(a) Stage 1 quality loss payments and some Stage 2 payment calculations are calculated using a quality loss percentage. The quality loss percentage is the percentage of loss calculated for a reduction in the total dollar value of the crop due to reduction in the physical condition of the crop indicated by an applicable grading factor or applicable nutrient factor for the crop. The quality loss percentage is based on the weighted quality reduction of impacted production compared to the total overall production and calculated separately for crops based on the crop type, intended use, certified organic or conventional status, county, and crop year.

(b) For forage crops, a quality loss percentage will be established using the following steps:

(1) FSA will determine:

(i) Acceptable high and low nutritional values; and

(ii) The range determined by subtracting the low nutritional value from the high nutritional value;

(2) The producer will submit a verifiable test to FSA that indicates the nutritional value for the impacted production;

(3) To calculate the quality loss, the producer will:

(i) Calculate the quality loss by subtracting the nutritional value from the verifiable test from the high nutritional value determined by FSA;

(ii) Calculate the percentage difference by dividing the quality loss by the range specified in paragraph (b)(1)(ii) of this section; and

(iii) Calculate the quality loss percentage by taking 100 percent minus the percentage difference in paragraph (b)(3)(ii) of this section.

(4) The quality loss percentage will be specific and weighted to the impacted production. If there is production that was not impacted by quality or impacted at a different level, the quality loss percentage must be weighted against the respective impacted production. The producer must calculate their weighted quality loss percentage as follows:

(i) Calculate the percent production impacted by quality loss by dividing the impacted production by the total production; and

(ii) Calculate the weighted quality loss percentage by multiplying the percent production impacted by quality loss by the quality loss percentage.

(iii) If more than one quality loss percentage applies, calculate the total weighted quality loss percentage by adding the separate calculated weighted quality loss percentages determined in paragraph (b)(4)(ii) of this section.

(c) For crops other than forage, the producer will calculate the quality loss percentage by:

(1) Calculating the total reduction in value due to quality; and

(2) Calculating the quality loss percentage by dividing total reduction in value due to quality by the expected price the producer would have received at the point of sale if not for the quality discounts.

(d) For Stage 1 quality loss payments for crops insured under APH and yield-based plans, RMA will provide the total revenue to count that was used in the calculation of the Stage 1 payment in accordance with § 760.2208(c). RMA will provide the production to count before quality adjustments and the percentage loss that was used to determine the production to count adjusted for quality. The applicant will certify the percent SDRP quality loss on FSA-526Q as provided in this section. If the producer's certified SDRP quality loss percentage is:

(1) Less than or equal to the RMA quality loss percentage, FSA will not issue a Stage 1 quality loss payment; or

(2) Greater than the RMA quality loss percentage, FSA will calculate the difference between the two percentages, and apply that percentage to the total revenue to count provided by RMA. The resulting value will equal the Stage 1 quality loss payment.

(e) For Stage 1 quality loss payments for NAP-covered yield-based crops, FSA will provide the total revenue to count that was used in the calculation for Stage 1 in accordance with § 760.2208(d). The applicant will certify the percent quality loss on the FSA-526Q as provided in this section. FSA will calculate the Stage 1 quality loss payment as follows:

(1) FSA will multiply the revenue to count by the SDRP quality loss percentage;

(2) The result of paragraph (d)(1) of this section will be multiplied by the producer's share, and then multiplied by 35 percent to stay within available funding. The resulting value will constitute the quality loss payment.