farm service agency (fsa) price support options - marketing assistance loans/loan deficiency...

Farm Service AgencyUnited States Department of Agriculture

Women Managing the Farm

2017 Conference

Our mission is to deliver timely, effective programs and

services to America’s farmers and ranchers to support them

in sustaining our Nation’s vibrant agricultural economy, as

well as provide first-rate support for domestic and

international food aid efforts.

FSA Price Support Options

Marketing Assistance Loans

Loan Deficiency Payments

Commodity Credit Exchange

Requirements Applying to All Three Price

Support Options

Commodity Eligibility

Producer Eligibility

Payment Limitation

Final Availability Dates

Commodity Eligibility Requirements

To be eligible for loan or LDP, the commodity must:

Be produced by eligible producer on a farm

Be in existence and in storable condition

Be merchantable for food, feed, or other per Commodity Credit Corporation (CCC)

Not contain mercurial compounds, toxin producing molds or other poisonous substances

Meet definition for commodity according to Official US Standards

Not be substituted, purchased, bartered, or a gift

Producer Eligibility Requirements

Producer Eligibility Requirements, Continued

Loan and LDP Provisions

Payment Limitation Provisions

Annual payment limitation of $125,000 per person

or legal entity, includes all payments and benefits

from Agricultural Risk Coverage (ARC), Price Loss

Coverage (PLC), Loan Deficiency Payment (LDP),

and Marketing Loan Gain (MLG)

Final Availability Dates

Final Availability Dates:

January 31 – Peanuts, Wool, Mohair & LDP only for

Unshorn Pelts

March 31 – Barley, Canola, Crambe, Flaxseed,

Honey, Oats, Rapeseed, Sesame Seed & Wheat

May 31 – Corn, Dry Peas, Grain Sorghum, Lentils,

Mustard Seed, Long & Medium grain Rice,

Safflower, Small & Large Chickpeas, Cotton,

Soybeans, Sunflower Seed

MARKETING ASSISTANCE LOANS (MALs)

Available for wheat, corn, grain sorghum, barley,

oats, soybeans, sunflowers, etc.

A marketing tool available beginning with harvest

Provides interim financing at harvest time without

having to sell the commodity

Allow storage of production at harvest


“Nonrecourse” loans can be redeemed by repayment or delivered to Commodity Credit Corporation (CCC) as full payment for the loan upon maturity

Interest rate is the rate in effect for the month in which loan is disbursed, adjusted on January 1 to January’s interest rate. *Current Interest Rate for February 2017 is 1.875%

Loan matures on demand but no later than last day of the 9th month after month of disbursement


Loan Service Fee – nonrefundable, deducted from

loan

Farm Stored Loan Service Fee: $45 per loan plus

$3 for each storage structure over 1

Warehouse Stored Loan Service Fee: $45 per loan

plus $3 for each warehouse receipt over 1


Loan Assessment Fees:

Kansas Assessment Fees are deducted from

proceeds of MAL – Wheat $.02 per bushel and Corn

$.01 per bushel

National Assessment Fees – Soybeans 0.5% of the

settlement value if delivered or forfeited to

Commodity Credit Corporation (CCC), Sorghum

0.6% of net market value deducted at loan making


Loan Rates Website:

https://www.fsa.usda.gov/programs-and-

services/price-support/commodity-loan-rates/index

Example: Riley County Kansas:

Hard Red Winter - $3.15 bu., Corn - $1.95 bu.,

Grain Sorghum - $3.27 cwt., Soybeans - $4.92 bu.

https://www.fsa.usda.gov/programs-and-services/price-support/commodity-loan-rates/index


Producer eligibility requirements:

Comply with conservation & wetland protection requirements by completing form AD-1026

File acreage report on all cropland

Have & retain Beneficial interest (control & title of the commodity) through loan repayment or forfeiture

Meet adjusted gross income (AGI) limitations


Commodity Eligibility requirements:

Have been produced, mechanically harvested by

eligible producer and be in storable condition

Be merchantable for food, feed or other uses, as

determined by CCC

Meet CCC minimum grade & quality standards


Loan Settlements:

Repay at principal plus interest at any time

before loan maturity

Repay at the posted county price (PCP). PCP’s are

posted at the local service center or website:

https://www.fsa.usda.gov/programs-and-

services/price-support/pcp-rates/index

Upon maturity, forfeit grain to Commodity Credit

Corporation (CCC)

https://www.fsa.usda.gov/programs-and-services/price-support/pcp-rates/index


Market Gains are Reported to IRS

Market gain is the difference between the loan

principal that is liquidated and the amount

needed for the marketing loan repayment

(NOTE: only considered a market gain when

marketing loan repayment amount is less than

loan principal)

LOAN DEFICIENCY PAYMENTS (LDP)

LDP’s are payments made to producers who are eligible to obtain a loan but agree to forgo the loan in return for a payment on the eligible commodity

LDP rates are determined by amount the commodity loan rate exceeds the CCC-determined value.

EXAMPLE for 2,000 bushels of wheat harvested:

Wheat Loan Rate - $3.02

Posted County Price (PCP) - $2.90

Effective LDP Rate - $.12

$.12 X 2,000 bushels = $240.00 LDP Payment


Form CCC-633EZ, page 1 must be completed, filed, and approved at the FSA County office to indicate intention to request LDP before beneficial interest has been lost for the eligible commodity

Page 1 includes all eligible commodities for the crop year

Page 1 only needs to be filed in 1 County office for all Counties in which the producer or entity has an interest


CCC-633EZ, page 1 AND page 2, 3, or 4 must be

filed before applicable final availability date to

be eligible for the LDP benefit

CCC-633EZ page 1 - Intention to file LDP

*Must be filed before beneficial interest (maintain title & control of

commodity) is lost

CCC-633EZ page 2 – Request for LDP

CCC-633EZ page 3 – Request for Cotton LDP

CCC-633EZ page 4 – Request for Wool, Mohair, or Unshorn Pelt LDP

CCC-633EZ page 5 – Continuation Sheet


LDP can be either:

Farm-Stored quantity

Warehouse-Stored quantity

Eligible Producer may request LDP quantity by:

Certifying the quantity

Requesting a measurement service

Certifying date of delivery

Providing delivery evidence


Certified LDP – quantity for LDP is based on producer certification, commodity is subject to random spot check which would require acceptable production evidence to be provided

Measurement Service – quantity for LDP is based on completed measurement service & producer identifying specific quantity or all

Production Evidence – quantity for LDP is based on acceptable production evidence provided at the time the LDP is requested


BENEFICIAL INTEREST – Maintaining Title & Control

of the Commodity

The date beneficial interest is lost is the date the

producer loses control of the commodity through

sale, feeding to livestock, or delivery to an

unauthorized warehouse, livestock feeder,

processor, ethanol or bio diesel plant or wool pool.


EFFECTIVE LDP RATE is the rate in effect on the date:

Of request, if beneficial interest is maintained

Beneficial interest is lost according to production

evidence

Of delivery if producer requests on CCC-633EZ, page 2

before grain is delivered on requested quantity

IMPORTANT NOTE: CCC-633EZ, PAGE 1 must be filed

before beneficial interest is lost to be eligible for LDP

payment.


Payments will be issued when:

CCC-633EZ, page 1 is filed and page 2, 3, or 4

have been approved

All production evidence has been received, if

required

County office completes second party review and

checklist


CCC-633EZ, page 2, 3, or 4 cannot be cancelled at

any time after producer signature

Payments cannot be delayed or deferred

COMMODITY CERTIFICATE EXCHANGE

(CCE)

Commodity certificates are available to exchange

collateral pledged to Commodity Credit

Corporation (CCC) for a Marketing Assistance Loan

(MAL)

Producer must have an outstanding nonrecourse

loan


(CCE)

CCE Options:

Turn Around Loan – Requested by producer at

servicing office to purchase a commodity

certificate for immediate exchange for entire

loan quantity

Commodity Certificate Purchase – Producer

requests immediate exchange of all or part of the

loan collateral before loan maturity


(CCE)

Exchange rate will be the Posted County Price

(PCP) for most commodities, applicable on the

date the commodity certificate is purchased

CCE Gains are reported to IRS on an IRS-1099-G

statement – Commodity loan gain is the difference

between loan principal and CCC-determined value

of commodity certificate used


(CCE)

Commodity loan gains from CCE are not subject to:

Payment Limitation ($125,000 ARC, PLC, LDP,

MLG)

Actively Engaged, Member Contribution, and Cash

Rent Tenant Provisions

AGI Provisions ($900,000 average over 3 taxable

years)


(CCE)

Producer provides a check, completes and signs

CCC-694-2, Acknowledgment of Commodity

Certificate Purchase (Note: this form cannot leave the County

office, cannot be copied or faxed)

County office will then release the loan collateral


(CCE)

Example

5,000 bushels, Wheat, County Posted County Price (PCP)

Loan Rate - $3.02 PCP - $2.90

Loan Principal - $15,100 (5,000 bushels X $3.02)

Check for CCE - $14,500 (5,000 bushels X $2.90)

Equals a Market Gain of $600 (Does not count toward Payment Limitation)

Note: the actual loan disbursement will have a nonrefundable service fee & loan

assessment fee deducted

farm service agency (fsa) price support options - marketing assistance loans/loan deficiency...

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