(a) Stage 2 payments for eligible crops and units that were insured under APH or yield-based plans but not indemnified for a loss will be calculated according to this section.

(b) For the purpose of calculating payments under this section:

(1) The quality loss percentage is the percentage determined according to § 760.2209(b) and (c), subject to any adjustment by FSA based on the documentation submitted by the producer;

(2) The production is the share-adjusted producer-certified production entered on the FSA-504, subject to any adjustment by FSA based on the documentation submitted by the producer, unless share-adjusted production is pre-filled on FSA-504 and the producer does not enter producer-certified production;

(3) The price is the price used by RMA to calculate the liability; and

(4) The SDRP liability is the share-adjusted amount provided by RMA based on data already on file for Federal crop insurance purposes, which is equal to the expected crop value multiplied by the SDRP factor.

(c) To calculate the Stage 2 payment, FSA will:

(1) Determine the calculated loss by:

(i) Converting the quality loss percentage to a decimal and subtracting that amount from 1;

(ii) Multiplying the production by the result of paragraph (c)(1)(i) of this section, and then by the price; and

(iii) Subtracting the result of paragraph (c)(1)(ii) of this section from the SDRP liability specified in paragraph (b)(4) of this section;

(2) Determine the potential insured indemnity by:

(i) Dividing the SDRP liability by the SDRP factor, and multiplying the result by the producer's coverage level under the APH or yield-based plan;

(ii) Multiplying the production by the price, multiplied by the producer's price election under the APH or yield-based plan; and

(iii) Subtracting the result of paragraph (c)(2)(ii) of this section from the insured liability, which is specified in paragraph (c)(1)(i) of this section;

(3) If the amount of the calculated loss minus the potential insured indemnity is greater than zero, calculate the Stage 2 payment by:

(i) Subtracting the potential insured indemnity from the calculated loss, and adding the premium and administrative fees for the crop and unit; and

(ii) Multiplying the result of paragraph (c)(3)(i) of this section by 35 percent to stay within available funding; and

(4) If the amount of the calculated loss minus the potential insured indemnity is equal to or less than zero, determine that the Stage 2 payment amount is zero.

(d) If an applicant designates shares for SBIs on FSA-504, the payment amounts for the primary policy holder and SBIs will be multiplied by the applicable share.