United States            Risk             Washington D.C.
Department of            Management       20250
Agriculture              Agency           




BULLETIN NO.: MGR-96-025

TO:       All Reinsured Companies
          All Risk Management Field Offices
          FSA Headquarters, Program Delivery and Field Operations

FROM:     Kenneth D. Ackerman
          Acting Administrator
          
SUBJECT:  Karnal Bunt Wheat Advisory


BACKGROUND:

The plant disease Karnal Bunt (Tilletia indica) has been identified in durum 
and winter wheat growing in Arizona, California, New Mexico, and Texas.  This 
is the first time the disease has been identified in the U. S. and it poses a 
significant threat to U. S. exports.  Fields of wheat found with the disease 
prior to heading were ordered destroyed in New Mexico and Texas, while 
contaminated fields already headed in Arizona and California will be 
harvested and tracked until it is milled or fed as livestock feed.

Insurance providers have requested information on the disease and how it 
affects the crop insurance program.

DISCUSSION:

The wheat crop insurance policy does not cover crop loss related to a 
government mandated quarantine.  Therefore, losses associated with producers 
being required to destroy acreage prior to harvest does not qualify as an 
insurable cause under the policy.

The current policy covers situations where the crop is destroyed in cases 
affecting human or animal health (e.g. mycotoxins and aflatoxin).  Karnal 
Bunt is not known to impact human or animal health.  The policy does not 
address the required destruction of a crop for the purpose of containing a 
potential economic hazard.

The crop insurance policy covers any loss of production below the established 
guarantee resulting from the disease, as well as any resulting quality losses 
based on the U. S. Grain Standards.

Production will be eligible for quality adjustment if:

     (i)  deficiencies in quality, in accordance with the United States 
          Standards for Grain, result in:

          (A)  wheat not meeting the grade requirements for U.S. No. 4 
               (grades U.S. No. 5 or worse) because of test weight, total 
               damaged kernels ( excluding heat damage), shrunken and broken 
               kernels, or defects (excluding foreign material or heat 
               damage), or grading garlicky, light smutty, smutty or ergoty;

If contaminated production was determined to be smutty in accordance with the 
U.S. Grain Standards, the quality discount would apply; however, the amount 
of the smut found in the quarantined grain to date has been very small in 
relation to the amount required to grade the grain "smutty".

After a field has been identified as infected with Karnal Bunt, the 
Department of Agriculture will require that no wheat or triticale be grown 
on the acreage for a period of four years following the current crop year. 

ACTION:

Insurance providers will adjust losses for insured acreage contaminated with 
Karnal Bunt in accordance with existing policy and procedure.  Premium which 
would otherwise be due on Karnal Bunt infected acres is due and payable even 
if the acreage is required to be destroyed by the Department of Agriculture 
prior to heading.