2010 Tobacco Crop Insurance Provisions Changes

1. 2010 Tobacco Crop Insurance Provisions Changes June 10, 2010 Dennis A. Chapman Raleigh Regional Office

2. Disclaimer! • The purpose of the following material is to highlight CHANGES to the Tobacco Crop Insurance Provisions. This material does not change the content or the meaning of the filed policy provisions.

3. Tobacco Crop Insurance Provisions • American Jobs Creation Act of 2004 eliminated the tobacco quota support price as administrated by Farm Service Agency (FSA). • A new environment exists for tobacco production and marketing; therefore, a revised tobacco policy was completed to reflect this new environment.

4. Tobacco Crop Insurance Provisions • Quota Tobacco and Guaranteed Crop Provisions have been removed and replaced with new Tobacco Crop Provisions. • AIP’s notified policyholders insured under Guaranteed Tobacco and Quota Tobacco that: • These crop provisions are no longer applicable; and, • New policy application must be rewritten under the new Tobacco Crop Provisions.

5. Definitions • Average Value: • For appraised production, the value of such production divided by the appraised pounds for the tobacco types. • For harvested production, the value of such production divided by the harvested pounds for the tobacco types. • Late planting period: (no change) • The period that begins the day after the final planting date for the insured crop and ends 15 days after the final planting date (1% reduction per day for first 10 days and 2% reduction for planting between the 11th and 15th day) unless otherwise specified in the Special Provisions.

6. Definitions • Basic Unit: (no change) • A basic unit is all insurable acreage of an insurable type of tobacco in the county in which you have a share on the date of planting for the crop year and that is identified by a single FSA farm serial number at the time insurance first attaches under these provisions for the crop year. • Harvest: • Cutting or priming and removing all insured tobacco from the unit (changed from field).

7. Definitions • Priming: • A method of harvesting tobacco by which one or more leaves (changed from each leaf) are removed from the stalk as they mature. • Planted acreage: • In addition to the definition contained in the Basic Provisions, land in which tobacco seedlings, including hydroponic plants, have been transplanted by hand or machine from the tobacco bed to the field.

8. Definitions • All reference to carryover tobacco has been deleted. • All reference to tobacco price support program has been deleted. • Removed the following definitions: • Adequate stand Fair market value • Approved yield Market price • Discount variety Production guarantee(per/ac)

9. Unit Division • A basic unit will be determined in accordance with the definition of basic unit in section 1 of the crop provisions. • Optional and enterprise units may be allowed by the SPOI’s.

10. Coverage Levels and Prices • You must select only one price election percentage and coverage level for each tobacco type designated in the SPOI’s that you elect to insure.

11. Contract Changes Cancellation and Termination • The contract change date is November 30 preceding the cancellation date. • The cancellation and termination dates are March 15.

12. Report of Acreage • You must provide a copy of any written lease agreement, if applicable, between you and any landlord or tenant. • The written lease agreements must: • Identify all other persons sharing in the crop; and, • Be submitted to us on or before the acreage reporting date.

13. Insured Crop • The insured crop will be each tobacco type you elect to insure and for which a premium rate is provided by the actuarial documents: • In which you have a share; • That meets all rotation requirements on the SPOI’s. • You will be considered to have a share in the insured crop if you retain control of the acreage on which the tobacco is grown and you are at risk of loss.

14. Insurable Acreage • In addition to the provisions of section 9 of the Basic Provisions, we will not insure any acreage that is; • Planted in any manner other than as provided in the definition of “planted acreage” in section 1 of these Crop Provisions, unless otherwise provided by the SPOI’s or by written agreement; or • Damaged before the final planting date to the extent that the majority of producers in the area would normally not further care for the tobacco crop, unless such crop is replanted or we agree that replanting is not practical.

15. Insurance Period • Coverage ends at the earlier of: • Total destruction to the tobacco on the unit; • Removal of the tobacco from the unit where grown, except for curing, grading, packing; • Abandonment of the crop on the unit; • Final adjustment of the loss on the unit; or • The calendar date for the end of the insurance period. • Reference to tobacco being weighed at a tobacco warehouse has been deleted.

16. Insurance Period • The calendar date for the end of the insurance period designated by tobacco types and states (or otherwise stated on the SPOI’s) as follows: • Flue cured – Nov 30 in VA & NC. • Flue cured - Oct 31 in AL, FL, GA & SC. • Burley – Feb 28 in all states. • Dark air cured – March 15 in KY, TN & VA. • Fire cured – April 15 in KY, TN & VA. • Maryland type – May 15 in MD & PA. • Cigar Binder, Cigar Filler, and Cigar Wrapper – April 30 in CT, MA PA & WI.

17. Causes of Loss • Adverse weather conditions. • Fire. • Insects, but not damage due to insufficient or improper application of pest control measures. • Plant disease, but not damage due to insufficient or improper application of disease control measures. • Wildlife. • Earthquake. • Volcanic eruption; or • Failure of the irrigation water supply.

18. Duties in the Event of Damage or Loss • Must maintain representative samples of each unharvested tobacco type for inspection. Sample must be 5 feet wide (at least two rows) and extend the entire length of each field in the unit. • If insured has filed a notice of damage, they must leave all tobacco stalks and stubble in the unit intact for our inspection (Applies for all types of tobacco).

19. Settlement of Claim • The total production to count from all insurable acreage on the unit will include an appraisal for not less than the production guarantee for acreage of any typeof tobacco when the stalks and stubble have been destroyed without our consent.

20. Settlement of Claim • Reference to total production to count has been changed from “pounds of appraised or harvested production multiplied by the applicable price” to “total production to count (in pounds)”. • Revised to clarify all appraised production to count will not be less than the production guarantee (per acre) for any type of tobacco when stubble has been destroyed without our consent as required in section 11.

21. Settlement of Claim • Once we agree the current year’s tobacco has no average value due to an insured cause of loss, you must destroy it, and it will not be considered production to count.

22. Settlement of Claim • Added provisions to allow claims to be settled based on appraised production, even when the acreage has been harvested; • If we determine that the harvested production the insured reported is inconsistent with the appraised production and the insured cannot prove that an insurable cause of loss occurred between the appraisal and the end of the insurance period that can account for the reduction in production; • The claim will be settled based on the appraised production, on insured acreage, even if the insured has harvested the acreage.

23. Settlement of Claim • If we settle a claim based on the insured’s appraised production, section 12(f) regarding quality adjustment is NOTapplicable.

24. Qualifying for Quality Adjustment • The insured must contact us before any tobacco is disposed of so we can inspect the tobacco to determine the extent of the damage. • Note: • The term used is “disposed of” and not “destroyed”. • An insured’s submission of a notice of loss will require the AIP to inspect the tobacco.

25. Qualifying for Quality Adjustment • Our inspection will be used to determine whether the average value is reasonable. • Based on the amount of damage determined during the inspection, if the average value is: • Reasonable, such average value will be used to determine the quality adjustment factor. • Unreasonable, we may adjust the average value used to calculate the quality adjustment factor.

26. Qualifying for Quality Adjustment • If the insured disposes of any production without giving us the opportunity to have the tobacco inspected, the insured will not receive a quality adjustment for such tobacco, regardless of the average value of the production.

27. Qualifying for Quality Adjustment • Production to count will only be reduced if the average value for damaged tobacco is less than 75 percent of the insured’s tobacco price election. • The insured must provide us with records that are acceptable to us which clearly shows the number of pounds, price per pound, and the quality of such tobacco.

28. Qualifying for Quality Adjustment • Under the terms of this policy, if your price election was $1.00 per pound and the average value of your production was $.74 per pound, you divide $.74 per pound by $1.00 per pound to arrive at a quality adjustment factor of .740 multiplied by the number of pounds of damaged production to count.

29. Qualifying for Quality Adjustment • Any reduction in the production to count will be determined by: • Dividing the average value per pound as determined by us (see slide # 23) by the insured’s applicable price election; and, • Multiplying this result by the number of pounds of damaged production.

30. Late Planting • Insurance will be provided for acreage planted to the insured crop after the final planting date as follows: • Production guarantee for acreage planted during the late planting period will be reduced by: • One percent per day for the 1st through the 10th day; and • Two percent per day for the 11th through the 15th day.

31. Late Planting • Premium amount for insurable acreage planted after the final planting date will be the same as that for timely planted acreage. • If the amount of premium for acreage planted after the final planting date exceeds the liability on the acreage, coverage for those acres will not be provided (no premium will be due and no indemnity will be paid).

32. Prevented Planting • Prevented planting coverage will be 35 percent of the production guarantee for timely planted acreage. • Additional prevented planting coverage levels are not available for tobacco.

33. Requesting Insurance Not Available • Requests for coverage on crops without actuarial documents must be submitted via AIP on or before the sales closing date listed in the crop provisions (March 15).

34. Request Requirements • Completed actual production history (APH) based on verifiable records of actual yields in the county where insurance being requested; • Acceptable production records for at least the most recent 3 consecutive crop years; • Evidence from ag expert(s) that the crop can be produced in the county, with dates requested crop normally planted and harvested; • Name, location of, and approximate distance to the place the crop will be sold • Copy of a binding contract with a tobacco company or bona fide tobacco buyer for the tobacco type for current crop year executed no later than the acreage reporting date.

35. Questions? / Discussion!