Common Crop Insurance Regulations, Pecan Revenue Crop Insurance Provisions

AGENCY:

Federal Crop Insurance Corporation, USDA.

ACTION:

Final rule.

SUMMARY:

The Federal Crop Insurance Corporation (FCIC) finalizes the proposal to add to 7 CFR part 457 a new § 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.

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 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 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 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 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 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

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

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

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

2. Section § 457.167 is added to read as follows:

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.