About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

1 [1] (April 3, 2019)

handle is hein.crs/govzao0001 and id is 1 raw text is: lnfrirgtheleikiee eic 1914I 0 April 3, 2019 2018 Farm Bill Primer: Marketing Assistance Loan Program Background The marketing assistance loan (MAL) program has been a significant feature of U.S. farm policy since the 1930s. The 2018 farm bill (Agricultural Improvement Act of 2018, P.L. 115-334) extended the MAL program for 2019 through 2023 but with upward adjustments to the loan rates for selected crops (Table 1). For details, see CRS Report R45525, The 2018 Farm Bill (P.L. 115-334): Summary and Side-by-Side Comparison. A MAL Is Nonrecourse The MAL program-operated by the U.S. Department of Agriculture (USDA)-provides both a floor price and interim financing for certain commodities-referred to as loan commodities. A participating producer may put a harvested loan crop under a nine-month, nonrecourse loan valued at a statutory commodity loan rate (Table 1). Nonrecourse means that USDA must accept the forfeited crop pledged as collateral for full payment of an outstanding loan. If local market prices for the crop increase above the loan rate (plus interest), a producer may repay a MAL and reclaim the crop. If market prices remain below the loan rate, then other program options (described below) are available to producers, including repayment of the loan at a lower rate, forfeiture of the crop, or taking a loan deficiency payment (LDP) in lieu of a MAL. MAL program benefits are available on the entire crop produced, but no benefits are available for any crop losses. Eligible Loan Commodities The list of eligible loan crops has expanded over the decades and now includes several field crops plus wool, mohair, and honey. (See Table 1 for a list of eligible commodities and their respective loan rates.) The mix of supported crops reflects historical policy goals and compromises. The most recent additions were pulse crops (dry peas, lentils, and small and large chickpeas) in 2002. MAL Program Benefits Generally farm prices are lowest at harvest time, when supplies are plentiful (Figure 1). The MAL program offers producers several alternatives to selling their crops at the harvest-time market price. MAL as Interim Financing The MAL program provides a temporary operating loan to help meet cash flow needs for the farm while delaying sale of the crop until more favorable market conditions emerge. Thus, a producer puts a harvested loan crop under a nine- month, nonrecourse loan valued at the statutory commodity-specific loan rate. The loan uses the crop as collateral (in other words, the loan benefits are coupled to current production), and the loan rate, in effect, establishes a price guarantee through the nonrecourse feature. Then, as the market year progresses, use of the crop-whether as feed, food, industrial processing, biofuels feedstock, or export-reduces the available supply, which tends to push prices higher. When market prices have increased above the loan rate (plus interest), a producer may then repay the loan and reclaim the crop. Figure I. Traditional Crop Cycle and Price Pattern Hypothetical example for two-year period ;4.00 3.SO 3.00 z.so 21oo W50 1-oo OOa Local Farm Price ------- Year2 -.... Pk I~ ~JARV~ST ~, Source: CRS. Note: Crop prices are generally lowest at harvest time when supply is greatest. Prices generally increase as post-harvest consumption reduces supply then decline again as a new crop approaches harvest. During the 1950s, 1960s, and 1980s, market prices remained below loan rates for extended periods (Figure 2). This led to frequent loan forfeitures and large government stock ownership at relatively great cost to taxpayers, and it created an environment where farmers were growing crops based on relative loan rates rather than market prices. To lower costs and reduce government ownership of grains and oilseeds, additional program features were added beginning in the 1980s to avoid forfeiture of the crop under loan. Figure 2. Four Types of Additional MAL Benefits Example of extended period of low market prices 4.00 3.5o $2.00 1.5O MtOO Wo.50 ;0.00 $7bushel Local Farm Price Fourpotential benefits under MAL 1-Loan Deficiency Payments (LDP) 2- Marketing Loan Gains (MLG) 3- Commodity Certificate Exchange Gains 4- Forfeiture Gains OiL. -------- Sc - -~ OfL n Source: CRS. ttps://crsreports.congress.gov R-ON , , L,

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Already a HeinOnline Subscriber?

Log In

profiles profiles most