(a) Stage 2 payments for eligible NAP-covered crops and units with an approved NAP application for payment with a calculated NAP payment amount of zero will be calculated according to this section.

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

(1) The SDRP liability equals the expected crop value multiplied by the SDRP factor and uses FSA data already on file for NAP purposes;

(2) Because NAP service fees and premiums are not calculated individually by crop and unit, the service fee and premium amount used to calculate a payment under this section will be zero if the producer has already received a payment for a NAP-covered crop under Stage 1.

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

(1) Determine the calculated loss by:

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

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

(iii) Multiplying the result of paragraph (c)(1)(ii) of this section by the unharvested payment factor, if applicable;

(iv) Subtracting the salvage value from the result of paragraph (c)(1)(iii) of this section;

(v) Multiplying the result of paragraph (c)(1)(iv) of this section by the producer's share; and

(vi) Subtracting the result of paragraph (c)(1)(v) of this section from the SDRP liability specified in paragraph (b)(1) of this section;

(2) If the calculated loss is greater than zero, determine the factored gross Stage 2 payment by adding the premium and service fees to the result of paragraph (c)(1) of this section, and multiply the result by 35 percent to stay within available funding; and

(3) If the calculated loss is equal to or less than zero, determine that the payment amount is zero.