Commodity Loans and Loan Deficiency Payments

Published on AidPage by IDILOGIC on Jun 24, 2005

Administered by:

US Federal Government Agency (see all agencies)
Department of Agriculture , Farm Service Agency
CFDA #: 10.051

Purpose of this program:

To improve and stabilize farm income, to assist in bringing about a better balance between supply and demand of the commodities, and to assist farmers in the orderly marketing of their crops.

Possible uses and use restrictions...

Loans and loan deficiency payments (LDP's) give farmers a means of promoting more orderly marketing. Loans to producers may be "nonrecourse" which means that producers have the option of forfeiting the collateral to CCC at loan maturity in full satisfaction of the loan obligation; or "recourse" for low quality grain, or un-ginned seed cotton, which means that producers must repay the loans by maturity." If market prices are above the support level producers may repay their loans at the original loan principal plus interest and market their commodities. When market prices are low, most nonrecourse commodity loan repayments are less than the original loan principal plus interest. Eligible commodities for loans are feed grains, wheat, rice, peanuts, tobacco, upland cotton, extra-long staple cotton, sugar, soybeans, crambe, canola, flaxseed, mustard seed, rapeseed, safflower, and sunflower seed. LDP's are offered for feed grains, wheat, upland cotton, rice, soybeans, crambe, canola, flaxseed, mustard seed, rapeseed, safflower, and sunflower seed. If the loan repayment rates for these commodities are less than the established loan levels, producers may, for most commodities that are eligible for a nonrecourse loan, agree to forego such loan and elect to receive an LDP. The LDP payment rate equals the amount by which the loan rate exceeds the loan repayment rate in effect at the time the LDP application is approved, or the delivery date for commodities delivered directly to processor, buyer, or warehouse from the field. LDP's and any gain realized from repaying a loan at a level lower than the original loan level are subject to a $75,000 per "person" payment limitation, except for crops produced in 1999, for which the payment limitation is $150,000 per "person".

Who is eligible to apply...

Owner, landlord, tenant, or sharecropper on an eligible farm that has produced the eligible commodities or, in the case of sugar, a processor or refiner who meets program requirements as announced by the Secretary.

Eligible Applicant Categories:
Eligible Functional Categories:

Record of farming operation must be on file in the FSA county office. This program is excluded from coverage under OMB Circular No. A-87.

Note:This is a brief description of the credentials or documentation required prior to, or along with, an application for assistance.

About this section:

This section indicates who can apply to the Federal government for assistance and the criteria the potential applicant must satisfy. For example, individuals may be eligible for research grants, and the criteria to be satisfied may be that they have a professional or scientific degree, 3 years of research experience, and be a citizen of the United States. Universities, medical schools, hospitals, or State and local governments may also be eligible. Where State governments are eligible, the type of State agency will be indicated (State welfare agency or State agency on aging) and the criteria that they must satisfy.

Certain federal programs (e.g., the Pell Grant program which provides grants to students) involve intermediate levels of application processing, i.e., applications are transmitted through colleges or universities that are neither the direct applicant nor the ultimate beneficiary. For these programs, the criteria that the intermediaries must satisfy are also indicated, along with intermediaries who are not eligible.

How to apply...

Application Procedure:

In the case of warehouse-stored commodities, producer or Cooperative Marketing Association presents warehouse receipts to the FSA county office (warehouse-stored peanut and tobacco loans are made through producer associations). In the case of farm-stored commodities (including sugar), producer/processor or Cooperative Marketing Association requests a loan at the FSA county office. This program is excluded from coverage under OMB Circular Nos. A-102 and A-110.

Note: Each program will indicate whether applications are to be submitted to the Federal headquarters, regional or local office, or to a State or local government office.

Award Procedure:

Applications are approved by the FSA upon determination that applicant and commodity are eligible.

Note: Grant payments may be made by a letter of credit, advance by Treasury check, or reimbursement by Treasury check. Awards may be made by the headquarters office directly to the applicant, an agency field office, a regional office, or by an authorized county office. The assistance may pass through the initial applicant for further distribution by intermediate level applicants to groups or individuals in the private sector.

Deadlines and process...


Loans and LDP's are available for wheat, barley, oats, canola, flaxseed, crambe, and rapeseed and loans are available for quota peanuts pledged as collateral for farm-stored loans through March 31 of the year following the year in which the crop is normally harvested. Loans and LDP's are available for rice, corn, grain sorghum, cotton, soybeans, safflower, sunflower seed and mustard seed through May 31 of the year following the year in which the crop is normally harvested. Loans are available for sugar through September 30.

Note: When available, this section indicates the deadlines for applications to the funding agency which will be stated in terms of the date(s) or between what dates the application should be received. When not available, applicants should contact the funding agency for deadline information.

Range of Approval/Disapproval Time

Approximately 3 days.

Preapplication Coordination

None. This program is excluded from coverage under E.O. 12372 and OMB Circular No. A-102.

Note: This section indicates whether any prior coordination or approval is required with governmental or nongovernmental units prior to the submission of a formal application to the federal funding agency.


Applications may be reviewed by county, State, or national offices.

Note: In some cases, there are no provisions for appeal. Where applicable, this section discusses appeal procedures or allowable rework time for resubmission of applications to be processed by the funding agency. Appeal procedures vary with individual programs and are either listed in this section or applicants are referred to appeal procedures documented in the relevant Code of Federal Regulations (CFR).



Note: In some instances, renewal procedures may be the same as for the application procedure, e.g., for projects of a non-continuing nature renewals will be treated as new, competing applications; for projects of an ongoing nature, renewals may be given annually.

Who can benefit...

Owner, landlord, tenant, or sharecropper on a farm that has produced the eligible commodities, meets program requirements as announced by the Secretary, and maintains beneficial interest in the commodity.

About this section:

This section lists the ultimate beneficiaries of a program, the criteria they must satisfy and who specifically is not eligible. The applicant and beneficiary will generally be the same for programs that provide assistance directly from a Federal agency. However, financial assistance that passes through State or local governments will have different applicants and beneficiaries since the assistance is transmitted to private sector beneficiaries who are not obligated to request or apply for the assistance.

What types of assistance...

Direct Payments with Unrestricted Use

Financial assistance from the Federal government provided directly to beneficiaries who satisfy Federal eligibility requirements with no restrictions being imposed on the recipient as to how the money is spent. Included are payments under retirement, pension, and compensatory programs.

Direct Loans

Financial assistance provided through the lending of Federal monies for a specific period of time, with a reasonable expectation of repayment. Such loans may or may not require the payment of interest.

How much financial aid...

Range and Average of Financial Assistance

Direct payments (Purchases): Range and average not available. FY 01 loans: $162 to $1,006,400. Average: $22,959.

Note: This section lists the representative range (smallest to largest) of the amount of financial assistance available. These figures are based upon funds awarded in the past fiscal year and the current fiscal year to date. Also indicated is an approximate average amount of awards which were made in the past and current fiscal years.


(Commodity Loans and Loan Deficiency Payments) FY 03 $9,691,205,594; FY 04 $9,493,383,881; and FY 05 est $9,493,383,881.

Note: The dollar amounts listed in this section represent obligations for the past fiscal year (PY), estimates for the current fiscal year (CY), and estimates for the budget fiscal year (BY) as reported by the Federal agencies. Obligations for non-financial assistance programs indicate the administrative expenses involved in the operation of a program.

Account Identification


Note: Note: This 11-digit budget account identification code represents the account which funds a particular program. This code should be consistent with the code given for the program area as specified in Appendix III of the Budget of the United States Government.

Examples of funded projects...

Not applicable.

About this section

This section indicates the different types of projects which have been funded in the past. Only projects funded under Project Grants or Direct Payments for Specified Use should be listed here. The examples give potential applicants an idea of the types of projects that may be accepted for funding. The agency should list at least five examples of the most recently funded projects.

Program accomplishments...

A total of 177,799 new loans and 2,855,289 loan deficiency payments were made in fiscal year 2001. The dollar volume of commodity loans and loan deficiency payments for fiscal year 2001 totaled $16,110,002,150 billion (comprised of loans made - $9,691,205,594, and loan deficiency payments - $6,418,796,556). The dollar volume of commodity loan and loan deficiency payment transactions for fiscal year 2002 is estimated to be $14,299,113,000.

Criteria for selecting proposals...

Not applicable.

Assistance considerations...

Length and Time Phasing of Assistance

Assistance is generally available for 9 months or less, and is normally disbursed on a lump-sum basis.

Formula and Matching Requirements

Not applicable.

A formula may be based on population, per capita income, and other statistical factors. Applicants are informed whether there are any matching requirements to be met when participating in the cost of a project. In general, the matching share represents that portion of the project costs not borne by the Federal government. Attachment F of OMB Circular No. A-102 (Office of Management and Budget) sets forth the criteria and procedures for the evaluation of matching share requirements which may be cash or in-kind contributions made by State and local governments or other agencies, institutions, private organizations, or individuals to satisfy matching requirements of Federal grants or loans.

Cash contributions represent the grantees' cash outlay, including the outlay of money contributed to the grantee by other public agencies, institutions, private organizations, or individuals. When authorized by Federal regulation, Federal funds received from other grants may be considered as the grantees' cash contribution.

In-kind contributions represent the value of noncash contributions provided by the grantee, other public agencies and institutions, private organizations or individuals. In-kind contributions may consist of charges for real property and equipment, and value of goods and services directly benefiting and specifically identifiable to the grant program. When authorized by Federal legislation, property purchased with Federal funds may be considered as grantees' in-kind contribution.

Maintenance of effort (MOE) is a requirement contained in certain legislation, regulations, or administrative policies stating that a grantee must maintain a specified level of financial effort in a specific area in order to receive Federal grant funds, and that the Federal grant funds may be used only to supplement, not supplant, the level of grantee funds.

Post assistance requirements...


Necessary loan documents will be held at the county FSA office.

Note: This section indicates whether program reports, expenditure reports, cash reports or performance monitoring are required by the Federal funding agency, and specifies at what time intervals (monthly, annually, etc.) this must be accomplished.


Periodic and required spot checks of farm-stored grain will be made by the county FSA office. Recipients are subject to audit by Office of Inspector General, USDA.

Note: This section discusses audits required by the Federal agency. The procedures and requirements for State and local governments and nonprofit entities are set forth in OMB Circular No. A-133. These requirements pertain to awards made within the respective State's fiscal year - not the Federal fiscal year, as some State and local governments may use the calendar year or other variation of time span designated as the fiscal year period, rather than that commonly known as the Federal fiscal year (from October 1st through September 30th).


Not applicable.

Note: This section indicates the record retention requirements and the type of records the Federal agency may require. Not included are the normally imposed requirements of the General Accounting Office. For programs falling under the purview of OMB Circular No. A-102, record retention is set forth in Attachment C. For other programs, record retention is governed by the funding agency's requirements.



Agricultural Adjustment Act of 1938, 7 U.S.C. 1301- 1393, Public Law 75-430; Commodity Credit Corporation Charter Act, as amended, 15 U.S.C. 714 et. seq.; Agricultural Act of 1949, as amended, 7 U.S.C. 1421, et. seq., Public Law 81-439, as amended; Food Security Act of 1985, Public Law 99-198, as amended; Joint Resolution Making Appropriations for Government Agencies for Fiscal Year 1987, Public Laws 99-500 and 99-591; Omnibus Budget Reconciliation Act of 1987, Public Law 100-203; Food, Agriculture, Conservation, and Trade Act of 1990, Public Law 101-624; Omnibus Budget Reconciliation Act of 1990, Public Law 101- 508; Omnibus Budget Reconciliation Act of 1993, Public Law 103-66; National Wool Act Amendments of 1993, Public Law 103-130; Federal Agriculture Improvement and Reform Act of 1996, Public Law 104-127; Agriculture, Rural Development, Food and Drug Administration and Related Agencies Appropriations Act, Public Law 106-78; Agricultural Risk Protection Act of 2000, Public Law 106-224; Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act of 2001, Public Law 106-387.

Note: This section lists the legal authority upon which a program is based (acts, amendments to acts, Public Law numbers, titles, sections, Statute Codes, citations to the U.S. Code, Executive Orders, Presidential Reorganization Plans, and Memoranda from an agency head).

Regulations, Guidelines, And Literature

Program regulations published in the Federal Register 7 CFR, Chapter XIV, Parts 1421, 1425, 1427, 1430, 1434, 1435, 1446, and 1464; announcements issued to news media and letters to producers; " FSA Commodity Fact Sheets, " no cost: The Price Support Program," BI-4-USDA, no cost; Farm Service Agency, U.S. Department of Agriculture, STOP 0532, 1400 Independence Avenue SW., Washington, DC 20250-0532.

Contact information...

Web Sites
Regional Or Local Office

Consult the local telephone directory for location of the FSA county office. If no listing, get in touch with appropriate FSA State office listed under the Farm Service Agency section of Additional Contact Information - FMR Help.

Note: This section lists the agency contact person, address and telephone number of the Federal Regional or Local Office(s) to be contacted for detailed information regarding a program such as: (1) current availability of funds and the likelihood of receiving assistance within a given period; (2) pre-application and application forms required; (3) whether a pre-application conference is recommended; (4) assistance available in preparation of applications; (5) whether funding decisions are made at the headquarters, regional or local level; (6) application renewal procedures (including continuations and supplementals) or appeal procedures for rejected applications; and (7) recently published program guidelines and material. However, for most federal programs, this section will instruct the reader to consult the so-called Appendix IV of the Catalog due to the large volume of Regional and Local Office Contacts for most agencies. This information is provided in Additional Contact Information (see below).

Headquarters Office

Department of Agriculture, Farm Service Agency, Price Support Division, STOP 0512, 1400 Independence Avenue SW., Washington, DC 20250-0512. Telephone: (202) 720-7901.

Note: This section lists names and addresses of the office at the headquarters level with direct operational responsibility for managing a program. A telephone number is provided in cases where a Regional or Local Office is not normally able to answer detailed inquiries concerning a program. Also listed are the name(s) and telephone number(s) of the information contact person(s) who can provide additional program information to applicants.

Additional Contact Information (Appendix IV)

Due to the large volume of regional and local office contacts for most agencies, full contact information is also provided separately here in a PDF format: