57 



Nonprogram Crops Produced for Different Uses: The Case of Oranges 



Suppose a producer's history indicates that 50 pounds of oranges are produced and sold in 

 the fresh fruit market and 50 pounds are sold in the juice market. The producer's actual 

 production because of a disaster is 60 pounds, all of which is sold in the juice market. Other 

 key components of the equation are that the loss threshold in accordance with Public 

 Law 101-624, is 40 percent (ie., the producer may receive benefits on losses exceeding 40 

 percent of expected production), and that the crop-loss payment rate is equal to 65 percent of 

 the previous 5-year Olympic average of prices for the relevant crop and market. Let's 

 suppose the respective calculated payment rates are $1 per pound and $.50 per pound, 

 respectively, and the producer received $0.40 per pound for the 60 pounds of oranges sold in 

 the juice market. 



Let's also suppose the respective calculated payment rates are $1 per pound and $0.50 per 

 pound, respectively, and the producer received $0.40 per pound for the 60 pounds of oranges 

 sold in the juice market. The expected production for the fresh fruit market was 50 pounds, 

 and there was no actual production. Thus, the producer is entitled to crop-loss benefits on 

 60 percent of 50 pounds, at a rate of $1 per pound, less the salvage value of the 10 pounds 

 sold in the secondary juice market that were in excess of the historical marketings in that 

 market. The salvage value is the "excess" sold in the secondary market, 60 pounds sold 

 minus 50 pounds historically expected, times the price actually received of $0.40 per pound, 

 ie., (60 - 50) * $0.40 = $4.00. The producer's crop-loss payment would equal $26, ie., 

 (0.60 * 50 - 0) * $1 - $4. A prorated factor, if applicable, would be applied after this 

 calculation. 



