(a) Stage 2 payments for eligible NAP-covered yield-based crops and units without an approved NAP application for payment will be calculated according to this section.

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

(1) FSA will adjust the amount of production if necessary to reflect the amount substantiated by the producer's documentation; and

(2) The SDRP liability is equal to the eligible acres, multiplied by the producer's approved yield, multiplied by the average market price, multiplied by the SDRP factor; and

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

(iii) Multiplying the result of paragraph (c)(1)(ii) of this section by the unharvested payment factor, if applicable, and then subtracting the salvage value from the result;

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

(v) Subtracting the result of paragraph (c)(1)(iv) of this section from the SDRP liability;

(2) Determine the potential NAP payment by:

(i) Dividing the SDRP liability by the SDRP factor, and multiplying the result by the producer's coverage level under NAP;

(ii) Multiplying the production by the average market price, and then subtracting that amount from the result of paragraph (c)(2)(i) of this section;

(iii) Multiplying the result of paragraph (c)(2)(ii) of this section by the price election under NAP, and then by the unharvested payment factor;

(iv) Subtracting the salvage value from the result of paragraph (c)(2)(iii) of this section and multiplying the result by the producer's share;

(3) If the calculated loss minus the potential NAP payment is greater than zero, determine the factored gross Stage 2 payment by:

(i) Subtracting the potential NAP payment from the calculated loss, and adding the NAP administrative fees and premiums; 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 NAP payment is equal to or less than zero, determine that the payment amount is zero.