[Federal Register Volume 74, Number 141 (Friday, July 24, 2009)]
[Notices]
[Pages 36655-36656]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-17616]


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DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation


Notice of FCIC's Proposed Pricing Methodology for Grain Sorghum

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Notice.

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SUMMARY: Section 12009 of the Food, Conservation, and Energy Act of 
2008 (2008 Farm Bill) requires the Federal Crop Insurance Corporation 
(FCIC) to obtain the services of five expert reviewers to ``develop and 
recommend a methodology for determining an expected market price for 
grain sorghum for both the production and revenue-based plans of 
insurance to more accurately reflect the actual market price at 
harvest'' and for FCIC to publish the selected methodology for notice 
and comment on the methodology.

DATES: Written comments on this notice will be accepted until September 
22, 2009. A public meeting will be held on August 20, 2009, at 9 a.m., 
at 6501 Beacon Drive, Kansas City, MO 64133 to discuss the proposed 
methodology.

ADDRESSES: Interested persons are invited to submit written comments to 
Quintrell Hollis, United States Department of Agriculture (USDA), 
Product Design Branch, Federal Crop Insurance Corporation, Risk 
Management Agency, 6501 Beacon Drive, Mail Stop 813, Kansas City, MO 
64133. Written comments may also be submitted electronically to: 
[email protected].

FOR FURTHER INFORMATION CONTACT: Quintrell Hollis at the Kansas City, 
MO address listed above, telephone (816) 926-3421.

SUPPLEMENTARY INFORMATION: 
    Background: The Risk Management Agency (RMA), on behalf of FCIC, 
uses the United States Department of Agriculture (USDA) estimates to 
establish grain sorghum price elections. The Actual Production History 
(APH) plan of insurance relies heavily on projections from USDA's World 
Agricultural Supply and Demand Estimates. The revenue-based plans of 
insurance use USDA grain sorghum-to-corn ratio multiplied by a futures 
price. The USDA's grain sorghum estimate reflects season average price, 
but the National Sorghum Producers did not feel that this process 
offers grain sorghum producers a price that adequately reflects harvest 
time price. As a result, section 12009 of the 2008 Farm Bill requires 
FCIC to contract for the services of five expert reviewers to ``develop 
and recommend a methodology for determining an expected market price 
for grain sorghum for both the production and revenue-based plans of 
insurance to more accurately reflect the actual price at harvest.'' The 
legislation further requires FCIC to review the recommendations, 
consider the recommendations when determining an appropriate 
methodology, publish its proposed methodology for public comment, and 
implement a methodology that is transparent and replicable for 2010 
crop year. The expert reviewers, all agricultural economists with 
experience in the grain sorghum and corn markets, are from within USDA, 
the grain sorghum industry and institutions of higher learning. They 
are:
     Dr. Holly Wang, Purdue University.

[[Page 36656]]

     Dr. James Richardson, Texas A&M University.
     Chris Cogburn, National Sorghum Producers.
     Robert Dismukes, Economic Research Service.
     Greg Pompelli, Economic Research Service.

Summary of Expert Reviews

    The Economic Research Service (ERS) reviews were similar and 
recommended no changes to current pricing methodology. ERS reviews 
revealed that grain sorghum and corn prices across all States and all 
years are highly correlated.
    Purdue University provided a methodology that proposed regression 
equations by State using National Agricultural Statistics Service 
(NASS) cash price data at State level or if no State level NASS data 
were available, national level NASS price data. The model used data 
from 2004-2008.
    The National Sorghum Producers proposed a regression model based on 
published monthly NASS prices, exports and total use of grain sorghum 
to calculate a grain sorghum-corn ratio. The grain sorghum-corn ratio 
was then multiplied by the USDA corn price estimate for APH policies 
and for revenue policies the ratio was multiplied by the corn futures 
price. The model used data from 1990-2008.
    Texas A&M University proposed a regression model based on regional 
grain sorghum cash price data and corn futures price at the Chicago 
Board of Trade. Price elections were developed at the national level 
and the model uses data from 1979-2008.

Proposed Methododogy Selected

    FCIC intends to implement the methodology submitted by Texas A&M 
University. This methodology met the requirements of the 2008 Farm Bill 
of being transparent and replicable. RMA determined that this 
methodology was the most accurate predictor of grain sorghum prices at 
harvest time.
    Details about this methodology as well as the other methodologies 
proposed by the expert reviewers can be found at http://www.rma.usda.gov.

    Signed in Washington, DC on July 20, 2009.
William J. Murphy,
Manager, Federal Crop Insurance Corporation.
[FR Doc. E9-17616 Filed 7-23-09; 8:45 am]
BILLING CODE 3410-08-P