FSA programs explained: A crop marketing option | TSLN.com

FSA programs explained: A crop marketing option

For the August 6, 2011 edition of Tri-State Livestock News.

Harvest has begun and combines are in full force harvesting wheat. I am sure that the farmers have been checking the posted prices on a daily basis. But, what do you do when you are ready to harvest and the price at the elevator isn’t all that you expected it to be? You could always store your crop and deliver to the elevator when the price is more suitable, but how do you pay your bills? The answer: a marketing assistance loan from the Farm Service Agency.

A marketing assistance loan or (MAL) is made by the Commodity Credit Corporation through the Farm Service Agency (FSA). A marketing assistance loan provides interim financing with a low interest rate for farmers that have harvested their crops. The crop is pledged collateral and a loan is issued to help the farmer pay their bills without having to sell the harvested crop at the time of year when prices tend to be lowest. The farmer may repay the loan once the commodity is sold or after nine months, whichever comes first. The concept is that the prices will be more favorable to the farmer at a later date.

The MAL is based on loan rates set by statute and the quantity of eligible commodity pledged. The actual loan rates vary by county and may be viewed by visiting http://www.fsa.usda.gov/pricesupport. MALs are available for wheat, corn, grain sorghum, barley, oats, upland cotton, extra long staple cotton, rice, soybeans, other oilseeds, dry peas, lentils, small chickpeas, honey and wool. The loan is nonrecourse in nature, which means that the farmer has the option of delivering the commodity pledged as collateral for a loan as full payment for that loan at loan maturity.

When prices are higher than the loan rate, farmers may sell their commodity and repay the loan at principal plus interest (the current interest rate for August is 1.25 percent). If prices fall below the loan rate, farmers may repay the loan at the posted county price without interest and accept the marketing gain. This is also called a loan deficiency payment (LDP) and may be received by a farmer without having taken a marketing assistance loan.

A marketing assistance loan can be a great option for producers with the ability to store their crops and market on their terms. The Farm Service Agency is ready to take your application and has additional information available if you would like to know more about marketing assistance loans.

james r. neill is the county executive director for the farm service agency in meade county, sd, and may be contacted at james.neill@sd.usda.gov. questions about marketing assistance loans or any other program administered by the farm service agency should be directed to your local farm service agency service center.

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