Final Agency Determination: FAD-213

Subject: A joint request for a Final Agency Determination, dated February 20, 2014, was submitted by two parties, along with their separate interpretations of the same policy provision requesting a Final Agency Determination for the 2013 crop year regarding the interpretation of section 11(d) of the Coarse Grains Crop Provisions, published at 7 C.F.R. § 457.113. This request is pursuant to 7 C.F.R. part 400, subpart X.

Background:

Section 11(d) of the Coarse Grains Crop Provisions states, in relevant part:

11. Settlement of Claim

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(d) Mature coarse grain production (excluding corn insured as silage) may be adjusted for excess moisture and quality deficiencies. If moisture adjustment is applicable it will be made prior to any adjustment for quality. Corn insured as silage will be adjusted for excess moisture and quality only as specified in section 11(e).

(1) Production will be reduced by 0.12 percent for each 0.1 percentage point of moisture in excess of:

(i) Fifteen percent (15%) for corn (If moisture exceeds 30 percent (30%), production will be reduced 0.2 percent for each 0.1 percentage point above 30 percent (30%));

(ii) Fourteen percent (14%) for grain sorghum; and

(iii) Thirteen percent (13%) for soybeans.

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Two interpretations were submitted in this joint FAD request.

First Requestor's Interpretation:

The first requestor states:

A reduction rate of 0.12 percent for each 0.1 percentage point of moisture is not reflective of bushel reductions applied by most elevators, nor is it comparable to that of the United States grain export market which applies reductions for corn with moisture in excess of 14.5 percent (versus 15 percent). The 0.14 percent reduction per 0.1 percentage point moisture widely recognized by the grain buying industry, and actually applied in the commodity sale, should be utilized for indemnity purposes otherwise the revenue protection included in the policy is not included in any paid claim. In summary, the actual moisture rate used by a grain buyer should be recognized for indemnity purposes.

Second Requestor's Interpretation:

The second requestor states:

Production to count, in bushels, for mature coarse grain production may ONLY be adjusted by the rate specifically cited in the Crop Provisions. That is, for example, corn production will be reduced by 0.12 percent for each 0.1 percentage point of moisture in excess of fifteen percent (15%), through and including thirty percent (30%) moisture. The corresponding moisture adjustment factors are published in the respective Loss Adjustment Standards Handbook. An alternative moisture adjustment cannot be applied for indemnity purposes, regardless of any separate entity (e.g. a grain buyer) applying a dissimilar discount for the same moisture content, or having dissimilar minimum tolerances for moisture content. The moisture adjustment provided by the Crop Provisions is the only adjustment that may be applied with regards to settlement of a claim.

The Federal Crop Insurance Corporation agrees with the second requestor's interpretation. Since standards may differ between elevators and buyers, RMA has set a specific schedule of reductions in the policy. Since they are part of the policy and codified in the Code of Federal Regulations, they have the force of law.

In accordance with 7 C.F.R. § 400.765(c), this constitutes the Final Agency Determination and is binding on all participants in the Federal crop insurance program for crop years the above stated provisions are in effect.

Date of Issue: March 25, 2014