July 29, 1997 INFORMATIONAL MEMORANDUM: R&D-97-059 TO: All Reinsured Companies All Risk Management Field Offices FROM: Tim B. Witt /s/ Tim B. Witt Deputy Administrator SUBJECT: 1998 Peach Crop Insurance Provisions Attached is a copy of the Peach 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 also available on the Reporting Organization (RO) Server. Please refer to the provisions for more complete information. - Section 1- Added definitions for the terms "actual price per bushel," "bearing tree," "bushel," "direct marketing," "FSA," "good farming practices," "harvest," "interplanted," "irrigated practice," "loss in quality," "packing shed," "production guarantee," "set out," and "written agreement" for clarification. - Section 1(a) - Added provisions that allow (FOB) Freight on Board peach prices in the absence of Market News Services prices. The current policy does not allow for FOB prices when the Market News Services does not establish a price. Also removed any relationship to 3/4 bushel of peaches. This change was made because a unit of measure for peaches is not always a 3/4 bushel. Any unit of measure of peaches can be converted to a full 50-pound bushel. - Section 3(a) - Specify that the insured may select only one price election for all the peaches 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 peach type designated in the Special Provisions. - Section 3(b) - Amended the provisions to include any circumstance that may reduce the expected yield below the yield upon which the guarantee is based. The final rule requires an insured to report damage, removal of or addition of trees, and change in practice that may reduce expected yields. If the insured fails to notify the insurance provider of factors that may reduce the expected yields from previous levels, the production guarantee will be reduced at any time the insurance provider becomes aware of any circumstance that may affect the yield. - Section 5 - Specifies that the cancellation and termination dates are November 20. Currently, the policy states November 30. The change was made to standardize the perennial crop policies. For the 1998 crop year, carry-over insureds have until November 30, 1997 to cancel or terminate their policy(ies). - Section 7 - Allows insurance on peaches interplanted with another perennial crop unless we inspect the acreage and determine that it does not meet the requirements contained in the policy. This change will make insurance available on more acreage and reduce reliance on the noninsured crop disaster assistance program (NAP) for crop loss protection. This standardizes the perennial crop policies and will have no adverse actuarial effect. Currently, the peach policy does not allow coverage on interplanted acreage. - Section 8(a)(1) - Specifies that insurance coverage begins on November 21. This change was made to be consistent with other perennial crops. Clarifies that for the year of application, if the application is received after November 11, but prior to November 21, insurance will attach on the 10th day after the properly completed application is received in the insurance provider's local office, unless the insurance provider inspects the acreage during the 10-day period and determines that it does not meet insurability requirements. - Section 8(b) - Added provisions to clarify insurability when an insurable share is acquired or relinquished on or before the acreage reporting date and after an inspection the acreage is considered acceptable, insurance will be considered to have attached on the calendar date for the beginning of the insurance period. Also clarifies that acreage acquired after the acreage reporting date is not insurable and that a person to whom coverage is transferred must be eligible for insurance. - Section 9(a)(1) - Added adverse weather as a cause of loss. This change deleted freeze, frost, hail, drought, wind and lightening as named perils because they are included in the term adverse weather. Also added wildlife as an insurable cause of loss to be consistent with other perennial crop policies. - Section 9(b)(1) - Added provisions to provide coverage against disease and insect infestation unless proper control measures are not utilized. This change was made to conform to the coverage provided for most other crops. - Section 10(b) - Require the producer to give notice at least 15 days before any production from a unit will be sold by direct marketing unless the producer has records verifying that the direct marketed peaches were "weighed and graded" through a packing shed. - Section 11(b) - Added provisions specifying the total production to be counted will be multiplied by the price election. The current policy multiplies the total production to be counted by the actual price per bushel (FOB) Freight on Board or by the price election, whichever is larger. This change standardizes the perennial crop policies. - Section 11(c)(3) - Added provisions to extend quality adjustment to all insurable causes of loss. The current policy only allows quality adjustment for damage due to frost, freeze, and misshapen fruit. - Section 12 - Added 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 specified insured in certain instances. The new section will cover the procedures for and duration of written agreements.