###### Purpose:  {#purpose .Style-Heading-6-+-Bold-No-underline-Before:--0-pt}

This document is intended to summarize the key features of the new
sweetpotato pilot crop insurance product. This summary is based on
program components that have been derived from data assessments and loss
experience information.

###### Basis of the Guarantee: Field pack Production {#basis-of-the-guarantee-field-pack-production .Style-Heading-6-+-Bold-No-underline-Before:--0-pt}

The APH insurance plan will be the basis for determining the guarantee.
The definition of yield will be the quantity of field pack production
that meets the requirements of the U.S. No. 1 Grade with regard to size,
as well as roots that would classify as U.S. No. 2 Grade on the basis of
physical characteristics, plus those roots heavier than thirty-six
ounces (commonly called Jumbos). Appearance and other quality attributes
will not be considered. Field pack is the quantity that is recovered
from the field and placed into a bin. This is the preferred basis
because producers typically will harvest these roots, whereas the roots
that do not qualify for this classification may or may not be recovered,
depending on market prices.

Individual producer production history data will be used with long term
NASS data in North Carolina for rating purposes to evaluate the risk
inherent in field pack production for each county or region. In
Louisiana, Type 15 data, which has been sorted to include only those
producers who would qualify for the program under the proposed
"gatekeeping" procedures and long term NASS data, will be used for
rating purposes. The Louisiana Sweetpotato Association and the North
Carolina Sweetpotato Commission have collected producer level data. Upon
completion of the data collection process, information was transferred
to Watts and Associates for evaluation. Louisiana has not provided
sufficient data for rating purposes, but with the appropriate sorting
measures in place, the Type 15 data has been deemed to be of sufficient
quality to serve as a proxy for individual producer records.

###### Calendar of Implementation: {#calendar-of-implementation .Style-Heading-6-+-Bold-No-underline-Before:--0-pt}

To meet the requirements imposed by the FCIC Board of Directors, the
field pack production component of the Sweetpotato New Pilot Program
must be initiated for the 2005 crop year. All developmental work must be
drafted by June 15, 2004 and submitted to RMA by July 12, 2004 so that
the proposal may be acted upon in accordance with FCIC procedures. If
feasible, the storage component must be completed and prepared for pilot
initiation in the 2006 crop year. It is planned that RMA and the
Contractor will monitor and adjust the Sweetpotato New Pilot Program
throughout the term of the pilot.

###### Unit of Exposure: {#unit-of-exposure .Style-Heading-6-+-Bold-No-underline-Before:--0-pt}

Field pack production will be measured per land acre.

######  {#section .Style-Heading-6-+-Bold-No-underline-Before:--0-pt}

###### Types: {#types .Style-Heading-6-+-Bold-No-underline-Before:--0-pt}

Only sweetpotatoes of the Beauregard variety, planted for the purpose of
harvesting for fresh market consumption, will be insurable.
Sweetpotatoes planted for processing will not be insurable due to the
small acreage of such sweetpotatoes. The majority of processed
sweetpotatoes are culls, removed after the roots are in a storage
facility or collected in separate bins apart from production, intended
for sale into the fresh market at the time of harvest.

###### Coverage Levels: {#coverage-levels .Style-Heading-6-+-Bold-No-underline-Before:--0-pt}

In accordance with the Act, coverage levels from catastrophic (CAT)
through 75% will be available. Due to issues related to the current
Sweetpotato New Pilot Program, coverage levels above 75% will not be
offered initially.

###### Practices: {#practices .Style-Heading-6-+-Bold-No-underline-Before:--0-pt}

Irrigated and non-irrigated practices will be insurable. Premium rates
and reference yields will be the same for both practices (as is done in
the current pilot). The 1997 Census of Agriculture identifies very
limited sweetpotato acreage grown on irrigated land in the eastern and
southeastern United States. There is insufficient irrigated sweetpotato
acreage to justify separate classification for irrigated acreage.

###### Insurance Dates: {#insurance-dates .Style-Heading-6-+-Bold-No-underline-Before:--0-pt}

Sales closing, final planting, the calendar date for the end of the
insurance period, and other dates will be the same as the present pilot.
An additional date, the "maturity" date, before which appraisals may not
take place, will be included as well. This maturity date will be used to
reduce the instance of adjustment of a crop prior to the most
appropriate assessment time period. Listening sessions have revealed
that a date not less than 105 days after completion of planting is
appropriate for the Louisiana, Central North Carolina, and
Columbus/Horry pilot regions.

######  {#section-1 .Style-Heading-6-+-Bold-No-underline-Before:--0-pt}

###### Initial Insurability Requirements: {#initial-insurability-requirements .Style-Heading-6-+-Bold-No-underline-Before:--0-pt}

Growing sweetpotatoes is more difficult than growing many other crops.
In many cases, the crop insurance program limits the eligibility of
persons to purchase the product until they have gained the prerequisite
experience. This is especially true of vegetable crops. We propose that
the new pilot will modify the existing provision to read, "The potential
insured person must have grown sweetpotatoes for commercial sale in not
less than three of the previous five years and must submit copies of
acreage and production data for all years for which data is provided." A
copy of all relevant APH records is proposed to be sent to the verifier
for every insured producer rather than following the normal APH random
spot checks.

######  {#section-2 .Style-Heading-6-+-Bold-No-underline-Before:--0-pt}

###### Eligible Land: {#eligible-land .Style-Heading-6-+-Bold-No-underline-Before:--0-pt}

The RMA Regional Offices in Raleigh, North Carolina, Jackson,
Mississippi, and Valdosta, GA are in the process of developing FCI-33
maps for the pilot regions. These designations will be used to identify
lands poorly suited for production of sweetpotatoes. In addition, land
identified as regulated or quarantined under Witchgrass eradication or
weevil infestation will be subject to limits on insurability.

A current provision limits insured acreage to 110% of the highest number
of insurable acres in any of the previous three crop years, which is in
place in the current APH program. We propose this rule be extended into
the Sweetpotato New Pilot Program.

###### Pilot Parishes/Counties: {#pilot-parishescounties .Style-Heading-6-+-Bold-No-underline-Before:--0-pt}

The proposed pilot areas are broken into three distinct pilot regions.
The contractor recommended two risk regions in the original submission,
including central North Carolina and two concentrated areas forming one
risk region in Louisiana. Upon review, the FCIC Board required the
addition of a third risk region which includes Columbus County, North
Carolina, and Horry County, South Carolina. Therefore, the three risk
regions are now Louisiana Pilot region, Central North Carolina Pilot
region and Columbus/Horry Pilot Region. The regions contain select
parishes/counties from states of Louisiana, North Carolina, and South
Carolina. The Louisiana pilot region is made up of the proposed parishes
of Acadia, Avoyelles, Evangeline, Franklin, Morehouse, Richland, St.
Landry, and West Carroll. The Central North Carolina pilot region is
made up of the counties of Cumberland, Duplin, Nash, Edgecombe, Greene,
Harnett, Johnston, Lenoir, Sampson, Wake, Wayne, and Wilson. The
Columbus/Horry pilot region is made up of Columbus County, North
Carolina and Horry County, South Carolina.

The first two pilot regions were selected by the Contractor to be
recommended for inclusion in the Sweetpotato New Pilot Program because
they represent geographically contiguous dense production areas.
Further, offering high levels of service is significantly more difficult
and costly for insurance companies in widely dispersed
parishes/counties. Geographic density of the recommended pilot counties
will allow insurance companies to develop a concentrated critical mass
of well trained and skilled personal with specific knowledge of
sweetpotatoes in the pilot region. As a result, the producers who
purchase the insurance are likely to receive more timely and accurate
loss adjustment and more knowledgeable customer service. The insurance
and reinsurance firms that offer these policies will benefit from more
manageable administrative costs in the consolidated recommended pilot
regions. The Contractor believes the geographically contiguous pilot
regions will positively contribute to the success of the Sweetpotato New
Pilot Program and its eventual expansion to other production areas
throughout the United States. The third pilot region (Columbus/Horry)
has been included at the direction of the FCIC Board of Directors.

######  {#section-3 .Style-Heading-6-+-Bold-No-underline-Before:--0-pt}

###### Insured Causes of Loss: {#insured-causes-of-loss .Style-Heading-6-+-Bold-No-underline-Before:--0-pt}

The currently defined causes of insurable losses will be continued. In
the Sweetpotato New Pilot Program, a differentiation of damage due to
insurable causes and non-insurable causes will be utilized during the
loss adjustment process. Losses to non-insured causes are not eligible
for indemnification.

######  {#section-4 .Style-Heading-6-+-Bold-No-underline-Before:--0-pt}

###### Additional Coverage: {#additional-coverage .Style-Heading-6-+-Bold-No-underline-Before:--0-pt}

Late planting and prevented planting coverage will not be offered, as is
consistent with the present pilot. Only basic units will be insurable.

######  {#section-5 .Style-Heading-6-+-Bold-No-underline-Before:--0-pt}

###### Pricing: {#pricing .Style-Heading-6-+-Bold-No-underline-Before:--0-pt}

Consistent with the Act, the price election will represent an estimate
of the expected market price for sweetpotatoes at the point in the
marketing channel that is most consistent with the definition of the
insured crop. The intent is to measure at a point of sale in the field.
Estimated costs of transportation and other values added between the
field and point of first delivery will not be considered as valid costs
for the purpose of establishing the pricing.

Differential pricing for harvested and unharvested acreage will be
examined. The unharvested price would be calculated by subtracting an
estimated per unit harvest cost estimate from the pricing. This is done
to reduce the insurance-based incentives that may encourage failure to
harvest in a marginal production year. Pricing data from the
Agricultural Marketing Service (AMS) has been determined to be the most
appropriate basis for the calculations resulting in a harvested basis
field pack production pricing. Production expense budgets from Louisiana
State University and North Carolina State University are used to
determine estimated harvest costs. While the Louisiana pilot region will
use the Louisiana prices, both the Central North Carolina and
Columbus/Horry pilot regions will use the North Carolina prices.

###### Methods to Determine Transitional Yields: {#methods-to-determine-transitional-yields .Style-Heading-6-+-Bold-No-underline-Before:--0-pt}

The requirement that three years of production records be provided
reduces the significance of the *t*-yield substantially. The "personal
*t*-yield," which is simply an average of the three available years of
production, is proposed in the event a producer has fewer than four
years of production history.

######  {#section-6 .Style-Heading-6-+-Bold-No-underline-Before:--0-pt}

###### Loss Adjustment Procedures: {#loss-adjustment-procedures .Style-Heading-6-+-Bold-No-underline-Before:--0-pt}

Sweetpotatoes are a perishable crop that must be promptly protected from
the sun (prevent sunscald) and either sold green or cured immediately
after harvest. Curing is necessary to heal the ends of the roots and any
cuts or scrapes that occurred during harvest. Curing is conducted in a
storage environment at higher temperatures and humidity than long-term
storage. Thus, the present provision that, "You must not dispose of or
sell the damaged crop, or store the crop, until after we have given you
written consent to do so, or 15 days after the notice of damage,
whichever is later," does not conform to the manner in which this crop
must be managed to minimize damage and maximize value to the producer.
This provision will not be included in the new program.

Watts and Associates believes it must be mandatory that portions of each
field remain unharvested whenever a notice of loss is filed. Appraisals
of those unharvested portions and pre-harvest appraisals will be the
basis for determining production loss. If the producer anticipates a
loss of 50 to 100%, pre-harvest appraisal must take place. If the
producer anticipates a loss between 25 and 50%, check strips may be used
for adjustment.

The Sweetpotato New Pilot Program includes a procedure for
differentiating losses to insured and uninsured perils. Losses to
uninsured perils will not be indemnified. Determining the causes of loss
requires a specialized skill set. All sweetpotato loss adjusters will be
required to attend specialized training to accurately assess causes of
loss.

######  {#section-7 .Style-Heading-6-+-Bold-No-underline-Before:--0-pt}

###### Indemnity Calculations: {#indemnity-calculations .Style-Heading-6-+-Bold-No-underline-Before:--0-pt}

The basis of insurance is the APH production guarantee. Therefore,
losses are payable only if the quantity produced (both harvested and
appraised) is less than the trigger level. The trigger level is the APH
yield multiplied by the coverage level percentage.

######  {#section-8 .Style-Heading-6-+-Bold-No-underline-Before:--0-pt}

###### Actuarial and Underwriting Soundness of the Sweetpotato New Pilot Program: {#actuarial-and-underwriting-soundness-of-the-sweetpotato-new-pilot-program .Style-Heading-6-+-Bold-No-underline-Before:--0-pt}

Given the unique nature of sweetpotato harvesting methods, and after a
review of all currently available alternatives (insurance plans), it was
determined that the APH plan was the best insurance alternative to this
crop. Numerous gate-keeping procedures have been developed to assist in
generating a sound program from an actuarial and underwriting
perspective. It should be noted that the intent of this development
effort is to substantially increase the soundness of the program. The
intent of the monitoring program attached to this contract is to allow
RMA and the Contractor to finalize the \"tweaking\" of the product to
bring it into alignment with FCIC goals.

###### Concept Paper Supplement: Harvest through Pack Out Process {#concept-paper-supplement-harvest-through-pack-out-process .Style-Heading-6-+-Bold-No-underline-Before:--0-pt}

Due to the unique nature of the cropping processes in sweetpotatoes,
particularly in harvest and storage, a more robust underwriting process
is warranted. This supplement is intended to provide additional context
for underwriting issues addressing harvest and storage.

Storage roots continue to grow until the leaves are killed by frost.
Normally, harvest begins when most of the roots are in the U.S. No. 1
size class, as U.S. No. 1 sweetpotatoes command the highest price. The
harvest season for sweetpotatoes runs from mid-September to as late as
mid-November depending on the production region.

The primary harvest peril is an over abundance of moisture during or
immediately prior to the harvest season. When the soil becomes
saturated, conditions that promote rot are created. The damage is not
generally obvious at the time of harvest or curing, but becomes apparent
during storage. A second peril is a condition known as "hardcore," a
disorder where a whitish, hard area appears in the cooked sweetpotato
occurring in roots chilled below 40°Fahrenheit overnight. Hardcore can
be detected after several weeks of storage, but it is generally not
discovered before the consumer makes use of the sweetpotatoes.

Sweetpotatoes are very susceptible to damage at harvest. Harvested roots
left in the sun at temperatures above 90° Fahrenheit sunscald in 30
minutes. Scalded areas turn purplish-brown and are more susceptible to
storage rots. Sweetpotato roots do not have a protective outer layer of
cells like that of tubers and may become "skinned" easily. Any abrasion
can lead to rot in storage. Skinned areas can become dark, sunken, and
surrounded by a narrow brown border. These scars offer opportunities for
storage rot pathogens such as *Fusarium* to enter the root. Curing roots
after harvest allows the surface cells or "*periderm*" to reform,
reducing subsequent storage damage.

In North Carolina, the leading sweetpotato production state, harvest is
a labor-intensive process. Although there are instances of higher levels
of technology in use, generally sweetpotato roots are turned up on top
of the ground by a side angle disk plow and partially exposed to aid the
crews of twenty to forty migrant laborers in picking and sorting.

In Louisiana, the second largest sweetpotato production state, harvest
is a relatively highly mechanized process. Chain diggers or modified
potato harvesters are used with crews of four to six laborers to sort
and place the sweetpotatoes into bins. Due to the differences in labor
requirements, harvest is far less costly in Louisiana than in North
Carolina.

The sweetpotatoes that are sorted into bins for storage are called
"field pack production." These are a combination of sweetpotatoes that
possess the external characteristics of U.S. No. 1, U.S. No. 2, and
Jumbo sweetpotatoes. The ratio of each is variable from field to field
and year to year, but will center around roughly 70% U.S. No. 1, 23%
U.S. No. 2, and 7% Jumbo. In years where the market price is low, a
larger percentage of the U.S. No. 2 roots will be left to rot in the
field. Sweetpotatoes are generally transferred to 22 bushel, 1,100
pound, bulk containers after harvest. Although there are a large variety
of other means of conveyance in use each year, the 22 bushel container
is the industry standard. The graph below (Figure 1) illustrates the
composition of a typical 1,100 pound bulk container by grade.

Figure 1. Typical Bin Composition by Type or Grade

![](media/image1.wmf){width="4.354330708661418in"
height="2.6980314960629923in"}

Source: Confidential regional pack in and pack out processing data set
from packing houses in pilot states aggregated to protect privacy.

Most roots are cured immediately after harvest to improve flavor and
storage life. Curing heals cuts, reduces decay, and reduces shrinkage in
storage because it allows the "*periderm*" to thicken and reform. Curing
should be started within 1 to 2 hours of harvest and continued for 4 to
7 days at 80 to 85° F and 90 to 95% relative humidity with ample
ventilation for about 5 days.

Storage temperatures are very important. Long-term storage areas should
be maintained at 55 to 60° F with 85% relative humidity and with
sufficient venting to produce a total volume change of air at least once
a day. Above 60° F, internal breakdown, shrinking, and sprouting can
occur. Shrinkage occurs at 1 to 3% per month. Losses in total
sweetpotato volume attributed to shrink, rot, removal of dirt, and
sorting out inadvertently harvested substandard roots are significant.
Losses will vary widely based on conditions at harvest, technology
implemented within the storage facility, term of storage, and cultivar.
Based on analysis of producer pack out data, losses typically make up
26% of the total sweetpotato volume harvested (Figure 2).

![](media/image2.wmf){width="3.8125984251968505in"
height="2.3751968503937007in"}Figure 2. Storage Survivability

Source: Confidential regional pack in and pack out processing data set
from packing houses in pilot states aggregated to protect privacy.

Sweetpotatoes packed out can be estimated by multiplying the composition
of a 1,100 lb bin by a loss ratio. U.S. No. 1 make up 70% of the field
pack production and 74% survive storage.

1,100 lbs. \* 0.70 \* 0.74 = \~569.8 lbs.

U.S. No. 2 make up 23% of field pack production and 74% survive storage.

1,100 lbs. \* 0.23 \* 0.74 = \~187.2 lbs.

Jumbo make up 7% of field pack production and 74% survive storage.

1,100 lbs. \* 0.07 \* 0.74 = \~57 lbs.

By industry convention, producers are typically paid based on the
portion of the field pack production that is marketed into fresh
consumption channels. U.S. No. 2's are nearly always either canned or
discarded, leaving the U.S. No 1's and Jumbos to the fresh market.
Generally, processors will salvage whatever value for the canning roots
they are able to obtain from canners.