Common Crop Insurance Regulations; Peanut Crop Insurance Provisions

AGENCY:

Federal Crop Insurance Corporation, USDA.

ACTION:

Final rule.

SUMMARY:

The Federal Crop Insurance Corporation (FCIC) finalizes amendments to the Peanut Crop Insurance Provisions. The intended effects of this action are to provide policy changes and clarify existing policy provisions to better meet the needs of the insured and to restrict the effect of the current Peanut Crop Insurance Regulations to the 2004 and prior crop years.

EFFECTIVE DATE:

November 29, 2004.

FOR FURTHER INFORMATION CONTACT:

Gary Johnson, 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 collections of information in this rule have been approved by OMB under control number 0563-0053 through February 28, 2005.

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 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 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 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

On May 17, 2004, FCIC published a notice of proposed rulemaking in the Federal Register at 69 FR 27864-27865 to revise 7 CFR 457.134 Peanut Crop Insurance Provisions. Following publication of the proposed rule, the public was afforded 30 days to submit written comments and opinions. Comments were received from reinsured companies, agents, trade associations, producers, and insurance service organization and other interested parties. The comments received and FCIC's responses are as follows:

Comment: A total of 30 commenters recommended that FCIC should allow optional units for peanuts to be established in accordance with section 34 of the Common Crop Insurance Policy Basic Provisions (Basic Provisions).

Response: FCIC agrees and has made the change accordingly.

Comment: An insurance service organization suggested that actual production history (APH) procedures should be revised in accordance with how existing units by farm serial number (FSN) can be converted to a section or section equivalent basis, in areas where that is appropriate. The commenter asks if peanut databases that still contain the “F” classification yield from the APH conversion process will be allowed to retain the yield in the new section databases that were part of the FSN for which that classification was established.

Response: FCIC revised the APH procedures in the Crop Insurance Handbook (CIH) effective for the 2003 crop year when peanuts were converted to a Category B APH crop. Classification “F” yields that were used to establish approved APH yields were removed by adding an actual or assigned yield to the affected databases for the 2003 crop year. In subsequent crop years, this process will continue until all classification yields in the database have been replaced by actual or assigned yields. Databases will be updated using acceptable production records under standard APH procedures.

Comment: An insurance service organization commented to the proposed rule that to allow optional units for peanuts in accordance with the Basic Provisions would not result in imposing optional units by section in parts of the country, such as some southeastern States. The southeastern States have optional units by FSN for other Category B crops. In those areas, the proposed rule would allow optional units by irrigated and non-irrigated practices as well as by FSN.

Response: FCIC agrees that in those states without sections, optional units will be by FSN or irrigated and non-irrigated practices.

Comment: An insurance service organization asked if FCIC has any estimates by State on how the number of optional units are affected so rates can be adjusted accordingly.

Response: An analysis of the number of potential optional units that may be generated by the proposed rule change was completed. FCIC will apply the rate surcharge for optional units as administered for other Category B crops in the applicable States. A study is being conducted regarding the premium rates for optional units to determine the appropriate rates and such rates will be applied to peanuts.

Comment: A total of 30 comments supported modifying the Peanut Crop Provisions to provide for a price election for peanuts based on a contract price for those peanuts that are grown under contract. However, an insurance service organization opposed insuring peanuts at a contract price election. The insurance service organization comment indicated many years ago a contract price was used to establish the price election for non-quota peanuts. Those contracts did not enforce delivery, which then resulted in some buying points being too generous. Peanuts do not have to be grown under contract to be insured. Allowing for a contract price would in effect establish two prices for peanuts similar to the quota/non-quota system. The pounds per acre grown under contract would have one price and those that are not grown under contract would default to the price established in the actuarial documents. Other insured crops such as corn, soybeans, and wheat can also be contracted at set prices without this type of price option available.

Response: FCIC only requested public comment regarding the feasibility and possible approaches for insuring peanuts at a contract price. FCIC will consider all the comments when it looks at the feasibility of allowing a price election by contract price. However, until such evaluation is complete, no changes will be made to the Peanut Crop Provisions.

List of Subjects in 7 CFR Part 457

• Crop insurance
• Peanut, reporting and recordkeeping requirements

Final 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) and 1506(p).

2. Amend § 457.134 as follows:

a. Remove and reserve section 2 under the heading “Peanut Crop --Insurance Provisions.”

b. Revise the introductory text to read as follows: