BULLETIN NO.: MGR-98-006 TO: All Reinsured Companies All Risk Management Field Offices FSA Headquarters and State Offices FROM: Kenneth D. Ackerman Administrator SUBJECT: 1997 Quota (Burley) Tobacco Loss Adjustment Procedure BACKGROUND: Adverse weather conditions across the burley tobacco growing areas of Indiana, Kentucky, Ohio, and Tennessee have created problems for producers in their attempts to prepare the crop for market (strip) as well as in their attempts to actually market their crop. These abnormalities caused tobacco to be planted later than usual resulting in slow growth and later-than-normal harvest. Cold weather hit before the tobacco was cured resulting in high moisture content. When taken to market, the tobacco received a low grade and a drastic reduction in the offered price, or a no grade and no offered price. The end of the insurance period in these areas was February 28. The Risk Management Agency (RMA) in conjunction with the Farm Service Agency and private insurance providers recognize that the tobacco impacted by the abnormal weather will require special treatment in order to market at least a portion of the crop. In order to assist producers in finalizing their 1997 crop insurance claims, RMA is approving changes in the loss procedures to recognize the unique conditions affecting this year's crop. ACTION: Effective immediately for the 1997 crop year ONLY, use the following approved deviation (from existing quota tobacco loss adjustment procedure) as shown below: A For Tobacco That Has Not Been Stripped: Use the following 10-step appraisal method in lieu of the "Cured Tobacco Hanging in the Barn" appraisal method in the Quota Tobacco loss adjustment handbook procedure. 1 Use this method for tobacco hanging in the barn which may not be completely cured or may contain high moisture content that prevents the tobacco from being marketable. Record all facts, determinations, and calculations on a Special Report or on the Production Worksheet as instructed below. 2 Remove and appraise one stick of average tobacco from each lower rail of the tobacco barn. Appraise at least the greater of 15 sticks per determined acre, or 1 percent of the total number of sticks. Record the number of sticks on the Special Report. 3 Strip the tobacco leaves and separate them into "marketable" and "unmarketable" piles. 4 By counting the leaves, determine the percentage of leaves contained in each pile to the nearest 1/10 of 1 percent. Record the percentages on the Special Report. 5 Divide the total weight of the stripped production contained in both piles by the number of sticks recorded in item 2 above and round to the nearest 1/1000 of a pound to determine the average weight of leaves per stick. Record the results on the Special Report. 6 Determine the number of sticks involved by counting the number of rails involved and multiplying by the average number of sticks per rail and record on the Special Report. 7 Multiply the weight of stripped production per stick to the nearest 1/1000 of a pound by the total number of sticks involved to obtain the gross production and record on the Special Report. 8 Multiply the gross production by the percentage (nearest 1/10 of 1 percent) of each pile (as shown in item 4) to determine pounds of "marketable" and "unmarketable" tobacco. Record in the Production column of the Production Worksheet. 9 Multiply the pounds of "marketable" tobacco at support price less six cents per pound ($1.76 less $0.06 = $1.70) and multiply the pounds of "unmarketable" leaves at zero. Enter on the Production Worksheet either as a two-line entry or document in the Narrative if using a one-line entry. 10 If all tobacco in the barn is unmarketable and valued at zero, it must be destroyed. B For Tobacco That Has Been Stripped And Offered For Warehouse Floor Sale: 1 Tobacco that did not receive a grade or an offer from a tobacco company buyer will be valued at zero and must be destroyed. 2 Tobacco that received a grade, but was not sold will be valued at the support price, less six cents per pound ($.06), for that grade. 3 Tobacco that did not receive a grade, but did receive an offer from a tobacco company buyer and was not sold will be valued at the bid price, less six cents per pound ($.06), of the tobacco company buyer. C For Tobacco That Has Been Stripped, But NOT Offered For Grade Or Sale: Tobacco that was not offered for grade or sale will be valued at the support price, less six cents per pound ($1.76 less $0.06 = $1.70). If a policy holder opts to obtain a grade for such tobacco from a licensed grader, follow item B2 above. D For Tobacco That Has Been Sold On The Warehouse Floor: Value will be the gross returns less six cents per pound ($.06) for warehouse charges. E For Tobacco The Policy Holder Expects To Sell Soon: For tobacco that the policy holder expects to sell soon, the claim may be deferred. F Documentation Of Carryover Pounds: 1 Instruct the policy holder that the total number of carryover pounds of tobacco must be reported on the 1999 crop year's acreage report. 2 For the following crop, in the event of a claim, the adjuster must verify any carryover pounds of tobacco sold with the number of pounds reported on the acreage report and reported to the Farm Service Agency. NOTE: Refer to this Bulletin number in the Narrative section of the Production Worksheet for authorization to use the approved deviation. cc: Manager's Bulletin Distribution RMA:IS/R&D:PDD/MSRSO:3/13/97:mgrtoba1.wpd FINAL:RMA:IS/R&D:PDD/MSRSO:3/16/97:mgrtoba1.wpd