September 2007
The Farm Security and Rural Investment Act of 2002 provides loans for crop years 2002 through 2007 for peanut producers. Producers may apply for marketing assistance loans (MALs) for farm- or warehouse-stored peanuts or for peanut loan deficiency payments (LDPs). These programs help to stabilize America's peanut industry and ensure the well being of agriculture in the United States.
Peanut nonrecourse marketing assistance loans provide eligible producers with interim financing on their production and facilitate the orderly distribution of loan-eligible peanuts throughout the year. A nonrecourse loan allows a producer with eligible peanuts to store the production and pledge the peanuts as collateral instead of selling them immediately after harvest. The loan helps an eligible producer pay bills without having to sell the peanuts at a time of year when prices tend to be lowest. When market conditions may be more favorable, a producer may sell the peanuts and repay the loan with the proceeds of the sale. If a producer is unable to repay the loan, he or she can deliver to Commodity Credit Corporation (CCC) the quantity of peanuts pledged as collateral as full payment for the loan at maturity.
Nonrecourse marketing assistance loans are administered by the U.S. Department of Agriculture's (USDA) Farm Service Agency (FSA) on behalf of the CCC. The regulations authorizing this program are in 7 CFR Part 1421 Marketing Assistance Loans and Loan Deficiency Payments. The regulations, which cover peanuts, pulse crops, wheat, feed grains, soybeans and other oilseeds were published on Oct. 11, 2002 and amended on June 6, 2006. The regulations authorizing the establishment of minimum quality and handling standards for domestic and imported peanuts marketed in the United States can be found at 7 CFR, Parts 996, 997, 998, and 999, published on Sept. 9, 2002, and amended on Aug. 1, 2005.
To be eligible for a MAL or LDP, the producer must:
- Share in the risk of producing the commodity;
- Be compliant with conservation and wetland requirements;
- Have and retain beneficial interest in the peanuts until the loan is repaid or CCC takes title to the commodity; and
- Report how cropland acreage is used on the farm.
To be eligible for a loan or LDP, the peanuts must:
- Have been produced and harvested by an eligible producer and be in storable condition;
- Be merchantable for feed, food, or other uses as determined by the CCC;
- Meet the specific commodity eligibility requirements for nonrecourse loans;
- Be one of the following types: Virginia, Runner, Spanish or Valencia;
- Not have been shelled or crushed;
- Be inspected and graded if warehouse-stored; and
- Be inspected and graded upon delivery if farm-stored.
Producers must have beneficial interest in the peanuts at the time of the request to obtain a MAL or LDP. Beneficial interest consists of the producer's maintaining control of the commodity and title to the commodity. If either of these is lost, the producer does not have beneficial interest in the peanuts. There are no provisions for waiving beneficial interest for the 2007 and subsequent crop years.
For a MAL, producers can request a farm-stored or warehouse-stored loan. Warehouse-stored loans will be adjusted for premiums and discounts if applicable.
For each of the 2002 through 2007 crop years, there is a combined $75,000 payment limitation for marketing loan gains and LDPs for peanuts, wool, mohair and honey. The 2002 Act required CCC to pay storage, handling and associated cost for all peanuts placed in MAL program through the 2002-2006 crop years. This policy is terminated with the 2007 crop year. Accordingly, for warehouse-stored peanut loans, CCC will not pay any storage charges and storage credits are not applicable for the 2007 crop year. For peanuts that are placed under warehouse?stored MAL for the 2007 crop year, producers have the following storage options.
Farm-stored loans are either certified or measured. Certified loans refer to the producer personally verifying crop quantity.
Measured loans refer to on-site measurement conducted by a county agent, which requires payment for the service at the time of request.
Producers who request warehouse-stored loans must present an acceptable warehouse receipt issued by a CCC-approved warehouse. To obtain a warehouse-stored peanut loan, the CCC loan collateral peanuts must be stored in a CCC-approved warehouse.
- If the warehouse-issued receipt indicates that storage charges have been paid through or provided for through loan maturity, FSA will not reduce the loan rate.
- If the warehouse-issued receipt indicates that storage charge have not been paid through or provided for through loan maturity, FSA will reduce the loan rate by the amount of the unpaid storage through loan maturity.
NOTE: If the loan was reduced before loan repayment, and the producer/agent provides proof that the warehouse storage charges have been paid or provided for during the period for which the storage was previously deducted, FSA will allow the loan amount to be adjusted to reflect the deducted storage amounts and the MAL will be adjusted to account for the additional cash disbursement.
The loan levels by type for an average grade of 2007-crop peanuts per ton are:
- Runner-type peanuts - $355.19
- Spanish-type peanuts - $347.61
- Valencia-type peanuts - $355.32
- Virginia-type peanuts - 355.32
The method of computing the loan levels for 2007-crop peanuts and the grades within the types are the same as last year.
The peanut marketing assistance loan service fee, which is nonrefundable, shall be the smaller of the following:
- $45 for each loan plus $3 for each storage bin or receipt over one; or
- Half of one percent times the gross amount.
- Exception: This fee is not applicable to Designated Marketing Associations (DMAs)
A producer realizes a marketing loan gain if the loan is repaid at less than the loan principal. The marketing loan gain rate equals the amount by which the applicable loan rate exceeds the loan repayment rates.
Offsets from the loan proceeds (or deductions) may be made for amounts contained on a separate statement of unpaid charges or a separate bill for unpaid charges. These charges must be associated with the handling of the peanuts represented by the warehouse receipt and the marketing of the peanuts pledged as loan collateral. The FSA county offices, peanut DMAs and Cooperative Marketing Associations (CMAs) are only authorized to offset charges associated with cleaning, drying, custom harvesting, seed accounts, storage and in-handling of peanuts from the producer's loan proceeds. These charges are not considered a lien, and must be included on a CCC-679, block 8(3), if an offset will be made for these charges. The Deputy Administrator for Farm Programs must approve all other requests for offset of charges.
A producer who is eligible to obtain a loan, but who agrees to forgo the loan, may obtain a loan deficiency payment (LDP). The LDP rate equals the amount by which the applicable loan rate where the commodity is stored exceeds the national posted repayment rate. Beginning with the 2007 calendar year, FSA/CCC will report producer market gains associated with repayments of a CCC loan, whether the producer repays the loan with cash or uses commodity certificates in exchange for the outstanding loan collateral. The market gain will be reported on IRS Form-1099G.
The following are examples of LDP calculations.
Using a warehouse receipt as production evidence to determine eligible LDP quantity,
Producer A presents a warehouse receipt and makes requests for LDP on Segregation 1, 2, or 3, Virginia type peanuts. The warehouse receipt contains the following information.
Eligible Quantity:
Pounds: 10,000 + 345 = | 10,345 |
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Tons: 10,000 ÷ 2,000 = | 5.00 |
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Tons: 345 ÷ 2,000 = | .17 |
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Total Tons | 5.17 |
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Loan rate Per Ton of Segregation 1, Virginia Peanuts: $355.32
National Posted Price for Virginia Peanuts: $341.66
LDP Rate Per Ton of Virginia Peanuts: $355.32 - $341.66 = $13.66/ton
LDP Amount: $13.66 x 5.17 = $70.62
When the National Posted Price by peanut type is higher than the applicable loan rate, there would be no LDP.
LDPs can either be certified or based on submitted acceptable production evidence. LDPs must be requested on form CCC-633 EZ. Eligible producers must indicate their intentions by submitting a completed CCC-633 EZ, page 1, to their local FSA county office before beneficial interest is lost and by the final loan availability date. The CCC-633 EZ, page 2, must be submitted by the producer when the producer wants the LDP payment. LDPs are assignable and not subject to premiums or discounts. The basic LDP rate is the rate in effect on the date of request.
Peanut DMA's will obtain the CCC-633 EZ from their customers.
Note: For the 2007-crop year, an FSA-1007 form may be considered acceptable production evidence only if a producer has filed a completed CCC-633 EZ (pages 1 and 2) and the peanuts are immediately sold upon delivery. The date the peanuts are sold will be printed on the FSA-1007, and this date is used to determine when beneficial interest is lost.
The use of peanut electronic warehouse receipts (EWR), implemented in late 2003, will continue during the 2007-crop year. FSA has designated a provider (EWR, Inc.) to maintain a central filing system for peanut EWRs. The electronic system is designed to:
- Allow the provider to issue peanut EWRs following the guidelines issued by FSA;
- Transfer EWR data from the provider to the requesting FSA county office;
- Use EWR data received from the provider to process marketing assistance loans or LDPs using Automated Price Support System; and
- Track the status of EWR data.
CCC announces the national posted price for peanuts weekly on Tuesdays at 3:00 p.m. Eastern Time (ET) on the FSA Web site and in local FSA offices. The repayment rate becomes effective Wednesday at 12:01 a.m. ET. The rates can be obtained by visiting: http://www.fsa.usda.gov/Internet/FSA_File/peanut.xls.
Producers may designate an agent to redeem all or a portion of the peanuts pledged as collateral for a marketing assistance loan.
Designation of an agent does not relieve the producer from the terms and conditions of the note and security agreement. Designated agents may transfer the designation to a subsequent agent on form CCC-605P, by endorsement. Agents who are subsequently designated may transfer the designation to other subsequent agents on CCC-605P-2, by endorsement. County offices will make forms CCC-605P, CCC-605-1, and CCC-605P-2 available to the public. Producers should be advised that a separate CCC-605P is required for each loan. These forms are available at http://forms.sc.egov.usda.gov/eforms/mainservlet or in FSA county offices.
Application Deadline/Loan Availability Period
Peanut MALs and LDPs are available to all eligible producers during the year following a normal harvest. All applications for peanut marketing assistance loans or LDPs must be made by January 31.
Additional information on loans and LDPs for peanut producers is available from local USDA Service Centers and on the FSA Web site at http://www.fsa.usda.gov.
The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race, color, national origin, age, disability, and where applicable, sex, marital status, familial status, parental status, religion, sexual orientation, genetic information, political beliefs, reprisal, or because all or part of an individual's income is derived from any public assistance program. (Not all prohibited bases apply to all programs.) Persons with disabilities who require alternative means for communication of program information (Braille, large print, audiotape, etc.) should contact USDA's TARGET Center at (202) 720-2600 (voice and TDD). To file a complaint of Discrimination, write to USDA, Director, Office of Civil Rights, 1400 Independence Avenue, SW., Washington, DC 20250-9410, or call (800) 795-3272 (voice) or (202) 720-6382 (TDD). USDA is an equal opportunity provider and employer.
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