INFORMATIONAL MEMORANDUM: R&D-97-016 TO: All Reinsured Companies FSA Headquarters, Program Delivery and Field Operations All Risk Management Field Offices FROM: Tim B. Witt Acting Deputy Administrator SUBJECT: Additional 1997 and 1998 Actual Production History (APH) and Master Yield Instructions for Carryover Sugar Beet and Dry Bean Insureds. BACKGROUND: The new Sugar Beet and Dry Bean Crop Provisions in effect for the 1997 crop year (1998 for sugar beets in Arizona and California) changed the county definition. This change will affect the use of the APH data provided by carryover insureds for previous crop years whose crop insurance contract contained land physically located in more than one county but identified by the same Farm Service Agency (FSA) farm serial number. Under the new county definition, separate crop insurance contracts are required for each location county; therefore, separate APH yields are required for each location county. Both "standard" APH and Master Yield calculations are affected by this change. Applicable APH procedures in the 1997 FCIC 18100 Catastrophic Risk Protection (CAT) Handbook or applicable APH and Master Yield procedures in the FCIC 18010 Crop Insurance Handbook (CIH) are still used; however, this memorandum provides additional APH and Master Yield instructions to provide the transition for affected insureds. ACTION: 1 Carryover insureds under standard APH procedures whose previous crop insurance contract covered land physically located in more than one county, beginning with the 1997 crop year (1998 for sugar beets in AZ and CA): A Must submit separate production reports (by unit, practice/type/variety [P/T/V]) for the most recent APH crop year for each insured location county. The most recent APH crop year is 1996 (except for sugar beets in AZ and CA which will be 1997). B Must have separate APH databases (by unit and P/T/V) established by the insurance provider for each insured county. (1) Replicate the yield history (actual and/or assigned yields) and acres from the previous crop/county contract, to applicable databases for the county requiring an application to continue coverage (new county), unless the insured requests that the prior APH yield history be separated by location county. Adjustments to replicated (actual and assigned) sugar beet yields may be required, see Par. 2. Replicated actual yields must be preceded by an "X" yield type descriptor. When assigned yields are replicated, retain the "P" yield type descriptor. See Par. 5, Example 1, Scenario 1 and 2. (2) If the insured requests prior APH yield history to be separated by location county and the prior year's APH databases: (a) Identify ALL crop years' prior APH yield history as belonging to a specific county, the prior history (actual and assigned yields) must be attributed to the applicable county's APH form (i.e., separate units are identified by the applicable county's legal description). Adjustments may be required to the actual and assigned yields, see Par. 2. (b) Do NOT identify ALL crop years' prior APH yield history separately by county (i.e., a single unit contains prior history from more than one county), ALL crop years' (not separated by county) production history must be recertified by the insured designating acres and production to the applicable county. If all such crop years are not recertified, the database for the "new county" must be established according to (1) above. Insureds may not leave out crop years that were previously reported. 2 Adjustments to actual and replicated sugar beet yields are required for standard APH or Master Yield calculations if the sugar percentages specified on the county actuarial documents are different for location counties. A If the prior actual production (which was reported together for more than one county) is separated by location county, the actual production for a "new county" must be recalculated using the applicable sugar percentage. B To adjust replicated actual or assigned yields, determine an adjustment factor by dividing the sugar percentage for the previously insured county by the sugar percentage for the "new county." Round the result to three decimal places. Multiply this factor times the yield to be replicated. See Par. 6, Example 2, Scenario 2. 3 Yield Limitation (CUPS and CAPS) instructions for standard APH and Master Yields. Refer to the CAT or CIH for additional information. A Yield limitation provisions will not apply the first year: (1) A different yield method is used (i.e., switches from standard APH to Master Yields). (2) Prior production history (which was reported together for more than one county) is separated by location county. B Yield limitation provisions will continue to apply if the same yield method is used and prior production history is not separated by location county. This includes approved yields in a "new county" when actual and/or assigned yields were replicated from another county. 4 Carryover insureds with Master Yields whose crop insurance contract covered land located in more than one county: A Must submit separate production reports (by unit and P/T/V) for the most recent APH crop year for each location county insured. B May request cancellation of the Master Yield (by the cancellation date for the applicable crop year) and have yields calculated under applicable standard APH procedures. C Will continue to have their APH yield calculated using Master Yield procedures if the existing Master Yield is not canceled timely, and acceptable production reports required to update the Master Yield are provided for the most recent APH crop year. Previously approved Master Yield summaries which consolidated acreage and production histories from two or more location counties by the designation of a homogeneous yield area must also have separate Master Yields established for each location county involved. Redefinition of county by the Sugar Beet or Dry Bean Crop Provisions disallows continuation of such APH Master Yield designations. (1) If an insured requests new Master Yields based on the acreage and production from the physical location counties, insurance providers may calculate new Master Yields by following the initial Master Yield procedure in the CIH. If the prior years' production reports do not adequately identify ALL crop years' production history that was contained in the previous year's Master Yield as belonging to a specific county, the insured must recertify ALL such crop years and designate the acres and production to each location county. If the insured is unable to provide separate acceptable APH data for each location county for ALL crop years contained in the previous year's Master Yield, or does not request new Master Yields based on the physical location, the 1997 (1998 for CA sugar beets) Master Yields will be calculated as indicated in (2) or (3) below. (2) If insurance is continued ONLY for the county insured the previous crop year, applicable existing Master Yields will be updated by adding the APH data for the most recent APH crop year (for the insured county). Refer to Par. 6, Example 2, Scenario 1. (3) If insurance is continued for the same counties/farming operation, separate Master Yields must be established for each insured county. 1997 (1998 for CA sugar beets) Master Yields must be structured as follows: (a) Existing Master Yields for the named insured county will be updated by adding the APH data for the 1996 APH crop year for the county. Refer to Par. 6, Example 2, Scenario 1. (b) Master Yields must be established for each "new county." The production history for the most recent APH crop year from each new county and replicated summarized actual yields and acres (ALL years from the previous year's Master Yield summaries within the base period) are used to establish the 1997 Master Yield summary database. Replicated actual yields used to complete the database are identified with an "X" yield type descriptor. In subsequent crop years, the Master Yield summary will be updated by adding the most recent crop year's production history. Refer to Par. 6, Example 2, Scenario 2. If the insured fails to provide the required production reports necessary to update the Master Yield, the Master Yield will be rejected and the approved APH Yield must be calculated using standard APH procedures. Assigned yields (under standard APH procedures) will be 75 percent of the prior year's Master Yield. 5 Example 1- Standard APH. The sugar beet application (in effect for the 1996 crop year) listed "County A" as the county insured; however, under the old county definition land located in County A and County B was insured under the same contract. The previous year's approved yield was calculated using standard APH procedure for the irrigated (IRR) practice in County A. The 1996 databases are shown below: 1996 Databases: County A-IRR County A-IRR County A&B-IRR Unit 0101 Unit 0102 Unit 0200 Year Prod. Acres Yield Prod. Acres Yield Prod. Acres Yield 1990 - - T28.5 - - T28.5 - - - 1991 - 0.0 Z *2224 80.0 A27.8 *2120 80.0 A26.5 1992 *2264 80.0 A28.3 *1184 40.0 A29.6 *2700 100.0 A27.0 1993 *4800 160.0 A30.0 - 0.0 Z - 0.0 Z 1994 - 0.0 Z *3360 20.0 A28.0 *5040 180.0 A28.0 1995 *2328 80.0 A29.1 - 0.0 Z *2160 80.0 A27.0 115.9/4=29.0 113.9/4=28.5 108.5/4=27.1 *@17% Sugar SCENARIO 1: The insured did not wish to continue insurance in County B, did not submit an application for it, and did not request that prior years' production history for County A and B in unit 0200 be separated. For 1997, the insured must file individual unit production reports for County A and the insurance provider must update the existing applicable (County A) databases with that information. The sugar percentages are the same for both counties; thus, no adjustment in replicated yields was required. Yield limitations provisions are applicable. The following illustration provides examples of how to update the individual unit databases. Updated 1997 Databases: County A-IRR County A-IRR County A-IRR Unit 0101 Unit 0102 Unit 0200 Year Prod. Acres Yield Prod. Acres Yield Prod. Acres Yield 1990 - - T28.5 - - - - - - 1991 - 0.0 Z *2224 80.0 A27.8 *2120 80.0 26.5 1992 *2264 80.0 A28.3 *1184 40.0 A29.6 *2700 100.0 A27.0 1993 *4800 160.0 A30.0 - 0.0 Z - 0.0 Z 1994 - 0.0 Z *3360 120.0 A28.0 *5040 180.0 A28.0 1995 *2328 80.0 A29.1 - 0.0 Z *2160 80.0 A27.0 1996 - 0.0 Z *2690 0.0 A26.9 *1920 80.0 A24.0 115.9/4=29.0 112.3/4=28.1 132.5/5=26.5 *@ 17.0% Sugar SCENARIO 2: This scenario uses the same basic information as provided for Example 1; however, the insured wished to continue insurance in both counties and signed an application for County B. For 1997, the insured reported 1996 production histories separately for each county but did not request that prior years' production history for County A and B (unit 0200) be separated. The existing County A database was updated with County A production history (see Scenario 1). A separate database was then established for County B. The 1996 County B actual yields and replicated acres and yields (taken from unit 0200's 1996 County A and B database) were used to establish a database for County B. Yield limitation provisions apply. The prior APH yield used for the comparison is 26.5 tons per acre. County B (Same sugar percentage as County A): County B-IRR County B-IRR Unit 0101 Unit 0102 Year Prod. Acres Yield Prod Acres Yield 1991 - 80.0 X26.5 - 80.0 X26.5 1992 - 100.0 X27.0 - 100.0 X27.0 1993 - 0.0 Z - - Z 1994 - 180.0 X28.0 - 180.0 X28.0 1995 - 80.0 X27.0 - 80.0 X27.0 1996 *1566 60.0 A26.1 *1080 40.0 A27.0 Total 134.6/5=26.9 Total 135.5/5=27.1 *@17.0% Sugar Example 2-Master Yields. The application (in effect for the 1996 crop year) listed "County A" as the county insured; however, land located in County A and County B was insured under the same contract. A Master Yield was established for the irrigated (IRR) practice in County A. The individual unit databases and Master Yield summary for the 1996 crop year are shown below. 1996 Individual Unit Production Reports: County A-IRR County AIRR County A&B-IRR Unit 0101 Unit 0102 Unit 0200 Year Prod. Acres Yield Prod. Acres Yield Prod. Acres Yield 1991 - 0.0 Z *2224 80.0 A27.8 *2120 80.0 A26.5 1992 *2264 80.0 A28.3 *1184 40.0 A29.6 *2700 100.0 A27.0 1993 *4800 160.0 A30.0 - 0.0 Z - 0.0 Z 1994 - 0.0 Z *3360 120.0 A28.0 *5040 180.0 A28.0 1995 *2328 80.0 A29.1 - 0.0 Z *2160 80.0 A27.0 *@ 17.0% Sugar 1996 Master Yield Summary: County A-IRR Year Prod. Acres Yield 1991 *4344 160.0 A27.2 1992 *6148 220.0 A28.0 1993 *4800 160.0 A30.0 1994 *8400 300.0 A28.0 1995 *4488 160.0 A28.1 *@17.0% Sugar Total: 141.3/5=28.3 (approved Master Yield) SCENARIO 1: The insured did not wish to continue insurance in County B and did not submit an application for it. For 1997, the insured must file individual unit production reports for County A and the insurance provider must update the existing applicable (County A) Master Yields with that information. Yield limitation provisions are applicable. The following illustrations provide examples of how to update the individual unit databases and the Master Yield summary. Updated 1997 Databases: County A-IRR County A-IRR County A-IRR Unit 0101 Unit 0102 Unit 0200 Year Prod. Acres Yield Prod. Acres Yield Prod. Acres Yield 1991 - 0.0 Z *2224 80.0 A27.8 *2120 80.0 A26.5 1992 *2264 80.0 A28.3 *1184 40.0 A29.6 *2700 100.0 A27.0 1993 *4800 160.0 A30.0 - 0.0 Z - 0.0 Z 1994 - 0.0 Z *3360 120.0 A28.0 *5040 180.0 A28.0 1995 *2328 80.0 A29.1 - 0.0 Z *2160 80.0 A27.0 1996 - 0.0 Z *2690 100.0 A26.9 *1920 80.0 A24.0 *@ 17.0% Sugar 1997 Master Yield Summary: Year Prod. Acres Yield 1991 *4344 160.0 A27.2 1992 *6148 220.0 A28.0 1993 *4800 160.0 A30.0 1994 *8400 300.0 A28.0 1995 *4488 160.0 A28.1 1996 *4610 180.0 A25.7 *@17.0% Sugar Total: 167.0/6=27.8 SCENARIO 2: This scenario uses the same basic information as Example 2; however, the insured wished to continue insurance in both counties and signed an application for County B. For 1997, the insured reported 1996 production histories separately for each county. The insurance provider updated the existing Master Yields (County A) with County A production history (see Scenario 1). A separate Master Yield(s) was then established for County B. Yield limitation provisions apply. The 1996 APH actual yields from County B and replicated acres and yields (taken from the 1996 Master Yield summary applicable to County A) were used to establish the new Master Yield. County B (Same sugar percentage as County A): County B-IRR County B-IRR County B-IRR Unit 0201 Unit 0202 Master Yield Summary Year Prod. Acres Yield Prod. Acres Yield Prod Acres Yield 1991 - - - - - - - 160.0 X27.2 1992 - - - - - - - 220.0 X28.0 1993 - - - - - - - 160.0 X30.0 1994 - - - - - - - 300.0 X28.0 1995 - - - - - - - 160.0 X28.1 1996 *1566 60.0 A26.1 *1080 40.0 A27.0 *2646 100.0 A26.5 *@17.0 sugar Total 167.8/6=28.0 County B (different sugar percentage than County A 1/): Unit 0201 (IRR) Unit 0202 (IRR) Master Yield Summary Year Prod. Acres Yield Prod. Acres Yield Prod Acres Yield 1991 - - - - - - - 160.0 X28.0 1992 - - - - - - - 220.0 X28.8 1993 - - - - - - - 160.0 X30.9 1994 - - - - - - - 300.0 X28.8 1995 - - - - - - - 160.0 X28.9 1996 *1613 60.0 A26.1 *1122 40.0 A27.0 *2735 100.0 A27.4 *@16.5 Sugar *Total 172.8/6=28.8 1/ County A Sugar 17.0%öCounty B Sugar 16.5% =1.030 County A's Master Yield summary actual yields are multiplied times 1.030 and the adjusted yields are entered on County B's Master Yield summary. 1991 (27.2 X 1.030 =28.0), 1992 (28.0 X 1.030= 28.8), etc.