(B) 65 percent of the payment rate deter-
mined under paragraph (3). 
(2) PAYMENT QUANTITY.—For the purpose of 
paragraph (1)(A), the payment quantity for quality 
losses for a crop of a commodity on a farm shall 
equal the lesser of— 
(A) the actual production of the crop of 
the commodity on the farm; or 
(B) the quantity of expected production of 
the crop of the commodity on the farm, using 
the formula used by the Secretary of Agri-
culture to determine quantity losses for the 
crop of the commodity under paragraph (1)(A) 
and (2)(A) of subsection (c). 
(3) PAYMENT RATE.—For the purpose of para-
graph (1)(B) and in accordance with paragraphs (5) 
and (6), the payment rate for quality losses for a 
crop of a commodity on a farm shall be equal to the 
difference between— 
(A) the per unit market value that the 
units of the crop affected by the quality loss 
would have had if the crop had not suffered a 
quality loss; and 
(B) the per unit market value of the units 
of the crop affected by the quality loss.
(4) ELIGIBILITY.—For producers on a farm to 
be eligible to obtain a payment for a quality loss for 
a crop under paragraph (1)(B) or (2)(B) of sub-
section (c), the amount obtained by multiplying the 
per unit loss determined under paragraph (1) by the 
number of units affected by the quality loss shall be 
at least 20 percent of the value that all affected pro-
duction of the crop would have had if the crop had 
not suffered a quality loss. 
(5) MARKETING CONTRACTS.—In the case of 
any production of a commodity that is sold pursuant 
to one or more marketing contracts (regardless of 
whether the contract is entered into by the pro-
ducers on the farm before or after harvest) and for 
which appropriate documentation exists, the quan-
tity designated in the contracts shall be eligible for 
quality loss assistance based on the one or more 
prices specified in the contracts. 
(6) OTHER PRODUCTION.—For any additional 
production of a commodity for which a marketing 
contract does not exist or for which production con-
tinues to be owned and produced by the producers 
on a farm, quality losses shall be based on the aver-
age local market discounts for reduced quality, as
determined by the appropriate State committee of 
the Farm Service Agency. 
(7) QUALITY ADJUSTMENTS AND DISCOUNTS.— 
The appropriate State committee of the Farm Serv-
ice Agency shall identify the appropriate quality ad-
justment and discount factors to be considered in 
carrying out this subsection, including the average 
local discount or loans made by the Farm Service 
Agency or crop insurance coverage under the Fed-
eral Crop Insurance Act (7 U.S.C. 1501 et seq.). 
(8) ELIGIBLE PRODUCTION.—The Secretary of 
Agriculture shall carry out this subsection in a fair 
and equitable manner for all eligible production, in-
cluding the production of fruits and vegetables, 
other specialty crops, and field crops. 
(e) ELIGIBILITY FOR ASSISTANCE.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the producers on a farm shall not be eli-
gible for assistance under this section with respect 
to losses to an insurable commodity or noninsurable 
commodity if the producers on the farm— 
(A) in the case of an insurable commodity, 
did not obtain a policy or plan of insurance for 
the insurable commodity under the Federal
Crop Insurance Act (7 U.S.C. 1501 et seq.) for 
the crop incurring the losses; 
(B) in the case of a noninsurable com-
modity, did not file the required paperwork, and 
pay the administrative fee by the applicable 
State filing deadline, for the noninsurable com-
modity under section 196 of the Federal Agri-
culture Improvement and Reform Act of 1996 
(7 U.S.C. 7333) for the crop incurring the 
losses; 
(C) had average adjusted gross income (as 
defined by section 1001D(a) of the Food Secu-
rity Act of 1985 (7 U.S.C. 1308–3a(a)), of 
greater than $2,500,000 in 2004; or 
(D) were not in compliance with highly 
erodible land conservation and wetland con-
servation provisions. 
(2) CONTRACT WAIVER.—The Secretary of Ag-
riculture may waive paragraph (1) with respect to 
the producers on a farm if the producers enter into 
a contract with the Secretary under which the pro-
ducers agree— 
(A) in the case of an insurable commodity, 
to obtain a policy or plan of insurance under 
the Federal Crop Insurance Act (7 U.S.C. 1501
et seq.) providing additional coverage for the in-
surable commodity for each of the next two 
crops, at a coverage level this provides— 
(i) not less than 65 percent of the ac-
tual production history for the crop pro-
duced on the farm; and 
(ii) 100 percent of the expected mar-
ket price or a comparable coverage (as de-
termined by the Federal Crop Insurance 
Corporation); and 
(B) in the case of a noninsurable com-
modity, to file the required paperwork and pay 
the administrative fee by the applicable State 
filing deadline, for the noninsurable commodity 
for each of the next two crops under section 
196 of the Federal Agriculture Improvement 
and Reform Act of 1996 (7 U.S.C. 7333). 
(3) EFFECT OF VIOLATION.—In the event of 
the violation of a contract under paragraph (2) by 
a producer, the producer shall reimburse the Sec-
retary of Agriculture for the full amount of the as-
sistance provided to the producer under this section. 
(f) PAYMENT LIMITATIONS.— 
(1) LIMIT ON AMOUNT OF ASSISTANCE.—As-
sistance provided under this section to a producer