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...CMA program uses Commodity Credit Corporation (CCC) funds and is administered by USDA's Farm Service Agency (FSA).
Participating cooperatives must meet certain eligibility requirements and follow specified operating procedures. Once designated a CMA, a cooperative may obtain marketing assistance loans or LDPs for any eligible members' qualified commodities covered by a marketing agreement.
Marketing Assistance Loan Program
Marketing assistance loans provide participating producers with interim financing after harvest, allowing them to use their crops as collateral. These are mostly non-recourse loans, which means CCC will accept ownership of the crop as repayment should the producer decide not to repay the loan during its 9-month term. However, a producer may repay the loan, reclaim title to the commodity and sell it at prevailing market prices at any point during the term of the loan.
Producers have three loan repayment options. A producer may borrow money from CCC at the county loan rate and repay it at principal and interest or repay at the marketing assistance loan repayment rate. This rate is calculated by subtracting the posted county prices (for wheat, feedgrains and oilseeds) or the adjusted world price (for rice and cotton) from the loan rate to calculate the CCC-determined value. When this calculated rate drops below the original loan rate during the term of the loan, a producer may repay the loan at the lower rate and earn the market gain--which is the difference between the repayment rate and the CCC-determined value.
For example, a producer obtains a marketing assistance loan for corn at $1.80 per bushel, the applicable county loan rate. With principal and interest, the producer will owe CCC $1.88 per bushel. If the producer decides to repay the loan on a day when the applicable county's repayment rate is $1.75 per bushel, the producer may redeem the loan at $1.75, thus saving 5 cents in principal ($1.80-$1.75 = $.05) and 8 cents in interest. The difference between the county loan rate and a lower repayment rate (in this example, 5 cents) is called the marketing loan gain.
Using commodity certificates is the third method of repayment. Producers can purchase commodity certificates at the repayment rate and immediately exchange the loan collateral with commodity certificates to redeem the loan.
Commodity certificate exchanges are not subject to payment limitations.
Loan Deficiency Payments
LDPs are payments to producers who agree to forego a marketing assistance loan. The LDP payment rate is the difference between the county loan rate and posted county price or adjusted world price, as applicable. Thus, producers who decide not to take advantage of the commodity loan program have the same opportunity to receive marketing loan gains as...
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