Commodity Loans and Loan Deficiency Payments
Program Funding
Annual program obligations reported to SAM.gov.
Funded Projects
Examples of what this program has supported.
Program Objective
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. Marketing assistance loans 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. Allowing producers to store production at harvest facilitates more orderly marketing of commodities throughout the year. Market loan repayment provisions specify, under certain circumstances, that producers may repay loans at less than principal plus accrued interest and other charges. Alternatively, loan deficiency payment (LDP) provisions specify that, in lieu of securing a loan, producers may be eligible for an LDP. Both programs allow a producer flexibly to market commodities while providing cashflow.
Eligibility
Eligible Applicants
- Land/Property Owner
- Unrestricted by Individual Type
- Tribal
- For-Profit Organization
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.
How to Apply
Application Procedure
Producers must contact their local USDA service center to apply.
Award Procedure
Applications are approved by the FSA upon determination that applicant and commodity are eligible.
Decision Timeline
- Approval: From 15 to 30 days
- Appeal: From 60 to 90 days
Approximately 3 days but could take from 15 to 30 days.
Program details & compliance
Description
Commodity Loans are typically 9-month loans offered to producers of eligible commodities. This programs consists of Marketing Assistance Loans and Sugar loans. MALs and LDPs may be issued to producers through USDA Service Centers or through or alternative delivery partners. Sugar loans are issued to sugar processors. Loan Deficiency Payments are issued in lieu of a MAL and are direct payments that do not have to be repaid. Additionally, Graze-out payments are available for producers who qualify for an LDP however, have chosen to forgo harvesting and have allowed livestock to graze.
Mission Categories
Primary: Production and Operation
Other categories:
Agriculture Stabilization and Conservation
Use of Funds
Allowed Uses
Commodity 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 non-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 produced and harvested wheat, corn, grain sorghum, oats, barley, rice, peanuts, upland cotton, extra-long staple cotton, soybeans, crambe, canola, flaxseed, mustard seed, rapeseed, safflower, sunflower seed, sesame seed, dry peas, lentils, small and large chickpeas, graded and ungraded wool, honey, and sugar. LDP's are offered for produced and harvested wheat, corn, grain sorghum, oats, barley, upland cotton, rice, soybeans, crambe, canola, flaxseed, mustard seed, rapeseed, safflower, sunflower seed, sesame seed, peanuts, dry peas, lentils, small and large chickpeas, graded and ungraded wool, unshorn pelts, honey, hay, and silage. 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, or date sold or date beneficial interest is lost, as applicable. The 2016 Consolidated Appropriations Act authorized producers the option of a commodity certificate exchange as a nonrecourse loan repayment mechanism. In situations when the loan rate exceeds the exchange rate, producers may opt to purchase a commodity certificate from the local FSA office and immediately exchange that certificate for their outstanding loan collateral.
Required Documentation
The commodity must be produced and harvested by the producer, and the producer must meet program requirements as announced by the Secretary. Requirements include a record of the farming operation on file in the FSA county office and a complete acreage report to account for all cropland on the farm must be submitted for the applicable crop year.
Reporting & Compliance
Formula
7 CFR Chapter 1421 Grains And Similarly Handled Commodities - Marketing Assistance Loans And Loan Deficiency Payments
7 CFR Chapter 1427- Cotton
7 CFR Chapter 1434- Nonrecourse Marketing Assistance Loans and Loan Deficiency Payments for Honey
7 CFR Chapter 1435- Sugar Program