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October 2002
The Farm Security and Rural Investment Act of 2002 (2002 Act) provides that the Farm Service Agency (FSA) administer the nonrecourse marketing assistance loan and loan deficiency payment (LDP) program for the 2002 through 2007 crop honey.
The honey nonrecourse marketing assistance loan and LDP program provides eligible honey producers with two forms of federal assistance. The program helps to stabilize America's honey industry and ensure the well being of agriculture in the United States. Nonrecourse marketing assistance loans are administered by FSA, on behalf of the Commodity Credit Corporation (CCC).
Honey nonrecourse marketing assistance loans provide eligible producers with interim financing on their production and facilitate the orderly distribution of loan-eligible honey throughout the year. Instead of selling the honey immediately after harvest, a nonrecourse loan allows a producer with eligible honey to store the production, pledging the honey itself as collateral. The loan helps an eligible producer pay bills when they come due without having to sell the honey at a time of year when prices tend to be lowest. When market conditions may be more favorable, a producer may sell the honey 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 CCC the quantity of honey pledged as collateral as full payment for the loan at maturity.
Market loan repayment provisions specify that, under certain circumstances, producers may repay loans at less than principal plus accrued interest and other charges, with repayment of some portion of the relevant interest and principal being waived. Producers may also use commodity certificates to repay marketing assistance loans.
To be eligible for a loan, a producer must have:
- Produced honey in the United States during the calendar year for which the loan is requested, and extracted honey on or before December 31, of the applicable crop year;
- Had a continuous beneficial interest in the honey through date of repayment of the loan; and
- Been responsible for the financial risk of keeping the bees and producing the honey.
To be eligible for a loan, the honey must:
- Have been produced by an eligible producer;
- Have been produced and extracted in the United States during the applicable calendar year;
- Be of merchantable quality deemed by CCC to be suitable for loan; and
- Be stored in acceptable containers.
The CCC makes 9-month nonrecourse marketing assistance loans available to producers on 2002-2007 crop honey.
Eligible producers must submit requests for honey nonrecourse marketing assistance loans on or before March 31, of the calendar year following the applicable crop year.
Loans mature on demand, but no later than the last day of the 9th month after the note and security agreement were approved.
The nonrecourse marketing assistance loan program applies to 2002-2007 crop honey and provides a national average loan rate of 60 cents per pound. The loan rate is calculated by a formula provided by the 2002 Act.
If the honey is stored on the producer's farm, the producer should apply at the FSA county office serving the area. If the honey is stored at a location other than the producer's farm, the producer may apply either: (1) at the county office serving the storage location, or (2) at the office serving the area in which the producer's main business is located.
- A loan service fee is collected at the time of loan disbursement.
- Interest is charged at a rate of 1 percent higher than the CCC borrowing interest rate.
- Honey pledged as collateral for a loan must be from eligible floral sources and must be in containers that meet the type, size, cleanliness, strength, damage and fill requirements defined by regulations published by CCC in the Federal Register.
- Pre-loan inspections are required to ensure that honey inventory exists in approved storage containers and is of approximate certified weight.
Producers who are eligible for nonrecourse marketing assistance loans may choose to receive loan deficiency payments (LDPs) in lieu of marketing loans. LDPs provide producers with price support during times of low market prices. LDP provisions are active when the alternative repayment rate at a given location is less than the base loan rate at the same location, i.e., when the payment rate is greater than zero. Premiums and discounts are not considered when determining the LDP rate. LDP provisions are in effect for a given loan-eligible quantity of honey until the final loan availability date.
The 2002 Act provides a $75,000 payment limitation beginning with the 2002 crop year for any:
- Gain received by the producer from repaying a marketing assistance loan for honey at a lower rate than the original loan rate; or
- Loan deficiency payment received.
There are other conditions that also may apply.
Further information on this and other FSA programs is available from local USDA Service Centers or on the FSA Web site at: 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, gender, religion, age, disability, political beliefs, sexual orientation, and marital or family status. (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 USDA, Director, Office of Civil Rights, Room 326-W, Whitten Building, 1400 Independence Avenue, SW, Washington, D.C., 20250-9410, or call (202) 720-5964 (voice or TDD).
USDA is an equal opportunity provider and employer.
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