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Farm Service Agency (FSA) Price Support Options - Marketing Assistance Loans/Loan Deficiency Payments/Commodity Certificate Exchanges - Carla Wikoff

Carla Wikoff, USDA Farm Service Agency

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Farm Service Agency (FSA) Price Support Options - Marketing Assistance Loans/Loan Deficiency Payments/Commodity Certificate Exchanges - Carla Wikoff

  1. 1. Farm Service Agency United 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.
  2. 2. FSA Price Support Options Marketing Assistance Loans Loan Deficiency Payments Commodity Credit Exchange
  3. 3. Requirements Applying to All Three Price Support Options  Commodity Eligibility  Producer Eligibility  Payment Limitation  Final Availability Dates
  4. 4. 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
  5. 5. Producer Eligibility Requirements
  6. 6. Producer Eligibility Requirements, Continued
  7. 7. 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)
  8. 8. 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
  9. 9. 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
  10. 10. MARKETING ASSISTANCE LOANS (MALs)  “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
  11. 11. MARKETING ASSISTANCE LOANS (MALs) 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
  12. 12. MARKETING ASSISTANCE LOANS (MALs) 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
  13. 13. MARKETING ASSISTANCE LOANS (MALs)  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.
  14. 14. MARKETING ASSISTANCE LOANS (MALs) 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
  15. 15. MARKETING ASSISTANCE LOANS (MALs) 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
  16. 16. MARKETING ASSISTANCE LOANS (MALs) 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)
  17. 17. MARKETING ASSISTANCE LOANS (MALs) 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)
  18. 18. 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
  19. 19. LOAN DEFICIENCY PAYMENTS (LDP)  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
  20. 20. LOAN DEFICIENCY PAYMENTS (LDP)  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
  21. 21. LOAN DEFICIENCY PAYMENTS (LDP) 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
  22. 22. LOAN DEFICIENCY PAYMENTS (LDP)  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
  23. 23. LOAN DEFICIENCY PAYMENTS (LDP) 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.
  24. 24. LOAN DEFICIENCY PAYMENTS (LDP) 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.
  25. 25. LOAN DEFICIENCY PAYMENTS (LDP) 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
  26. 26. LOAN DEFICIENCY PAYMENTS (LDP)  CCC-633EZ, page 2, 3, or 4 cannot be cancelled at any time after producer signature  Payments cannot be delayed or deferred
  27. 27. 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
  28. 28. COMMODITY CERTIFICATE EXCHANGE (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
  29. 29. COMMODITY CERTIFICATE EXCHANGE (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
  30. 30. COMMODITY CERTIFICATE EXCHANGE (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)
  31. 31. COMMODITY CERTIFICATE EXCHANGE (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
  32. 32. COMMODITY CERTIFICATE EXCHANGE (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

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