Quantities placed under loan highest for many crops since 2009 crop year
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Producers have taken out marketing assistance loans (MALs) an increasing amount of 2015-crop corn, soybeans, wheat and sorghum, according to USDA data. The following table shows official USDA loan activity data for 2015 and 2014 crops:
Price support loans disbursed in February carry a 1.625% interest rate, the same level as was the case for January, but up from 1.375% in November. MALs are designed to provide producers interim financing at harvest time to meet cash flow needs without having to sell their commodities when market prices are typically at harvest-time lows. Marketing assistance loans for covered commodities are non-recourse as the commodity is pledged as loan collateral and producers have the option of delivering the pledged collateral to the Commodity Credit Corporation (CCC) in satisfaction of the repayment of the outstanding loan for the loan at maturity -- forfeiture. A settlement value is determined and applied to the outstanding loan principal and interest. Market loan repayment provisions allow repayment at less than principal plus interest under certain conditions. The difference between the repayment rate and the loan level plus interest is retained by the producer and is called a marketing loan gain.
Comments: MAL use now totals $5.778 billion as of Feb. 15, including $1.283 billion for corn, $1.171 billion for upland cotton, $3.9 million for sorghum, $551 million for soybeans and $183 million for wheat. Expectations as prices declined going into harvest were that use of the MAL program would increase and data shows that is the case, especially with some farmer lenders/bankers suggesting the loan program use for farmer borrowers.
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NOTE: This column is copyrighted material; therefore reproduction or retransmission is prohibited under U.S. copyright laws. |
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