INFORMATIONAL MEMORANDUM: R&D-97-037 TO: All Reinsured Companies All Risk Management Field Offices FSA Headquarters, Program Delivery and Field Operations FROM: Tim B. Witt /s/ Tim B. Witt 05/27/97 Deputy Administrator SUBJECT: 1998 Onion Crop Insurance Provisions Attached is a copy of the Onion Crop Provisions that will be effective for the 1998 and succeeding crop years. The following is a brief description of the significant changes to these provisions. The provisions are available on the Reporting Organization (RO) Server also. Please refer to the provisions for more complete information. - Changed the term "third stage" to "final stage" throughout the text for clarification. - Section 1 added the terms "storage onions" and "non-storage onions." Also redefined the term "onion production" and added the term "damaged onion production" to base onion production on U.S. No. 1 or any other standards contained in the Special Provisions for storage onions, and any applicable marketing order or other standards contained in the Special Provisions for non-storage onions. - Section 2, unit division provisions, provides for optional units by type as shown in the Special Provisions. Previously types were listed in the Onion Endorsement. These provisions state the insured's reporting responsibilities to qualify for optional units and allow optional units for irrigated and non-irrigated acreage. - Section 3(a) specifies that the insured may select only one price election for all the onions in the county insured under the policy, unless the Special Provisions provide different price elections by type, in which case the insured may select one price election for each onion type. The price elections selected are required to have the same percentage relationship to the maximum price offered for each type. - Section 3(b) adds provisions that allow insurance for the onion crop in three stages and provides the percentage of coverage and the qualifications for each stage based on producer input and appropriate insurer liability. Also modified the language to read "Stages will be determined on an acre basis and 75 percent of the plants on such acreage must be at the same stage to qualify for the applicable stage guarantee." In the Proposed Rule the language describing stages 2 and 3 read "...25 percent of the acreage in the unit... ." Stages are now on an acre basis rather than a unit basis. - Section 4 adds a June 30 contract change date for states and counties with an August 31 cancellation date and change the contract change date to November 30 preceding the cancellation date for the other states and counties. This maintains an adequate time period between this date and the cancellation date revised to correspond to the change in the sales closing date and comply with the Federal Crop Insurance Reform Act of 1994, and allows producers sufficient time to make informed risk management decisions. The current contract change date is December 31. - Section 5 adds an August 31 cancellation and termination date for counties with fall seeded non-storage type onions. The cancellation and termination dates have been changed to February 1 for all other onions in all states and counties. These changes are intended to minimize program vulnerabilities which may exist because insureds may be able to anticipate below normal yields and to implement amendments to the Federal Crop Insurance Act made by the Federal Crop Insurance Reform Act of 1994. - Section 6 revises the annual premium section to clarify that the premium is based on the final stage production guarantee. - Section 7 makes non-storage type onions eligible for insurance, which provides crop insurance protection for producers of this commodity. - Section 7(c)(1) and (2) add provisions allowing insurance for onions interplanted with a windbreak crop that protects the onion plants when they are small and tender. This is a standard practice in certain areas of the country which have sandy soils and frequently experience strong winds. This section also allows insurance for onions interplanted into a grass or legume provided this practice will not adversely affect the amount or quality of the production. - Section 8(a) clarifies that acreage of the onion crop is not insurable if it does not meet the stated rotation requirements, unless different rotational requirements are shown on the Special Provisions or we agree in writing to insure the acreage. - Section 8(b) clarifies that any acreage damaged prior to the final planting date must be replanted unless the insurance provider agrees that it is not practical to replant. - Section 9(b)(1) adds dates for the end of insurance period for fall planted non-storage onions in Georgia, Oregon, Texas, and Washington and for spring planted non-storage onions. The date for the end of insurance period in Colorado was changed from September 30 to October 15, since it is a normal practice to harvest onions after September 30. - Section 9(b)(2) specifies the end of insurance period as 14 days after lifting or digging of both storage and non-storage onions to allow appropriate time for field drying without undue risk exposure to the insurance provider. - Section 10(a)(3) and (4) add provisions to clarify that any losses caused by insufficient or improper application of pest or disease control measures are not an insured cause of loss. - Section 10(a)(5) adds a provision to insure against wildlife, unless control measures have not been taken. - Section 10(a)(8) specifies that failure of the irrigation water supply must be caused by an insured peril that occurs during the insurance period. - Section 10(b) adds provisions to clarify that we do not insure against any loss of production due to damage that occurs or becomes evident after the end of the insurance period, including, but not limited to, damage that occurs after the onions have been placed in storage. - Section 11(a) adds provisions to allow producers to receive a replanting payment when itis considered practical to replant. - Section 11(b) specifies that the maximum amount of a replanting payment will be the lesser of 7 percent of the final stage production guarantee or 18 hundredweight, multiplied by the price election for the type and by the insured's share. - Section 11(c) specifies that onions replanted using a practice that is uninsurable as an original planting will cause the liability for the unit to be reduced by the amount of the replanting payment. - Section 12(b) requires the producer to give notice at least 15 days prior to any direct marketing so a preharvest inspection can be made. This appraisal may be used to determine the amount of production to count. - Section 13(b) removes the provision that required multiplying the total production to be counted by the greater of the local market price at the time the onions are appraised or by the respective price election. Under the new policy the price election is used to determine the amount of liability and to value production to count, consistent with other crop insurance policies. - Section 13, deleted 13(c)(1)(vi)(C) based on proposed rule comments that the provision did not relate well to sections 13(c)(1)(vi)(A) and 13(c)(1)(vi)(B) and that it did not further clarify section 13(c)(1)(vi)(A) as was intended. - Section 13(d) adds provisions that allow for zero production to count for the unit or portion of a unit if the appraised percent of damage exceeds the percentage of damage shown by type on the Special Provisions, unless onions from that acreage are subsequently harvested and sold. - Section 13(e) adds provisions to clarify that the extent of damage must be determined not later than the time onions are placed in storage, if the production is stored prior to sale, or the date they are delivered to a packer, processor, or other handler if the production is not stored. - Section 14 adds late and prevented planting provisions to the policy. This provision grants protection for acreage planted within 25 days after the final planting date, and for acreage that cannot be planted due to any insurable cause of loss. If the insured is prevented from planting by the final planting date, or intends to plant within the late planting period and is prevented from doing so, insurance protection is provided at a specified percent of the production guarantee for timely planted acreage. Reductions are made to recognize lower yield potential for late planting acreage. Late planting was previously only provided by the execution of a separate Late Planting Agreement Option. To ease the administrative burden, this coverage along with prevented planting are provided for in the policy and the premium included in the premium owed for the unit. - Section 15 adds provisions for providing insurance coverage by written agreement. FCIC has a long standing policy of permitting certain modifications of the insurance contract by written agreement for some policies. This amendment allows FCIC to tailor the policy to a specific insured in certain instances. The new section will cover application for and duration of written agreements. Attachment - Will be sent in the mail.