for the prior 
crop year. Policy cancellation that results solely from transferring an 
existing policy to a different insurance provider for a subsequent crop 
year will not be considered a break in continuous coverage.
    (3) For California, the calendar date for the end of the insurance 
period for each crop year is November 5, or such other date as 
specified in the Special Provisions. For all other states, the calendar 
date for the end of the insurance period for each crop year is November 
20.
    (4) Cancellation and termination provisions that pertain to the 
period after insurance has attached, but prior to the cancellation and 
termination date, are contained in section 5 of these crop provisions.
    (b) In addition to the provisions of section 11 of the Basic 
Provisions:
    (1) If you acquire an insurable share in any insurable acreage 
after coverage begins but on or before the acreage reporting date for 
the crop year, and after an inspection we consider the acreage 
acceptable, insurance will be considered to have attached to such 
acreage on the calendar date for the beginning of the insurance period. 
There will be no coverage of any insurable interest acquired after the 
acreage reporting date.
    (2) If you relinquish your insurable share on any insurable acreage 
of apples on or before the acreage reporting date for the crop year, 
insurance will not be considered to have attached to, and no premium or 
indemnity will be due for such acreage for that crop year unless:
    (i) A transfer of coverage and right to an indemnity, or a similar 
form approved by us, is completed by all affected parties;
    (ii) We are notified by you or the transferee in writing of such 
transfer on or before the acreage reporting date; and
    (iii) The transferee is eligible for crop insurance.
10. Causes of Loss
    (a) In accordance with the provisions of section 12 of the Basic 
Provisions, insurance is provided only against the following causes of 
loss that occur during the insurance period:
    (1) Adverse weather conditions;
    (2) Fire, unless weeds and other forms of undergrowth have not been

[[Page 16185]]

controlled or pruning debris has not been removed from the orchard;
    (3) Earthquake;
    (4) Volcanic eruption;
    (5) Failure of irrigation water supply, if caused by an insured 
peril that occurs during the insurance period;
    (6) Wildlife; and
    (7) All other natural causes of loss that cannot be prevented, 
including, but not limited to hail, wind, sunburn, and russeting caused 
by frost or freeze.
    (b) In addition to the causes of loss excluded in section 12 of the 
Basic Provisions, we will not insure against damage or loss of 
production due to:
    (1) Disease or insect infestation, unless adverse weather:
    (i) Prevents the proper application of control measures or causes 
properly applied control measures to be ineffective; or
    (ii) Causes disease or insect infestation for which no effective 
control mechanism is available;
    (2) Inability to market the apples for any reason other than actual 
physical damage from an insurable cause specified in this section. For 
example, we will not pay you an indemnity if you are unable to market 
due to quarantine, boycott, or refusal of any person to accept 
production.
11. Duties in the Event of Damage or Loss
    In addition to the requirements of section 14 of the Basic 
Provisions, the following will apply:
    (a) You must notify us within 3 days of the date harvest should 
have started if the crop will not be harvested.
    (b) You must notify us at least 15 days before any production from 
any unit will be sold by direct marketing. We will conduct an appraisal 
that will be used to determine your production to count for production 
that is sold by direct marketing. If damage occurs after this 
appraisal, we will conduct an additional appraisal. These appraisals, 
and any acceptable records provided by you, will be used to determine 
your production to count. Failure to give timely notice that production 
will be sold by direct marketing will result in an appraised amount of 
production to count of not less than the production guarantee per acre 
if such failure results in our inability to make the required 
appraisal.
    (c) If you intend to claim an indemnity on any unit, you must 
notify us at least 15 days prior to the beginning of harvest or 
immediately if damage is discovered during harvest. You must not sell 
or dispose of the damaged crop until after we have given you written 
consent to do so. If you fail to meet the requirements of this section 
and such failure results in our inability to inspect the damaged 
production, we may consider all such production to be undamaged and 
include it as production to count.
12. Settlement of Claim
    (a) We will determine your loss on a unit basis. In the event you 
are unable to provide separate acceptable production records:
    (1) For any optional unit, we will combine all optional units for 
which such production records were not provided; or
    (2) For any basic unit, we will allocate any commingled production 
to such units in proportion to our liability on the harvested acreage 
for the units.
    (b) In the event of loss or damage covered by this policy, we will 
settle your claim on any unit by:
    (1) Multiplying the insured acreage by its respective production 
guarantee, by type or varietal group as applicable;
    (2) Multiplying each result in section 12(b)(1) by the respective 
price election;
    (3) Totaling the results in section 12(b)(2) if there are more than 
one type or varietal group;
    (4) Multiplying the total production to count (see section 12(c)), 
for each type or varietal group as applicable, by the respective price 
election;
    (5) Totaling the results in section 12(b)(4), if there are more 
than one type or varietal group;
    (6) Subtracting the total in section 12(b)(5) from the total in 
section 12(b)(3); and
    (7) Multiplying the result in section 12(b)(6) by your share. Basic 
Coverage example:
    You have 100 percent share and designated 10 acres of fresh apples 
and 5 acres of processing apples in the unit on the acreage report, 
with a 600 bushel per acre guarantee for both fresh and processing 
apples and a price election of $9.10 per bushel for fresh apples and 
$4.76 per bushel for processing apples that graded U.S. No. 1 
Processing or better. You are only able to harvest 5,000 bushel of 
fresh apples and 1,000 bushels of processing apples. Your indemnity 
would be calculated as follows:
    (1) 10 acres x 600 bushels = 6,000 bushels guarantee of fresh 
apples; 5 acres x 600 bushels = 3,000 bushels guarantee of processing 
apples;
    (2) 6,000 bushels x $9.10 price election = $54,600.00 value of 
guarantee for fresh apples; 3,000 bushels x $4.76 price election = 
$14,280.00 value of guarantee for processing;
    (3) $54,600.00 + $14,280.00 = $68,880.00 total value guarantee;
    (4) 5,000 bushels x $9.10 price election = $45,500.00 value of 
production to count for fresh apples; 1,000 bushels x $4.76 price 
election = $4,760.00 value of production to count for processing;
    (5) $45,500.00 + $4,760.00 = $50,260.00 total value of production 
to count;
    (6) $68,880.00 - $50,260.00 = $18,540.00 loss; and
    (7) $18,540.00 x 100 percent share = $18,540.00 indemnity payment.
    (c) The total apple production to count (in boxes or bushels) from 
all insurable acreage on the unit will include:
    (1) All appraised apple production as follows:
    (i) Not less than the production guarantee per acre for acreage:
    (A) That is abandoned;
    (B) That is sold by direct marketing if you fail to meet the 
requirements contained in section 11;
    (C) That is damaged solely by uninsured causes; or
    (D) For which you fail to provide production records that are 
acceptable to us;
    (ii) Apple production lost due to uninsured causes;
    (iii) Unharvested apple production that would be marketable if 
harvested; and
    (iv) Potential marketable apple production on insured acreage that 
you intend to abandon or no longer care for, if you and we agree on the 
appraised amount of production. Upon such agreement, the insurance 
period for that acreage will end. If you do not agree with our 
appraisal, we may defer the claim only if you agree to continue to care 
for the crop. We will then make another appraisal when you notify us of 
further damage or that harvest is general in the area unless you 
harvested the crop, in which case we will use the harvested production. 
If you do not continue to care for the crop, our appraisal made prior 
to deferring the claim will be used to determine the production to 
count; and
    (2) All harvested marketable apple production from the insurable 
acreage.
    (3) Unharvest and harvested mature fresh apple production to count 
may be reduced in accordance with section 14 of these Crop Provisions 
if you elect this option.
13. Late and Prevented Planting
    The late and prevented planting provisions of the Basic Provisions 
are not applicable.

[[Page 16186]]

14. Optional Coverage for Fresh Fruit Quality Adjustment.
    (a) In the event of a conflict between the Apple Crop Insurance 
Provisions and this option, this option will control.
    (b) In return for payment of the additional premium designated in 
the actuarial documents, this option provides for quality adjustment of 
fresh apple production as follows:
    (1) You must elect this option on or before the sales closing date 
for the initial crop year for which you wish to insure your apples 
under this option. This option will continue in effect until canceled 
by either you or us for any succeeding crop year by written notice to 
the other party on or before the cancellation date.
    (2) To be eligible for this option, you must have elected to insure 
your apples at the additional coverage level. If you elect Catastrophic 
Risk Protection (CAT) after this option is effective, it will be 
considered as notice of cancellation of this option by you.
    (3) This option will apply to all your apple acreage designated in 
your acreage report as grown for fresh apples and that meets the 
insurability requirements specified in the Apple Crop Insurance 
Provisions, except any acreage specifically excluded by the actuarial 
documents. Any acreage designated in your acreage report as grown for 
processing apples are not eligible for coverage under this option.
    (4) In lieu of sections 12(c)(1)(iii) and (iv) and (2), the 
production to count for appraised and harvested production for a unit 
will include all fresh apple production in accordance with this option.
    (5) If appraised or harvested fresh apple production is damaged by 
an insured cause of loss to the extent that 80 percent or more of the 
fresh apples do not grade U.S. Fancy or better, in accordance with 
applicable USDA Standards for Grades of Apples, the following 
adjustments will apply:
    (i) Production to count with 21 through 40 percent of the fresh 
apples not grading U.S. Fancy or better will be reduced 2 percent for 
each full percent in excess of 20 percent.
    (ii) Production to count with 41 through 50 percent of the fresh 
apples not grading U.S. Fancy or better will be reduced 40 percent plus 
an additional 3 percent for each full percent in excess of 40 percent.
    (iii) Production to count with 51 percent through 64 percent of the 
fresh apples not grading U.S. Fancy or better will be reduced 70 
percent plus an additional 2 percent for each full percent in excess of 
50 percent.
    (iv) Production to count with 65 percent or more of the fresh 
apples not grading U.S. Fancy or better will not be considered as 
production to count.
    The following is an example of loss under the Quality Option Fresh 
Fruit Coverage: You have 100 percent share and designated 10 acres of 
fresh apples and 5 acres of processing apples in the unit on the 
acreage report, with a 600 bushels per acre guarantee for both fresh 
and processing apples and a price election of $9.10 per bushel for 
fresh apples and $4.76 per bushel for processing apples that graded 
U.S. No. 1 Processing or better. You are only able to harvest 5,000 
bushels of fresh apples, and of those only 2,750 bushels of apples 
grade U.S. Fancy or better, and 1,000 bushels of processing apples. 
Your indemnity would be calculated as follows:
    (1) 10 acres x 600 bushels = 6,000 bushels guarantee of fresh 
apples; 5 acres x 600 bushels = 3,000 bushels guarantee of processing 
apples;
    (2) 6,000 bushels x $9.10 price election = $54,600.00 value of 
guarantee for fresh apples; 3,000 bushels x $4.76 price election = 
$14,280.00 value of guarantee for processing;
    (3) $54,600.00 + $14,280.00 = $68,880.00 total value guarantee;
    (4) 5,000 bushels of fresh apples would be adjusted as follows: 
2,750 / 5000 = 55 percent; 5,000 x .45 (40 percent reduction, plus an 
additional 3 percent for each full percent in excess of 40 percent) = 
2,250 bushels x $9.10 = $20,475.00 value of the fresh bushels; 1,000 
bushels of processing apples x $4.76 price election = $4,760.00 value 
of production to count.
    (5) $20,475.00 + $4,760.00 = $25,235.00 total value of production 
to count;
    (6) $68,880.00 - $25,235.00 = $43,645.00 loss; and
    (7) $43,645.00 x 100 percent share = $43,645.00 indemnity payment.

    Signed in Washington, DC, on March 24, 2004.
Ross J. Davidson, Jr.,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 04-6938 Filed 3-26-04; 8:45 am]
BILLING CODE 3410-08-P