QUALITY ADJUSTMENT.

SEC. 107. QUALITY ADJUSTMENT. Section 508 of the Federal Crop Insurance Act (7 U.S.C. 1508) is amended by striking subsection (m) and inserting the following: “(m) Quality Loss Adjustment Coverage.— “(1) Effect of coverage.—If a policy or plan of insurance offered under this title includes quality loss adjustment coverage, the coverage shall provide for a reduction in the quantity of production of the agricultural commodity considered produced during a crop year, or a similar adjustment, as a result of the agricultural commodity not meeting the quality standards established in the policy or plan of insurance. “(2) Additional quality loss adjustment.— “(A) Producer option.—Notwithstanding any other provision of law, in addition to the quality loss adjustment coverage available under paragraph (1), the Corporation shall offer producers the option of purchasing quality loss adjustment coverage on a basis that is smaller than a unit with respect to an agricultural commodity that satisfies each of the following: “(i) The agricultural commodity is sold on an identity-preserved basis. “(ii) All quality determinations are made solely by the Federal agency designated to grade or classify the agricultural commodity. “(iii) All quality determinations are made in accordance with standards published by the Federal agency in the Federal Register. “(iv) The discount schedules that reflect the reduction in quality of the agricultural commodity are established by the Secretary. “(B) Basis for adjustment.—Under this paragraph, the Corporation shall set the quality standards below which quality losses will be paid based on the variability of the grade of the agricultural commodity from the base quality for the agricultural commodity. “(3) Review of criteria and procedures.—The Corporation shall contract with a qualified person to review the quality loss adjustment procedures of the Corporation so that the procedures more accurately reflect local quality discounts that are applied to agricultural commodities insured under this title. Based on the review, the Corporation shall make adjustments in the procedures, taking into consideration the actuarial soundness of the adjustment and the prevention of fraud, waste, and abuse.”.