Commodity Loans and Loan Deficiency Payments

To improve and stabilize farm income, to assist in bringing about a better balance between supply and demand of the commodities, and to assist farmers in the orderly marketing of their crops.



Agency - Department of Agriculture

Established in 1862, the Department of Agriculture serves all Americans through anti-hunger efforts, stewardship of nearly 200 million acres of national forest and rangelands, and through product safety and conservation efforts. The USDA opens markets for American farmers and ranchers and provides food for needy people around the world.

Office - Consult the local telephone directory for location of the FSA county office.

If no listing, get in touch with appropriate FSA State office listed under the Farm Service Agency section of Appendix IV of the Catalog.


Program Accomplishments

Not available.

Uses and Use Restrictions

Loans and loan deficiency payments (LDP's) give farmers a means of promoting more orderly marketing.

Loans to producers may be "nonrecourse" which means that producers have the option of forfeiting the collateral to CCC at loan maturity in full satisfaction of the loan obligation; or "recourse" for low quality grain, or un-ginned seed cotton, which means that producers must repay the loans by maturity." If market prices are above the support level producers may repay their loans at the original loan principal plus interest and market their commodities.

When market prices are low, most nonrecourse commodity loan repayments are less than the original loan principal plus interest.

Eligible commodities for loans are feed grains, wheat, rice, peanuts, tobacco, upland cotton, extra-long staple cotton, sugar, soybeans, crambe, canola, flaxseed, mustard seed, rapeseed, safflower, and sunflower seed.

LDP's are offered for feed grains, wheat, upland cotton, rice, soybeans, crambe, canola, flaxseed, mustard seed, rapeseed, safflower, and sunflower seed.

If the loan repayment rates for these commodities are less than the established loan levels, producers may, for most commodities that are eligible for a nonrecourse loan, agree to forego such loan and elect to receive an LDP.

The LDP payment rate equals the amount by which the loan rate exceeds the loan repayment rate in effect at the time the LDP application is approved, or the delivery date for commodities delivered directly to processor, buyer, or warehouse from the field.

LDP's and any gain realized from repaying a loan at a level lower than the original loan level are subject to a $75,000 per "person" payment limitation, except for crops produced in 1999, for which the payment limitation is $150,000 per "person".

Eligibility Requirements

Applicant Eligibility

Owner, landlord, tenant, or sharecropper on an eligible farm that has produced the eligible commodities or, in the case of sugar, a processor or refiner who meets program requirements as announced by the Secretary.

Beneficiary Eligibility

Owner, landlord, tenant, or sharecropper on a farm that has produced the eligible commodities, meets program requirements as announced by the Secretary, and maintains beneficial interest in the commodity.

Credentials/Documentation

Record of farming operation must be on file in the FSA county office. This program is excluded from coverage under OMB Circular No. A-87.

Aplication and Award Process

Preapplication Coordination

None.

This program is excluded from coverage under E.O.

12372 and OMB Circular No.

A-102.

Application Procedures

In the case of warehouse-stored commodities, producer or Cooperative Marketing Association presents warehouse receipts to the FSA county office (warehouse-stored peanut and tobacco loans are made through producer associations). In the case of farm-stored commodities (including sugar), producer/processor or Cooperative Marketing Association requests a loan at the FSA county office. This program is excluded from coverage under OMB Circular Nos. A-102 and A-110.

Award Procedures

Applications are approved by the FSA upon determination that applicant and commodity are eligible.

Deadlines

Loans and LDP's are available for wheat, barley, oats, canola, flaxseed, crambe, and rapeseed and loans are available for quota peanuts pledged as collateral for farm-stored loans through March 31 of the year following the year in which the crop is normally harvested. Loans and LDP's are available for rice, corn, grain sorghum, cotton, soybeans, safflower, sunflower seed and mustard seed through May 31 of the year following the year in which the crop is normally harvested. Loans are available for sugar through September 30.

Authorization

Agricultural Adjustment Act of 1938, 7 U.S.C. 1301-1393, Public Law 75-430; Commodity Credit Corporation Charter Act, as amended, 15 U.S.C. 714 et. seq.; Agricultural Act of 1949, as amended, 7 U.S.C. 1421, et. seq., Public Law 81-439, as amended; Food Security Act of 1985, Public Law 99-198, as amended; Joint Resolution Making Appropriations for Government Agencies for Fiscal Year 1987, Public Laws 99-500 and 99-591; Omnibus Budget Reconciliation Act of 1987, Public Law 100-203; Food, Agriculture, Conservation, and Trade Act of 1990, Public Law 101-624; Omnibus Budget Reconciliation Act of 1990, Public Law 101- 508; Omnibus Budget Reconciliation Act of 1993, Public Law 103-66; National Wool Act Amendments of 1993, Public Law 103-130; Federal Agriculture Improvement and Reform Act of 1996, Public Law 104-127; Agriculture, Rural Development, Food and Drug Administration and Related Agencies Appropriations Act, Public Law 106-78; Agricultural Risk Protection Act of 2000, Public Law 106-224; Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act of 2001, Public Law 106-387.

Range of Approval/Disapproval Time

Approximately 3 days.

Appeals

Applications may be reviewed by county, State, or national offices.

Renewals

None.

Assistance Considerations

Formula and Matching Requirements

Not applicable.

Length and Time Phasing of Assistance

Assistance is generally available for 9 months or less, and is normally disbursed on a lump-sum basis.

Post Assistance Requirements

Reports

Necessary loan documents will be held at the county FSA office.

Audits

Periodic and required spot checks of farm-stored grain will be made by the county FSA office. Recipients are subject to audit by Office of Inspector General, USDA.

Records

Not applicable.

Financial Information

Account Identification

12-4336-0-3-351.

Obigations

(Commodity Loans and Loan Deficiency Payments) FY 07 $9,493,383,881; FY 08 est not available; and FY 09 est not reported.

Range and Average of Financial Assistance

Direct payments (Purchases): Range and average not available. Loans: $162 to $1,006,400. Average: $22,959.

Regulations, Guidelines, and Literature

Program regulations published in the Federal Register 7 CFR, Chapter XIV, Parts 1421, 1425, 1427, 1430, 1434, 1435, 1446, and 1464; announcements issued to news media and letters to producers; " FSA Commodity Fact Sheets, " no cost: The Price Support Program," BI-4-USDA, no cost; Farm Service Agency, Department of Agriculture, STOP 0532, 1400 Independence Avenue S.W., Washington, DC 20250-0532.

Information Contacts

Regional or Local Office

Consult the local telephone directory for location of the FSA county office. If no listing, get in touch with appropriate FSA State office listed under the Farm Service Agency section of Appendix IV of the Catalog.

Headquarters Office

Department of Agriculture, Farm Service Agency, Price Support Division, STOP 0512, 1400 Independence Avenue S.W., Washington, DC 20250-0512. Telephone: (202) 720-7901.

Criteria for Selecting Proposals

Not applicable.



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