In parts of the US, unfavorable weather conditions are having an adverse effect on crops resulting in low test weight and/or damaged grain. The Coarse Grains Policy provides for a reduction in mature production to count when quality of the appraised and/or harvested mature production is reduced due to insurable causes. The quantity of mature production is reduced when the analyzed crop samples satisfy the requirements in the Coarse Grains Policy and Special Provisions. The following guidelines are provided as an overview to the procedures governing the terms and conditions of the MPCI Policy and loss adjustment procedures.
Quality adjustment criteria is crop specific. The examples provided are for corn and soybeans when dealing with low test weight and/or damaged grain. Review the individual Crop Provisions and Crop Special Provisions to ensure accuracy. The examples given are not intended to represent all scenarios. This document does not include quality adjustment procedures for grain contaminated by mycotoxins (aflatoxin, vomitoxin, fumonisin, etc) or other substances that are injurious to human or animal health. Please contact the loss adjuster for details specific to each situation.
In case of damage or loss of production or revenue, insureds must provide notice of loss, by unit, within 72 hours of discovery of damage or loss of production but not later than 15 days after the end of the insurance period (i.e. harvest).
- Unharvested Production: Samples must be obtained and submitted by the loss adjuster on, at a minimum, a unit basis. The crop samples will be submitted to a licensed grain grader to be analyzed. There are time limits for acceptable samples to be obtained and graded. Contact the adjuster for additional information.
- Undelivered Harvested Production: The adjuster must obtain samples from stored production. These crop samples will be submitted to a licensed grain grader to be analyzed. (Sampling from stored production is not allowed for certain mycotoxins and other substances that are injurious to human or animal health. Contact the adjuster for additional information.)
- Harvested Delivered Production: Samples can be obtained by the qualified elevator personnel or a disinterested third party as approved by DCIS.
WHO CAN GRADE SAMPLES:
- Deficiencies must be analyzed by a licensed grain grader. There may be fees for grading and these fees may be required prior to the sample being graded. It is the insured’s responsibility to pay any fees for grading. Contact the loss adjuster for the fee payment requirements in your area.
QUALITY ADJUSTMENT OF PRODUCTION
1. Section A Quality Factors:
For sampled/graded corn and soybean production qualifying under Section A, the quality adjustment factor will be the sum of all pre-established discount factors (DF). The following corn and soybean examples establish the steps to arrive at the quality adjustment factor (QAF).
In order to qualify for quality adjustment under Section A for test weight and/or damage:
Corn – test weight below 49.0 lbs and/or damage above 10.0%.
Soybeans – test weight below 49.0 lbs and/or damage above 8.0%.
There are other factors which can be quality adjusted under Section A, but are not listed in this document.
For sold and unsold production that qualifies solely for quality deficiencies found in the Special Provisions; Section A: Discount Factor Charts, only the Discount Factors will be used to establish the quality adjustment factor. RIV’s based on the price received will not be used.
- Example 1. Corn sample was analyzed/graded and the sample qualified for pre-established DF’s as found in Section A:
- Corn Test Weight 48.12 pounds
- Corn Kernel Damage 12.01 percent
- 0.041 discount factor for test weight
- 0.082 discount factor for kernel damage
- 1.000 – (0.041 + 0.082) = 0.877 QAF
For a 1,000 bu load of corn, the result would be 877 bu of production to count.
- Example 2. Soybean sample was analyzed/graded and the sample qualified for pre-established DF’s as found in Section A:
- Soybean Test Weight 45.00 pounds
- Soybean Damage 12.50 percent
- 0.013 discount factor for test weight
- 0.076 discount factor for kernel damage
- 0.030 discount factor for U.S. Sample Grade (damage was > 8.0%).
- 1.000 – (0.013 + 0.076 + 0.030) = 0.881 QAF
For a 1,000 bu load of soybeans, the result would be 881 bu of production to count.
2. Section B Quality Factors:
Corn and soybean production can qualify for quality adjustment under Section B of the SPOIs. For corn and soybeans, if the test weight is below 44.0 lbs and/or the damage is greater than 35.0%, the production would qualify for quality adjustment under Section B. Once a sample qualifies for quality adjustment under Section B, Section A discount factors are disregarded. Discount Factors from Section A and Section B cannot be added together.
Section B Quality Factors – Unsold Grain:
For sampled corn and soybean production qualifying under Section B that is unsold on the date of final inspection, claims will be settled using the applicable Discount Factors (DF) unless the insured has elected in writing to delay settlement for up to 60 days after the calendar date for end of the insurance period (EOIP). If the production is sold during this delay, the claim will be settled based on the reduction in value (RIV). If the insured elects to settle the claim based on the DF’s for unsold production, the Discount Factor will be .500. If the production is later sold, we will not recalculate or adjust your claim for indemnity.
Section B Quality Factors – Sold Grain:
For sampled corn and soybean production qualifying under Section B that is sold to a disinterested third party prior to 60 days after the calendar date for the EOIP the discount factor will be all reduction in value (RIV) applied by the buyer due to all insurable quality deficiencies. RIVs must be reasonable, usual and customary. The unit production will be adjusted in the following manner to arrive at the quality adjustment factor (QAF):
Example: The corn sample was analyzed/graded and the sample qualified under Section B:
- Corn test weight: 43.5 pounds
- Corn kernel Damage: 37.0 percent
- $0.48 RIV for 43.5-pound test
- $1.41 RIV for 37% kernel
- Total RIV = $1.89
- $1.89 RIV divided by the local market price ($3.60) = 0.525 DF
- 1.000 – 0.525 DF = 0.475 QAF
For a 1,000 bu load of corn, the result would be 475 bu of production to count.
3. POTENTIAL MARKETS FOR LOW TEST WEIGHT/DAMAGED PRODUCTION
DCIS will work with the insured to identify local markets and distant markets outside the insured’s local marketing area, including salvage markets (salvage use that could result in any type of compensation to the insured) to establish fair market value of the crop production. For markets outside the insured’s local marking area, the additional transportation costs in excess of the cost to transport to the local marketing area will be taken into consideration when establishing the value of the production for Section B Quality Factors. Section A Quality Factors are not eligible for transportation considerations.
4. ZERO MARKET VALUE PRODUCTION:
For production listed in Section A or B (Special Provisions) that we determine has zero market value due to insured quality deficiencies:
- The Discount Factor will be 1.000 if such production is destroyed in a manner acceptable to us. Contact the loss adjuster to determine an acceptable manner of destruction.
- If the insured does not destroy production in a manner acceptable to us, such production is no longer considered to be zero value and will be adjusted as follows:
- For production in Section A: we will use the pre-established DF’s.
- For production in Section B: we will use a 0.500 DF.
If you have additional questions, please contact your Area Claim Supervisor.
Source: Diversified Crop Insurance Services