USDA Implements Marketing Loan Program Changes Called for in Farm Bill

April 7, 2009 07:00 PM

Pro Farmer Editors

USDA has announced new regulations for the Marketing Assistance Loans (MAL) and Loan Deficiency Payments (LDP) program that implement provisions contained in the 2008 Farm Bill.

Background: Marketing Assistance Loans and Loan Deficiency Payments provide financing and marketing assistance for wheat, rice, feed grains, soybeans, other oilseeds, peanuts, pulse crops, honey, wool and mohair. This assistance is available to eligible producers beginning with harvest or shearing season and extending through the program year.

The 2008 Farm Bill included several changes to marketing assistance loan provisions:

  • The regulation for Marketing Assistance Loans and Loan Deficiency Payments redefines rice as long grain and medium grain. Large chickpeas are included as an eligible pulse crop beginning with crop year 2009.
  • The 2008 crop year marketing loan and loan deficiency payment benefits were subject to a limit of $75,000 per person. Starting with the 2009 crop year, these benefits will no longer be subject to a payment limit.
  • USDA also said it would streamline the loan prices by no longer adjusting loan rates on warehouse-stored loans by premiums and discounts at loan making time. Loan rates will be adjusted by premiums and discounts only at loan settlement, if the commodity is either farm-stored delivered or warehouse-stored forfeited. This change starts with the 2009 crop year and does not apply to peanuts.

    In the past, the Commodity Credit Corporation (CCC) executed storage agreements with warehouse operators to set forth financial and storage conditions to protect against the massive accumulation of commodities resulting from forfeitures. This practice resulted in duplicity of efforts already provided by other federal and state level jurisdictions. During recent years, CCC's loan repayment policies have minimized forfeitures to very low levels. USDA will no longer require the execution of a storage agreement in storage facilities that are either (a) federally-licensed or (b) in compliance with applicable state laws and issue warehouse receipts. CCC reserves the right to execute a storage agreement in either (a) or (b) if deemed necessary by the Secretary. CCC may, on a case by case basis, require a storage agreement for storage facilities that are neither (a) nor (b).

    This modification in the regulation is expected to benefit warehouse operators and producers by eliminating redundant costs without increasing financial risk for CCC. This change starts with the 2009 crop year and does not apply to peanuts.

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