[Federal Register Volume 69, Number 164 (Wednesday, August 25, 2004)]
[Rules and Regulations]
[Pages 52157-52167]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-19446]


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DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Part 457

RIN 0563-AB91


Common Crop Insurance Regulations, Pecan Revenue Crop Insurance 
Provisions

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Final rule.

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SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes the 
proposal to add to 7 CFR part 457 a new Sec.  457.167 that provides 
insurance for pecans. The provisions will be used in conjunction with 
the Common Crop Insurance Policy Basic Provisions. The intended effect 
of this action is to convert the pecan revenue pilot crop insurance 
program to a permanent insurance program for the 2005 and succeeding 
crop years.

DATES: Effective August 30, 2004.

FOR FURTHER INFORMATION CONTACT: Linda Williams, Risk Management 
Specialist, Research and Development, Product Development Division, 
Risk Management Agency, United States Department of Agriculture, 6501 
Beacon Drive, Stop 0812, Room 421, Kansas City, MO 64133-4676, 
telephone (816) 926-7730.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule has been determined to be non-significant for the 
purposes of Executive Order 12866 and, therefore, it has not been 
reviewed by the Office of Management and Budget (OMB).

Paperwork Reduction Act of 1995

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

Government Paperwork Elimination Act (GPEA) Compliance

    In an effort to comply with GPEA, FCIC requires all insurance 
companies delivering the crop insurance program to make available all 
insurance documents electronically and to transact business with 
insureds electronically. Further, to the maximum extent practicable, 
FCIC transacts its business with the insurance companies 
electronically.

[[Page 52158]]

Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) 
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 UMRA.

Executive Order 13132

    It has been determined under section 1(a) of Executive Order 13132, 
Federalism, that this rule does not have sufficient implications to 
warrant consultation with the States. The provisions contained in this 
rule will not have a substantial direct effect on States, or on the 
relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government.

Regulatory Flexibility Act

    FCIC certifies 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 direct action taken by FCIC 
under the terms of the crop insurance policy, the administrative appeal 
provisions published at 7 CFR part 11 and 7 CFR part 400, subpart J for 
the informal administrative review process of good farming practices, 
as applicable, 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 impact on the 
quality of the human environment, health, and safety. Therefore, 
neither an Environmental Assessment nor an Environmental Impact 
Statement is needed.

Background

    On March 10, 2004, FCIC published a notice of proposed rulemaking 
in the Federal Register at 69 FR 11342-11346 to add to the Common Crop 
Insurance Regulations (7 CFR part 457) a new section, 7 CFR 457.167, 
Pecan Revenue Crop Insurance Provisions. FCIC intends to convert the 
pecan revenue pilot crop insurance program to a permanent crop 
insurance program beginning with the 2005 crop year. These provisions 
will replace and supersede the current unpublished provisions that 
insure pecans under a pilot program. The Pecan Revenue Crop Provisions 
will be effective for those insured whose first year of the two-year 
coverage module is 2005. If an insured's first year of the two-year 
coverage module is 2004 under the pilot program, the pilot policy will 
still be effective for the 2005 crop year. As with any policy changes, 
the new Crop Provisions would be applicable for the 2006 crop year if 
the policy remains in force and coverage will begin the day immediately 
following the end of the insurance period for the previous two-year 
coverage module.
    Following publication of the proposed rule, the public was afforded 
30 days to submit written comments, data and opinions. The comments 
received from the proposed rule are addressed in this final rule and 
FCIC's responses are as follows:
    Comment: A commenter questioned why the definition of ``acreage'' 
had been removed from the Crop Provisions and wondered if the 
definition would be in the Basic Provisions and would it provide the 
clarification that only ``the area occupied by the insured crop * * 
*.'' is counted for perennial crop purposes.
    Response: Acreage for pecans are determined the same as all other 
crops, so a separate definition is not required.
    Comment: A commenter suggested revising the definition of ``average 
gross sales per acre'' as the phrase ``during a crop year'' was not 
clear. It was also suggested the term ``gross sales'' be added in the 
definition as it is the basis for the average gross sales per acre.
    Response: The definition of ``average gross sales per acre'' has 
been revised to add an example to clarify the crop year referred to and 
a separate definition of gross sales has been added for further 
clarification.
    Comment: One comment suggested removing the phrase ``(in-shell 
basis)'' from the definition of ``approved average revenue per acre'' 
as it is already contained in another definition. It was also suggested 
to remove the last phrase `` * * * will be used to determine your total 
average gross sales per acre'' and the word ``have'' contained in the 
last sentence be replaced to ``provide'' as it is in the current Crop 
Provisions.
    Response: FCIC agrees and has made the changes accordingly.
    Comment: A commenter questioned if the change in the beginning and 
end dates for the definition of ``crop year'' means it is not necessary 
to refer to when the trees ``normally'' bloom.
    Response: Since blooming normally occurs between April and August, 
it is no longer necessary to refer to the crop year in which the tree 
``normally'' blooms.
    Comment: A comment asked if the term ``mature'' should be added 
back to the definition of ``harvest'' as it is not considered harvested 
if the pecans are collected before they are ready.
    Response: FCIC agrees and has made the change accordingly.
    Comment: A commenter had questions regarding the definition of 
``market price.'' The commenter asked who determines whether the actual 
price received and the average price per pound are inconsistent with 
AMS prices, and how much difference is to be considered. The commenter 
also asked if the AMS price is representative of the area and what date 
is used for appraisals

[[Page 52159]]

and how is the value calculated when there might be two appraisals when 
pecan acreage is harvested more than once.
    Response: In an effort to avoid the difficulty in determining 
whether prices are inconsistent, FCIC has revised the definition to 
specify the market price is the greater of: (1) The average price per 
pound offered by buyers in the area; (2) the actual price received for 
any sold production; or (3) the average of the AMS prices published 
during that week for similar quality pecans. The AMS prices may be 
obtained daily and a weekly report is also available. The AMS prices 
are identified by area and also contain the quality by pecan variety 
for specific areas. The AMS prices may be found at www.ams.usda.gov/marketnews.htm. If multiple appraisals occur in the same week, the same 
average AMS price would be applicable. However, if appraisals occur in 
different weeks, different AMS prices would be used to value the 
production. Section 13(d) has been revised to take into consideration 
the different prices that may be applicable.
    Comment: One commenter asked why the reference to ``pecans (in-
shell basis)'' was removed from the definition of ``pound'' and whether 
references to pounds of pecans always mean in-shell or not shelled 
nuts.
    Response: FCIC has revised the definition of ``pound'' to include 
that it is specifically on an ``in-shell'' basis.
    Comment: A commenter suggested in the definition of ``scion'' to 
change ``plant'' to ``pecan variety'' and to remove the word ``stock'' 
and replace it with ``tree or branch'' as in the ``top work'' 
definition.
    Response: There is duplication within the definitions of ``scion'' 
and ``top work'' so FCIC has revised the definition of ``scion'' to 
remove the duplication.
    Comment: A commenter asked if removing the phrase ``terms and 
conditions'' (which is understood to refer to the policy provisions) 
from the definition of ``two-year coverage module'' means it is the 
insured who must meet all requirements in order for coverage to remain 
the same both years of the coverage module.
    Response: Like other FCIC crop insurance programs, the insured must 
meet all terms and conditions of the insurance policy in order for 
coverage to remain in effect. However, FCIC has replaced the removed 
phrase to avoid any ambiguity with respect to when the terms of the 
policy can be revised in the second year of a two-year module.
    Comment: Two commenters asked if the final rule is effective for 
the 2005 crop year, will the changes apply to insureds whose first year 
of coverage is 2004 and the second year of coverage is 2005 or will the 
changes be effective for the 2006 crop year for these insureds.
    Response: If the Pecan Revenue Crop Provisions is effective for the 
2005 crop year, it will be applicable for those insureds whose first 
year of a two-year coverage module is 2005. If an insured's first year 
of the two-year coverage module is 2004 (under the pilot program 
phase), then the pilot policy will still be effective for the 2005 crop 
year. Like any other amendment to the policy, the new Crop Provisions 
would be applicable for the 2006 crop year if the policy remained in 
force.
    Comment: Section 2--Eighteen commenters requested consideration in 
allowing additional basic units by share or lease agreement. The 
commenters stated in many cases growers may have several different 
lease agreements and the orchards could be located in several different 
areas. Each orchard has different soil characteristics, age of the 
pecan trees, or access to water and is subject to different perils. As 
growers are required to market these blocks separately and maintain 
separate records, no additional burden would be placed on the grower. 
Some of the commenters suggested for program consistency of the crop 
insurance program, optional unit division should be allowed on a 
noncontiguous land basis as provided in other tree crops such as 
apples, almonds, and walnuts.
    Response: FCIC has revised section 2 to allow coverage by 
enterprise unit or basic unit. An enterprise unit will consist of all 
insurable acreage in the county. A basic unit as defined in the Basic 
Provisions will allow units by share. The insured can only select one 
unit structure and it will be effective for both years of the two-year 
coverage module. Pecan insurance is a history-based individual program 
where both price and yield come from the producer. Currently there are 
only two other history-based individual programs available (adjusted 
gross revenue and avocado), one of which does not offer any unit 
division. At this time, too little data is available to fully assess 
the impact of smaller units on history-based revenue products. Given 
the uncertain risk, the optional unit provisions contained in the Basic 
Provisions are not applicable.
    Comment: Two comments suggested the percent of coverage under the 
Catastrophic Risk Protection Endorsement (CAT) be contained in the Crop 
Provisions rather than shown in the Special Provisions.
    Response: It would not be practical to put the percent of coverage 
for CAT in the Crop Provisions. Should legislation revise the CAT level 
of coverage, the Special Provisions could be quickly and easily 
updated. If the percentage amount were contained in these Crop 
Provisions, FCIC would have to make changes through a regulatory 
process causing unnecessary time delays in implementation. No change 
has been made.
    Comment: A commenter questioned if the provisions contained in the 
Basic Provisions (section 3(g)(2)) regarding the High-Risk Land 
Exclusion Option was applicable to pecans. As section 3 of the Crop 
Provision replaces all of section 3 of the Basic Provisions the 
commenter asked if the provision should be reinstated in the Crop 
Provisions.
    Response: FCIC agrees with the comments and has amended section 3 
of the Pecan Revenue Crop Provisions to include the high-risk land 
provisions like those contained in the Basic Provisions.
    Comment: Sixteen commenters noted the sequential thinning 
limitation of 12.5 percent contained in section 3(d)(1) is not 
appropriate for most pecan growers. Thinning trees in a pecan orchard 
increases sunlight penetration, which improves crop quality, quantity, 
and size as well as reducing disease pressure. The commenters stated no 
other tree crop is subjected to such a reduction in the insurance 
guarantee, and the sequential thinning reduction of 30 percent the 
first year after thinning and a 15 percent reduction the second year 
after thinning is penalizing pecan growers for following proven 
extension recommendations. The commenters stated the penalty is 
arbitrary and capricious because there is no published data to support 
the provisions regarding sequential thinning. All of the commenters 
stated the provision should be eliminated.
    Response: FCIC recognizes thinning trees in a pecan orchard is 
beneficial for future production. However, amounts of insurance are 
based on the production capability of the acreage in the current crop 
year, not future crop years. A review of publications from Agricultural 
Research Service and Cooperative Extension Service indicates thinning 
does result in reduced pecan production for some period of time. 
Therefore, provisions must be included to adjust production to the 
expected capability of the acreage. However, FCIC has amended section 
3(d)(1) to state if more than 12.5 percent of the total acres are 
sequentially thinned, the average gross sales for those acres thinned 
will be multiplied by a factor of .80 for only the

[[Page 52160]]

first year after thinning unless specified otherwise in the Special 
Provisions.
    Comment: Nine comments received stated the 12.5 percent threshold 
for adding acreage contained in section 3(d)(2) is not practical. Some 
of the commenters indicated growers would only add acreage when it is 
significant enough to justify expansion. All of the commenters thought 
the pecan pilot program had exemplary experience throughout the pilot 
phase and should have the same considerations as other California tree 
programs that allow a 70 percent increase in added acreage. A few of 
the commenters stated very few pecan orchards would ever have a 
historical dollar amount as low as the dollar span contained in the 
actuarial documents. The 12.5 percent threshold for added land then 
becomes a greater penalty if the sales records for the added acreage 
are not provided and a growers' own production history would be diluted 
when their approved average revenue combined with the history from the 
added acreage. Some of the commenters suggested growers be allowed to 
add up to 500 acres per county at the same approved average revenue as 
the existing units, and for acreage greater than the 500 acre limit, 
the lowest available dollar span provided in the actuarial documents 
should apply to such acreage over 500 acres.
    Response: FCIC disagrees with the commenters. Pecans cannot be 
compared to programs that are available in California because they are 
a different plan of insurance. Most California perennial crop programs 
are actual production history (APH) plans of insurance while the pecan 
revenue program is a revenue plan of insurance. A review of FCIC's 
acreage data for the three states providing pecan revenue coverage show 
that pecan insured's annual average was approximately 201 acres of 
pecans for the years 1999 through 2003. For the 2003 crop year, 
approximately one third of the orchards insured in Georgia consisted of 
approximately 30 acres. Allowing an insured the ability to add 500 
acres with no change in the average gross revenue is not reasonable and 
would cause excessive risk to the program. FCIC has determined that 
given the risks, recalculation of the approved average revenue when 
acreage is increased by more than 12.5 percent is appropriate. No 
change has been made.
    Comment: One comment asked if, according to section 3(e), can the 
reduction in insurable acreage due to removal of a contiguous block of 
trees be done at any time during the two-year coverage module, or only 
if reported by the annual acreage reporting date.
    Response: Section 3(e) has been revised to clarify that removal of 
a continuous block of trees must be reported at any time including 
within the two-year coverage module. Further, section 6 has been 
revised to clarify that failure to report removal of trees will result 
in a reduction in the insured acreage any time the circumstances become 
known.
    Comment: For section 3(f), a commenter thought the provision should 
be written to make it clear that if gross sales for any year were not 
reported that both years would be assigned an amount if either year 
were missing. It should be clear or an insured could report gross sales 
for the year with high yields and not report the year with lower yields 
if it fell below the assigned amount of 75 percent of the approved 
average revenue.
    Response: FCIC agrees assigning 75 percent of the approved average 
revenue for the year gross sales amounts are not reported may encourage 
an insured to not report the low yields. FCIC has revised section 3(f) 
to state if gross sales amounts are not reported, an amount would be 
assigned for the missing year. The assigned amount will be the lowest 
dollar span provided in the actuarial documents.
    Comment: Two commenters stated section 3(g) indicates hail and fire 
coverage may be excluded if additional coverage is selected. Additional 
coverage could include the 50 percent, 55 percent, and 60 percent 
coverage levels that do not qualify the insured to exclude these 
perils. The provision needs to be amended to indicate these perils can 
only be excluded at 65 percent coverage level and at 100 percent price 
or an equivalent coverage.
    Response: FCIC disagrees with the commenters. The Basic Provisions 
define additional coverage as a level of coverage greater than 65 
percent coverage level.
    Comment: Two commenters thought there seemed to be a conflict 
between sections 4(a), (d), and 5(e) where the cancellation date is 
listed as January 31 of the second crop year of each two-year coverage 
module. Section 4(a) states that coverage terms may change between any 
two-year coverage module and section 4(d) states that any policy 
changes will be provided not later than 30 days prior to the 
cancellation date. One of the commenters suggested changing the word 
``between'' in section 4(a) to ``for.''
    Response: FCIC has made the revision as suggested for section 4(a). 
FCIC agrees there may be some ambiguity regarding when changes can be 
made to the policy and when they will be provided to the insured. As 
stated above, FCIC has replaced language in the definition of ``two-
year coverage module'' stating that the same terms and conditions will 
apply to each year of the module unless Congress or the producer do 
something to require a policy change. If the producer does something 
under the policy to affect coverage, sections 4(a), (d), and 5(a) would 
not be applicable. Further, producers cannot change their coverage in 
the middle of the module. However, if Congress makes a change prior to 
the second year of the module, the producer will need to receive notice 
of such changes prior to the cancellation date. FCIC has revised the 
provisions to specify that such changes will be provided 30 days prior 
to the termination date.
    Comment: Two comments received expressed concern with section 4(b) 
in which RMA's Web site is provided. The commenters thought it might 
lead to policyholders contacting RMA rather than their agents. In 
addition, the language states any policy changes will be available on 
RMA's Web site not later than the contract change date but there are 
instances where the policy changes may not be available on the contract 
change date, for instance, if a final rule is published on the actual 
contract change date, the new documents may not be on the Web site for 
a few days.
    Response: Policy changes posted on RMA's Web site are intended to 
provide alternative methods for producers to access policy changes by 
the contract change date. Should any producers contact RMA with 
questions regarding their insurance coverage, they generally are 
advised to contact their crop insurance agent for assistance. If policy 
changes are not available by the contract change date, they are not 
effective for the crop year. Rules are filed and available for public 
inspection with the Federal Register several days prior to the date of 
publication. Therefore, there is no reason why the policy changes would 
not be posted on RMA's Web site by the contract change date. No changes 
will be made to section 4(b).
    Comment: One commenter suggested revising section 5(a) to include 
language contained in the Basic Provisions section 2(a) to clarify it 
is a continuous policy ``until canceled by you in accordance with the 
terms of the policy or terminated by operation of the terms of the 
policy or by us.''
    Response: FCIC agrees and section 5(a) has been revised 
accordingly.
    Comment: One comment stated the language contained in section 6(b) 
seemed to indicate that the acreage would no longer be reduced as it 
was in

[[Page 52161]]

the pilot phase, only the insurance guarantee would be reduced. If that 
is the intent, the commenter asked why refer to reducing the insurance 
guarantee rather than one of the defined terms for the basis of the 
insurance.
    Response: Section 6(a)(1) requires the insured to report the number 
of acres that are affected by the specified circumstances. Some of 
those circumstances may result in a reduction in insured acreage, 
others may only affect the gross sales. Therefore, section 6 has been 
revised to separate out those that affect acreage from those that 
affect gross sales and require the applicable adjustment to the insured 
acreage or amount of insurance per acre. Further, section 6(c) now 
makes it clear that either the insured acreage or amount of insurance 
per acre may be adjusted if the applicable circumstances are not 
reported.
    Comment: Five commenters stated the requirement of a written 
agreement to insure pecan trees that have been hedged is improper. 
Hedging is a common recommended practice in the southwest region and is 
used to increase sunlight penetration, increase yields, and can aid in 
control of alternate bearing years.
    Response: Section 8(f) of the Crop Provisions states hedging may be 
insurable if allowed by the Special Provisions or by written agreement. 
Some southwestern county actuarial documents have incorporated 
statements to insure hedged trees and in those counties a written 
agreement will not be required. However, the practice is not common 
everywhere and FCIC has not determined the effect of hedging trees in 
all areas where pecans are produced. As additional data is collected 
and FCIC regional offices review the data, more counties may include a 
Special Provision statement to allow insurance on hedged trees. No 
change has been made.
    Comment: Three commenters expressed concern in the omission of a 
provision in the pilot policy that was not in the proposed rule and 
questioned if the intent was to insure pecans that are direct marketed 
to consumers. The commenter stated loss adjusters must appraise each 
grove before harvest and provide a price from three buyers. Appraisals 
could be inaccurate due to the lack of grading and pricing standards 
used in the industry, and insuring direct marketed pecans will increase 
administrative expenses since multiple appraisals will have to be made 
each time the trees are shook in order for there to be acceptable 
records of production to count. The commenters asked FCIC to reinstate 
the provision specifying pecans that are direct marketed to consumers 
is not insured unless allowed by the Special Provisions or by written 
agreement.
    Response: FCIC did not intend to insure pecans directly marketed to 
consumers unless allowed by the Special Provisions or written 
agreement. FCIC agrees that the burden and costs are much higher due to 
the multiple harvesting of pecans and has added the provisions back to 
section 8(f).
    Comment: One comment suggested rewording section 8(e) to ``that are 
improved pecan varieties'' since the definition includes ``a 
distinguishable planting pattern.''
    Response: FCIC has removed the definitions of ``improved pecan 
varieties'' and ``unimproved pecan varieties'' since FCIC insured both 
improved and unimproved varieties in the pilot program, it has elected 
to continue to insure all pecan varieties.
    Comment: One comment questioned why the new provision in section 
8(e) requires `` * * * an orchard that consists of a minimum of one (1) 
contiguous acre, unless allowed by written agreement.'' The commenter 
asked why the provision was added and how the size was determined. The 
commenter asked if small orchards (less than one acre) considered to be 
at greater risk, or if they involve proportionately greater 
administrative expense than larger orchards. They asked how that 
compares to the increased expense involved in the written agreement 
process if those pecan producers still want coverage.
    Response: Pecan orchards are susceptible to a number of risks if 
good farming practices are not carried out. FCIC believes pecan 
orchards must be of some size for good farming practices to be carried 
out. Requiring orchards be at least one acre in size should minimize 
the chance of insuring orchards where recommended farming practices are 
not utilized and the risks would be greater. FCIC believes there are 
few orchards less than an acre in size and very few written agreements 
will be requested.
    Comment: Eight comments disagreed with the provision contained in 
section 9(a) that required a written agreement to insure acreage in 
which more than 10 percent of the total acreage is unimproved pecan 
varieties. All of the commenters stated many of the seedlings produce 
the same quality and quantity as improved varieties, with some areas 
having a higher value than the improved varieties in Georgia. 
Commenters stated as seedling pecans constitute a significant part of 
the acreage in many regions, all varieties should be allowed to be 
insured as all levels of protection are either based on county averages 
or proven yields. All of the commenters stated that while in the pilot 
phase, the pecan program was not limited to improved varieties and it 
should be up to each individual region to determine what, if any, type 
or variety should not be insured. Many of the comments stated the 
requirement for a written agreement is ill advised, cumbersome, 
difficult to manage and too much extra work for the producers, agents, 
and FCIC.
    Response: FCIC agrees and has removed section 9(a) and all 
references to unimproved and improved varieties. All pecans will now be 
insurable.
    Comment: Two comments were received regarding the requirement 
contained in section 10(a)(1) that notification of acceptance or 
rejection of an application would be made within 30 days after the 
sales closing date. One commenter thought 30 days did not provide 
sufficient time to complete and review the required inspection. One 
commenter stated that the 30 day requirement was reasonable and much 
more to their satisfaction than the previous 10 day requirement.
    Response: Under the pilot program, a crop inspection and acceptance 
or rejection of the application had to be completed within 10 days. 
FCIC recognized insurance providers needed additional time to inspect 
the acreage and determined that 30 days provides a good balance between 
the needs of producers to know whether they have coverage and time for 
the required inspections. No changes will be made.
    Comment: One commenter agreed with section 10(b)(1) to allow 
coverage on acreage acquired up to the acreage reporting date. The 
commenter recommended the acreage reporting date be March 31 which 
would allow for the many orchards that change ownership in February or 
March to be handled in accordance with these provisions.
    Response: Acreage report dates are being adjusted and will be set 
on a regional basis determined by the growing season. For the 2005 crop 
year, the acreage reporting date will be March 1.
    Comment: One comment asked if section 10(b)(2) meant if the 
insurable share is relinquished between the first and second years of 
the two-year coverage module, whether the insured should report zero 
acres on the acreage report for the second year. If so, there seems to 
be a loophole in requirement that pecans be insured both years of the 
two-year coverage module.
    Response: This provision does not provide a loophole because it is 
only applicable if the producer no longer has

[[Page 52162]]

an insurable interest in the orchard. In those cases, the producer 
should not be required to pay premium on acreage when the producer no 
longer has an insurable interest and cannot receive an indemnity. If 
the producer continues to have an interest in the pecans, coverage 
cannot be canceled during the two-year coverage module.
    Comment: Section 10 of the proposed rule revised the dates for when 
coverage begins and the end of the insurance period. Nine commenters 
suggested the sales closing date, acreage reporting date and production 
reporting dates be changed to dates other than currently in effect. 
Four of the comments indicated an acreage reporting date and production 
reporting date of April 1 would be consistent with a grower's schedule. 
This change would allow a grower the time to know which groves he will 
have for the coming year and harvesting and sales of the crop would be 
complete. Five of the commenters stated the southwestern growers do not 
start harvest until November or December and a sales closing date of 
February or March would be better suited for the southwestern growers. 
Three southwestern growers stated that some growers enter into pools 
and do not receive a final price until July or August. FCIC must 
consider the appropriateness of all growing areas when establishing 
crop insurance reporting dates.
    Response: FCIC recognizes the required dates in the pilot program 
were not suitable for all regions. Program dates contained in the Crop 
Provisions have been changed and are no longer the same as those in the 
pilot program. All other reporting and program date requirements are 
contained in the actuarial documents and will be revised as appropriate 
for the growing area.
    Comment: One comment suggested that section 10(b)(2)(i) be revised 
to ``A transfer of right to an indemnity'' rather than ``A transfer of 
coverage and right to an indemnity.''
    Response: FCIC agrees with the comment and the provision has been 
revised accordingly.
    Comment: Two commenters recommended revising section 11 to clarify 
fire is an insured cause of loss only when due to natural causes, 
consistent with the Federal Crop Insurance Act and the Crop Insurance 
Handbook.
    Response: This change is not necessary because the Act requires all 
causes of loss to be natural causes, not just fire. Specifically 
referring to natural disasters with respect to fire but not the other 
causes could create the impression that such other causes of loss could 
be caused by something other than natural causes. No change will be 
made.
    Comment: In response to the provision contained in section 
11(a)(8), one comment questioned how likely plant disease or insects 
would cause a failure of the irrigation water supply. It was suggested 
the language contained in the pilot policy would be sufficient rather 
than specifying ``11(a)(1) through (7).''
    Response: While it is highly unlikely that plant disease or insects 
would cause failure of the irrigation water supply, such coverage is 
provided in most other policies, and should be provided here to protect 
any possibility. Further, the proposed language would not eliminate 
this coverage. The specific reference to paragraphs (1) through (7) is 
needed to ensure that coverage is limited to those perils included in 
this policy and not those that may be included in other policies that 
may be different. No change will be made.
    Comment: Two comments indicated the provision in section 12(b) 
requires appraisals be made when determining production to count for 
production sold by direct marketing. Pecan trees are harvested three 
times and the provision entails making three appraisals for each 
orchard, which is very expensive from an administrative standpoint. 
Both commenters asked if there were any other types of records that 
would be acceptable and could alleviate the need to do an appraisal on 
all of the direct marketing situations regardless of whether or not the 
acreage is in a loss situation.
    Response: As stated above, FCIC revised section 8 of these Crop 
Provisions to reinsert the pilot language specifying that production 
that is to be sold via direct marketing will only be insurable if 
provided in the Special Provisions or by written agreement. Therefore, 
the burdens are no different than existed in the pilot program. 
Further, because of the impossibility to verify production sold through 
direct marketing, appraisals must be conducted on direct marketed 
acreage. The provision contained in section 12(b) has been revised to 
clarify it only applies if the Special Provisions or a written 
agreement authorizes direct marketing.
    Comment: One commenter wrote that section 12(d) specifies the 
insured must not sell, destroy or dispose of the damaged crop until 
after written consent has been given. They asked if pecans are selling 
for less than the market price, it is assumed there is damage. Since 
there is not a standard grading process, the commenter asks how an 
insurance provider determine what, if any, damage exists to give 
consent.
    Response: Damage cannot be presumed from low market prices. The 
producer must still establish that any price decline was unavoidable 
and not caused by the actions of the producer or a third party (such as 
bioterrorism). Since the market price is determined on the date of the 
appraisal, the insurance provider should be able to determine whether 
an indemnified loss has occurred and whether to give consent to sell, 
destroy, or dispose of the crop.
    Comment: One comment asked if section 13(d)(1)(i) should refer to 
``amount of insurance per acre'' rather than ``insurance guarantee'' 
since it is not defined in the Crop Provisions.
    Response: FCIC agrees with the comment and has revised the 
provision to specify ``amount of insurance per acre.''
    Comment: A commenter suggested the example in section 13 be moved 
to the end of the section as some of the information comes from section 
13(d).
    Response: FCIC agrees with the suggestion and has revised section 
13 so that the example of indemnity is contained at the end of the 
section and expanded the example to include sold and appraised 
production.
    Comment: Nine commenters suggested additional pecan growers would 
benefit if the pecan crop insurance program were to be offered in other 
pecan producing states and counties. The commenters requested 
consideration is given to expand the availability of pecan crop 
insurance as it becomes a permanent insurance program.
    Response: The criteria considered for crop program expansion does 
not change regardless of whether the pecan revenue program is a pilot 
or permanent program. FCIC expanded the pecan revenue program for the 
2004 crop year based on expansion requests and supporting data. FCIC 
will continue to review county expansion requests on the merit of 
supporting data.
    Comment: A commenter asked if section 18 of the Basic Provisions 
would be applicable and mean written agreements may be requested for 
organically certified pecans.
    Response: To be consistent with other Crop Provisions, an organic 
practice premium rate factor will be in the actuarial documents and if 
qualified, organic acreage of pecans will be insured.
    Comment: A commenter asked if section 36 ``Substitution of Yields'' 
of the Basic Provisions applies to pecans.
    Response: Substitution of yield provisions are applicable for 
actual

[[Page 52163]]

production history plans of insurance. Pecans are insured under a 
revenue plan of insurance and section 36 of the Basic Provisions is not 
applicable. A new section 15 has been added for clarity.
    Comment: One comment asked if the Pecan Disclaimer would still be 
required as part of the policy. If it is useful in making sure an 
insured understands the difference between the pecan policy and other 
multiple peril crop insurance policies, it should be updated according 
to these Crop Provisions.
    Response: The Pecan Disclaimer is no longer required.
    In addition to the changes described above, FCIC has made the 
following changes:
    1. Modified the definition of ``approved average revenue per acre'' 
to clarify that if four years of gross sales records are not provided, 
the approved average revenue will be the average of two years of gross 
sales records and two years of the lowest available dollar span amount 
provided in the actuarial documents. If no gross sales records are 
provided, the approved average revenue will still be the lowest 
available dollar span amount provided in the actuarial documents.
    2. Added a definition for ``enterprise unit'' to specify all 
insurable acreage in the county will be considered as an ``enterprise 
unit.'' This change is to clarify the revisions in section 2 that will 
allow both ``enterprise units'' and ``basic units.''
    3. Revised section 7 to remove references to CAT. The Catastrophic 
Risk Protection Endorsement states that no premium is due for CAT 
policies and when administrative fees must be paid, but to prevent any 
ambiguity the phrase ``as applicable'' has been added.
    4. Revised section 10 to add a provision as section 10(a)(2) to 
clarify for each two-year coverage module following application of the 
first two-year module, the policy will remain continuously in force and 
coverage begins the day immediately following the end of the insurance 
period for the prior two-year coverage module. Section 10(a)(2) has 
been renumbered as section 10(a)(3).
    5. Added a new section 7(b)(3) to clarify when insurable pecan 
acreage is relinquished after the acreage reporting date, coverage will 
be provided for insurable causes of loss that occurs before the date 
the share was relinquished, and the premium earned for such acreage 
will be due for that crop year.
    6. Amended section 11 to add a new section 11(b) to clarify if 
damage occurs before the beginning of the crop year, coverage is only 
provided if the crop was insured the previous crop year. The proposed 
section 11(b) has been renumbered as section 11(c).
    7. Removed the phrase ``as determined by us'' from sections 
13(d)(1)(v), 13(d)(2)(i), and 13(d)(2)(ii). This change is necessary 
due to the revisions in the definition of ``market price.''
    8. Added a new section 16 (Written Agreement) clarifying that 
producers must have at least two years of production and gross sales 
records in counties with actuarial documents and at least four years of 
production and gross sales records in counties without actuarial 
documents to qualify for a written agreement.
    Good cause is shown to make this rule effective less than 30 days 
after publication in the Federal Register. Good cause to make the rule 
effective upon less than 30 days after publication exists when the 30-
day delay in the effective date is impracticable, unnecessary, or 
contrary to the public interest.
    It is in the public interest to implement changes in this rule 
because it will provide improved insurance benefits for pecan 
producers. These changes include: Converts the pecan revenue insurance 
program from a pilot phase to a permanent program. This will allow the 
program to be expanded into areas where coverage was not previously 
provided; Increases insurance flexibility by providing additional 
insurance units for producers who lease multiple pecan orchards or have 
a share in the crop; Moves the contract change date to a later date to 
provide a greater amount of time between the contract change date and 
the sales closing date. This will allow producers more time to make 
insurance decisions; Changes the limitation on the amount of trees that 
can be thinned in an orchard. Tree thinning is a recommended practice 
that will increase the pecan production one year after thinning; Allows 
hail and fire coverage to be excluded as causes of loss if additional 
coverage levels are selected; and Provides clarification of what 
actions may cause changes in the amount of pecan revenue insurance.
    If FCIC is required to delay the implementation of this rule 30 
days after the date it is published, the provisions of this rule could 
not be implemented until the next crop year. This would mean the 
affected producers would be without the benefits described above for at 
least an additional year and those producers currently insured under 
the pilot insurance program, coverage would be delayed until the 2007 
crop year because pecan coverage is provided under a two-year insurance 
module.
    For the reasons stated above, good cause exists to make these 
policy changes effective less than 30 days after the publication in the 
Federal Register.

List of Subjects in 7 CFR Part 457

    Crop insurance, Pecan, Reporting and recordkeeping requirements.

Final Rule

0
Accordingly, as set forth in the preamble, the Federal Crop Insurance 
Corporation is amending 7 CFR part 457, Common Crop Insurance 
Regulations, for the 2005 and succeeding crop years as follows:

PART 457--COMMON CROP INSURANCE REGULATIONS

0
1. The authority citation for 7 CFR part 457 continues to read as 
follows:

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


0
2. Section Sec.  457.167 is added to read as follows:


Sec.  457.167  Pecan revenue crop insurance provisions.

    The Pecan Revenue Crop Insurance Provisions for the 2005 and 
succeeding crop years are as follows:
    FCIC policies:

UNITED STATES DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

    Reinsured policies: (Appropriate title for insurance provider)
    Both FCIC and reinsured policies: Pecan Revenue Crop Insurance 
Provisions

1. Definitions

    AMS. The Agricultural Marketing Service of the United States 
Department of Agriculture.
    Amount of insurance per acre--The amount determined by multiplying 
your approved average revenue per acre by the coverage level percentage 
you elect.
    Average gross sales per acre--Your gross sales of pecans for a crop 
year divided by your net acres of pecans grown during that crop year. 
For example, if for the 2004 crop year, your gross sales were $100,000 
and your net acres of pecans was 100, then your average gross sales per 
acre for the 2004 crop year would be $1,000.
    Approved average revenue per acre--The total of your average gross 
sales per acre based on at least the most recent consecutive four years 
of sales records building to ten years and dividing that result by the 
number of years of average gross sales per acre. If you provide more

[[Page 52164]]

than four years of sales records, they must be the most recent 
consecutive 6, 8 or 10 years of sales records. If you do not provide at 
least four years of gross sales records, your approved average revenue 
will be:
    (1) The average of two years of your gross sales per acre and two 
years of the lowest available dollar span amount provided in the 
actuarial documents; or
    (2) If you do not provide any gross sales records, the lowest 
available dollar span amount provided in the actuarial documents.
    Crop year--The period beginning February 1 of the calendar year in 
which the pecan trees bloom and extending through January 31 of the 
year following such bloom, and will be designated by the calendar year 
in which the pecan trees bloom.
    Direct marketing--Sale of the insured crop directly to consumers 
without the intervention of an intermediary such as wholesaler, 
retailer, packer, processor, sheller, shipper, buyer or broker. 
Examples of direct marketing include selling through an on-farm or 
roadside stand, or a farmer's market, or permitting the general public 
to enter the field for the purpose of harvesting all or a portion of 
the crop, or shelling and packing your own pecans.
    Enterprise unit--In lieu of the definition of ``enterprise unit'' 
contained in the Basic Provisions, for pecan revenue, an enterprise 
unit will be all your insurable pecan acreage in the county in which 
you have any share on the date coverage begins for the crop year.
    Gross sales--Total value of in-shell pecans grown during a crop 
year.
    Harvest--Collecting mature pecans from the orchard.
    Hedge--The removal of vegetative growth from the tree to prevent 
overcrowding of pecan trees.
    In-shell pecans--Pecans as they are removed from the orchard with 
the nut-meats in the shell.
    Interplanted--Acreage on which two or more crops are planted in any 
form of alternating or mixed pattern.
    Market price--The market price that is the greater of:
    (1) The average price per pound for in-shell pecans of the same 
variety or varieties insured offered by buyers on the day you sell any 
of your pecans, you harvest any of your pecans if they are not sold, or 
your pecans are appraised if you are not harvesting them, in the area 
in which you normally market the pecans (If buyers are not available in 
your immediate area, we will use the average in-shell price per pound 
offered by buyers nearest to your area.);
    (2) The actual price received for any sold pecan production;
    (3) The average of the AMS prices for similar quality pecans 
published during the week you sell any of your pecans, you harvest your 
pecans if they are not sold, or your pecans are appraised if you are 
not harvesting them (For example, if you sell production on November 5 
and harvest production on November 14 but do not sell the production, 
the average of the AMS prices for the week containing November 5 will 
be used to determine the market price for the production sold on 
November 5 and the average of the AMS prices for the week containing 
November 14 will be used to determine the market price for the 
production harvested on November 14).
    Net acres--The insured acreage of pecans multiplied by your share.
    Pound--A unit of weight equal to sixteen ounces avoirdupois of in-
shell pecans.
    Scion--Twig or portion of a pecan variety used in top work.
    Sequentially thinned--A method of systematically removing pecan 
trees for the purpose of improving sunlight penetration and maintaining 
the proper spacing necessary for continuous production.
    Set Out--The transplanting of pecan trees into the orchard.
    Top work--To graft scions of one pecan variety onto the tree or 
branch of another pecan variety.
    Two-year coverage module--A two-crop-year subset of a continuous 
policy in which you agree to insure the crop for both years of the 
module, and we agree to offer the same premium rate, amount of 
insurance per acre, coverage level, terms and conditions of insurance 
for each year of coverage except for legislatively mandated changes, as 
long as all policy terms and conditions are met for each year of the 
coverage module, including the timely payment of premium, and you have 
not done anything that would result in a revision to these terms, as 
specified in this policy.

2. Unit Division

    (a) For both years of the two-year coverage module a unit will be:
    (1) A enterprise unit as defined in section 1; or
    (2) A basic unit as defined in section 1 of the Basic Provisions.
    (b) Provisions in section 34 of the Basic Provisions that allow 
optional units by section, section equivalent, or FSA farm serial 
number, by irrigated and non-irrigated practices, or grown under an 
organic farming practice are not applicable.

3. Insurance Guarantees and Coverage Levels for Determining Indemnities

    In lieu of section 3 of the Basic Provisions the following applies:
    (a) You may select only one coverage level for both years of the 
two-year coverage module for all pecans in the county. By giving us 
written notice, you may change the coverage level for the succeeding 
two-year coverage module not later than the sales closing date of the 
next two-year coverage module.
    (b) For coverage in excess of catastrophic risk protection, your 
insurance guarantee for the unit will be determined by multiplying your 
amount of insurance per acre by the net acres.
    (c) For coverage under the Catastrophic Risk Protection 
Endorsement, your insurance guarantee for each unit equals your 
approved average revenue per acre multiplied by the percentage listed 
in the Special Provisions and multiplied by the net acres.
    (d) Your amount of insurance per acre will remain the same as 
stated in the Summary of Coverage on each unit for each year of the 
two-year coverage module unless:
    (1) Otherwise provided in the Special Provisions, you sequentially 
thin more than 12.5 percent of your insured acres, your average gross 
sales for those acres thinned will be multiplied by a factor of .80 for 
the first year after thinning or a factor contained in the Special 
Provisions.
    (2) You increase the previous year's insured acreage by more than 
12.5 percent, which will result in the recalculation of your approved 
average revenue using the sales records for the added acreage. If such 
sales records are not available for the added acreage, the lowest 
available dollar span amount provided in the actuarial documents will 
apply to the added acreage.
    (3) You take any other action that may reduce your gross sales 
below your approved average revenue, which will result in an adjustment 
to your approved average revenue to conform to the amount of the 
reduction in gross sales expected from the action.
    (e) If you remove a contiguous block of trees from the unit, you 
must report such removal on your acreage report in accordance with 
section 6, or within 3 days if removal has occurred after the acreage 
reporting date, and your insurable acreage will be reduced by the 
number of acres of trees that have been removed.
    (f) You must report for each unit your gross sales including the 
amount of harvested and appraised potential production to us for each 
year of the

[[Page 52165]]

two-year coverage module on or before the acreage reporting date for 
the first year of the next two-year coverage module.
    (1) If you do not report your gross sales in accordance with this 
paragraph, we will assign a gross sales amount for any year you fail to 
report. The gross sales amount assigned by us will be not greater than 
the lowest available dollar span provided by the actuarial table for 
the current coverage module.
    (2) If your gross sales are reported after the acreage reporting 
date for the two-year coverage module, we will readjust your average 
gross sales per acre for the next crop year.
    (3) The gross sales or your assigned gross sales amount will be 
used to compute your sales history for the next two-year coverage 
module.
    (4) If you filed a claim for any year, the value of harvested 
production and appraised potential production used to determine your 
indemnity payment will be the gross sales for that year.
    (g) Hail and fire coverage may be excluded from the covered causes 
of loss for this insurance plan only if additional coverage is 
selected, and you have purchased the same or a higher dollar amount of 
coverage for hail and fire from us or another source.
    (h) If you have additional coverage for pecans in the county and 
the acreage has been designated as ``high risk'' by FCIC, you will be 
able to obtain a High Risk Land Exclusion Option for the high risk land 
under the additional coverage policy and insure the high risk acreage 
under a separate Catastrophic Risk Protection Endorsement, provided 
that the Catastrophic Risk Protection Endorsement is obtained from the 
same insurance provider from which the additional coverage was 
obtained.
    (i) Any person may sign any document related to pecan crop 
insurance coverage on behalf of any other person covered by this policy 
provided that person has a properly executed power of attorney or such 
other legally sufficient document authorizing such person to sign.

4. Contract Changes

    In lieu of the provisions contained in section 4 of the Basic 
Provisions:
    (a) We may change the terms of your coverage under this policy for 
any two-year coverage module. Any change to your policy within a two-
year coverage module may only be done in accordance with this policy.
    (b) Any changes in policy provisions, amounts of insurance, premium 
rates, and program dates (except as allowed herein or as specified in 
section 3) can be viewed on the RMA Web site at http://www.rma.usda.gov/ or a successor website not later than the contract 
change date contained in these Crop Provisions. We may revise this 
information after the contract change date to correct clerical errors.
    (c) The contract change date is October 31 preceding the next two-
year coverage module.
    (d) After the contract change date, all changes specified in 
section 4(b) will also be available upon request from your crop 
insurance agent. You will be provided, in writing, a copy of the 
changes to the Basic Provisions, Crop Provisions, and a copy of the 
Special Provisions. If changes are made that will be effective for the 
second year of the two-year coverage module, such copies will be 
provided not later than 30 days prior to the termination date. If 
changes are made that will be effective for a subsequent two-year 
coverage module, such copies will be provided not later than 30 days 
prior to the cancellation date. For changes effective for subsequent 
two-year coverage modules, acceptance of the changes will be 
conclusively presumed in the absence of written notice from you to 
change or cancel your insurance coverage in accordance with the terms 
of this policy.

5. Life of Policy, Cancellation and Termination Dates

    (a) In lieu of section 2(a) of the Basic Provisions, this is a 
continuous policy with a two-year coverage module and will remain in 
effect for each subsequent two-year coverage module until canceled by 
you in accordance with the terms of this policy or terminated by us or 
by the operation of the terms of this policy.
    (b) In lieu of section 2(c) of the Basic Provisions, after 
acceptance of your application, you may not cancel or transfer your 
policy to a different insurance provider during the initial two-year 
coverage module. Thereafter, the policy will continue in force for each 
succeeding two-year coverage module unless canceled, terminated, or 
transferred to a different insurance provider in accordance with the 
terms of this policy.
    (c) In lieu of section 2(d) of the Basic Provisions, this contract 
may be canceled by either you or us for the next two-year coverage 
module by giving written notice on or before the cancellation date.
    (d) Your policy may be terminated before the end of the two-year 
coverage module if you are determined to be ineligible to participate 
in any crop insurance program authorized under the Act in accordance 
with section 2(e) of the Basic Provisions or 7 CFR part 400, subpart U.
    (e) The cancellation date is January 31 of the second crop year of 
each two-year coverage module.
    (f) The termination date is January 31 of each crop year.

6. Report of Acreage

    (a) In addition to the requirements of section 6 of the Basic 
Provisions you must report, by the acreage reporting date designated in 
the Special Provisions:
    (1) Any damage to trees, removal of trees, change in practices, 
sequential thinning in excess of 12.5 percent of your insured acreage 
or any other action that may reduce the gross sales below the approved 
average revenue upon which the amount of insurance per acre 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;
    (4) Any acreage that is excluded under sections 8 or 9; and
    (5) Your gross sales receipts as required under section 3(f);
    (b) We will reduce the amount of your insurable acreage based on 
our estimate of the removal of a contiguous block of trees or damage to 
trees of the insured crop. We will reduce your amount of insurance per 
acre based on our estimate of the expected reduction in gross sales 
from a change in practice or sequential thinning in excess of 12.5 
percent of your insured acreage.
    (c) If you fail to notify us of any circumstance stated in section 
6(a)(1), we will reduce your insured acreage or your amount of 
insurance per acre to an amount to reflect the expected reduction of 
gross sales, as applicable, at any time we become aware of the 
circumstance.

7. Annual Premium and Administrative Fees

    In addition to the requirements of section 7 of the Basic 
Provisions, the premium and administrative fees, as applicable, are due 
annually for each year of the two-year insurance period.

8. Insured Crop

    In accordance with section 8 of the Basic Provisions, the crop 
insured will be all the pecans in the county for which a premium rate 
is provided by the actuarial documents:
    (a) In which you have a share;
    (b) That are grown for harvest as pecans;
    (c) That are grown in an orchard that, if inspected, is considered 
acceptable by us;

[[Page 52166]]

    (d) That are grown on trees that have reached at least the 12th 
growing season after either being set out or replaced by transplants, 
or that are in at least the 5th growing season after top work and have 
produced at least 600 pounds of pecans in-shell per acre in at least 
one year after having been grafted;
    (e) That are in an orchard that consists of a minimum of one (1) 
contiguous acre, unless allowed by written agreement; and
    (f) That are not (unless allowed by the Special Provisions or by 
written agreement):
    (1) Grown on trees that are or have been hedged; or
    (2) Direct marketed to consumers.

9. Insurable Acreage

    In lieu of the provisions in section 9 of the Basic Provisions that 
prohibit insurance attaching to a crop planted with another crop, 
pecans interplanted with another perennial crop are insurable if 
allowed by the Special Provisions or by written agreement.

10. Insurance Period

    (a) In accordance with the provisions of section 11 of the Basic 
Provisions:
    (1) Coverage begins on February 1 of each crop year. However, for 
the year of application, we will inspect all pecan acreage and will 
notify you of the acceptance or rejection of your application not later 
than 30 days after the sales closing date. If we fail to notify you by 
that date, your application will be accepted unless other grounds exist 
to reject the application, as specified in section 2 of the Basic 
Provisions of the application. You must provide any information that we 
require for the crop or to determine the condition of the orchard.
    (2) For each subsequent two-year coverage module that the policy 
remains continuously in force, coverage begins on the day immediately 
following the end of the insurance period for the prior two-year 
coverage module. Policy cancellation that results solely from 
transferring an existing policy to a different insurance provider for a 
subsequent two-year coverage module will not be considered a break in 
continuous coverage.
    (3) The calendar date for the end of the insurance period is 
January 31 of the crop year.
    (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. 
Acreage acquired after the acreage reporting date will not be insured.
    (2) If you relinquish your insurable share on any insurable acreage 
of pecans 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 request for a transfer of right to an indemnity is submitted 
by all affected parties and approved by us;
    (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.
    (3) If you relinquish your insurable share on any insurable acreage 
of pecans after the acreage reporting date for the crop year, insurance 
coverage will be provided for any loss due to an insurable cause of 
loss that occurred prior to the date that you relinquished your 
insurable share and the whole premium will be due for such acreage for 
that crop year.

11. Causes of Loss

    (a) In lieu of the first sentence of section 12 of the Basic 
Provisions, insurance is provided against an unavoidable decline in 
revenue due to the following causes of loss that occur within the 
insurance period:
    (1) Adverse weather conditions;
    (2) Fire unless weeds and other forms of undergrowth have not been 
controlled or unmulched pruning debris has not been removed from the 
orchard;
    (3) Insects, but not damage due to insufficient or improper 
application of pest control measures;
    (4) Plant disease, but not due to insufficient or improper 
application of disease control measures;
    (5) Wildlife;
    (6) Earthquake;
    (7) Volcanic eruption;
    (8) Failure of the irrigation water supply, if caused by a cause of 
loss specified in sections 11(a)(1) through (7) that occurs during the 
insurance period; or
    (9) Decline in market price;
    (b) If damage occurs before the beginning of the crop year, 
coverage is only provided if and to the extent the crop was insured the 
previous crop year;
    (c) 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 the inability to market the pecans 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.

12. 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) If the Special Provisions permit or you have a written 
agreement authorizing direct marketing, you must notify us at least 15 
days before harvest begins if 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 the dollar value of 
your production to count. Failure to give timely notice that production 
will be sold by direct marketing will result in an appraised dollar 
value of production to count that is not less than the amount of 
insurance per acre for the direct-marketed acreage if such failure 
results in our inability to make the required appraisal.
    (c) If you intend to claim an indemnity, you must notify us at 
least 15 days prior to the beginning of harvest, or immediately if a 
loss occurs during harvest, so that we may inspect the damaged 
production.
    (d) You must not sell, destroy or dispose of the damaged crop until 
after we have given you written consent to do so.
    (e) If you fail to meet the requirements of this section, and such 
failure results in our inability to inspect the damaged production, all 
such production will be considered undamaged and included as production 
to count.
    (f) You may be required to harvest a sample, selected by us, to be 
used for appraisal purposes.

13. Settlement of Claim

    (a) Indemnities will be calculated separately for each year in the 
two-year coverage module.
    (b) We will determine your loss on a unit basis.
    (c) In the event of loss or damage covered by this policy, we will 
settle your claim by:

[[Page 52167]]

    (1) Multiplying the amount of insurance per acre by the net acres 
of the insured pecans;
    (2) Subtracting the dollar value of the total production to count 
as determined in section 13(d) from the result of section 13(c)(1):
    (i) For additional coverage, the total dollar value of the total 
production to count determined in accordance with section 13(d); or
    (ii) For catastrophic risk protection coverage, the result of 
multiplying the total dollar value of the total production to count 
determined in accordance with section 13(d) by the catastrophic risk 
protection factor contained in the Special Provisions; and
    (d) The dollar value of the total production to count from all 
insurable acreage will include:
    (1) The value of all appraised production as follows:
    (i) Not less than your amount of insurance 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 12;
    (C) That is damaged solely by uninsured causes;
    (D) For which no sales records or unacceptable sales records are 
provided to us;
    (ii) Production lost due to uninsured causes;
    (iii) Unharvested production;
    (iv) Potential 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 value of production to count; 
and
    (v) The market price will be used to value all appraised production 
in section 13(d)(1); and
    (2) The value of all harvested production from the insurable 
acreage determined as follows:
    (i) The dollar amount obtained by multiplying the number of pounds 
of pecans sold by the market price for each day the pecans were sold;
    (ii) Totaling the results of Sec.  457.167(d)(2)(i), as applicable;
    (iii) The dollar amount obtained by multiplying the number of 
pounds of pecans harvested, but not sold production, by the market 
price;
    (iv) Totaling the result of Sec.  457.167(d)(2)(iii), as 
applicable; and
    (v) Totaling the results of Sec.  457.167(d)(2)(ii) and (iv).

                          Pecan Revenue Example
------------------------------------------------------------------------
                                                  Average      Average
               Year                   Acres      pounds per  gross sales
                                                    acre       per acre
------------------------------------------------------------------------
  2004...........................          100          750       $1,050
  2003...........................          100          625          625
  2002...........................          100          200          250
  2001...........................          100         1250          750
                                                            ------------
      Total Average Gross Sales    ...........  ...........        2,675
       Per Acre..................
------------------------------------------------------------------------
The approved average revenue equals the total average gross sales per
  acre divided by the number of years ($2,675 / 4 = $669).
The amount of insurance per acre equals the approved average revenue
  multiplied by the coverage level percent ($669 x .65 = $435).
Assume the insured produced, harvested and sold 70 acres of pecans with
  300 pounds per acre of pecans on the 13th with an average price per
  pound of $0.75, an actual price received of $0.73, and an average AMS
  price of $0.74, and elected not to harvest the other 30 acres of
  pecans, which were appraised on the 30th at 100 pounds per acre, but
  because of the quality, the average price per pound was $0.65 and an
  average AMS price was $0.64. The total dollar value of production to
  count is (300 pounds x $0.75 x 70 net acres) + (100 pounds x $0.65 x
  30 net acres) = $15,750 + $1,950 = $17,700.
The indemnity would be:
The amount of insurance per acre multiplied by the net acres minus the
  dollar value of the total production to count equals the dollar amount
  of indemnity ($435 x 100 = $43,500.00 - $17,000.00 = $25,800).

    14. Late and Prevented Planting
    The late and prevented planting provisions of the Basic Provisions 
are not applicable.
    15. Substitution of Yields
    The substitution of yield provisions of the Basic Provisions are 
not applicable.
    16. Written Agreements
    Not withstanding the provisions of section 18 of the Basic 
Provisions, for counties with actuarial documents for pecans, you must 
have at least two years of production and gross sales records and for 
counties without actuarial documents, you must have at least four years 
of production and gross sales records to qualify for a written 
agreement.

    Signed in Washington, DC, on August 19, 2004.
David C. Hatch,
Acting Manager, Federal Crop Insurance Corporation.
[FR Doc. 04-19446 Filed 8-23-04; 9:20 am]
BILLING CODE 3410-08-P