Commodity Marketing Assistance Loans and Loan Deficiency Payments

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To support farmers in the United States, a number of commodity marketing assistance loans and loan deficiency payments have been in existence for a very long time. These are government loans that offer assistance to farmers to market their field and commodity crops. This way, it also helps in stabilising their income and provides other forms of benefits to the agricultural producers. These government loans, called agriculture loans, also form part of the three primary subsidies in the US farm commodity programs.

Over a period of time, these commodity marketing assistance loans and loan deficiency payments have addressed various agricultural issues such as price stability, price support and short term liquidity issues. The main purpose of this loan category is to provide short term financial assistance to the farmers to enable them to settle their outstanding bills immediately after harvest and smoothen the marketing process throughout the year. Hence, marketing assistance loan is an apt name for such agriculture loans. In the absence of such facility, there might be a possibility of the crops being sold soon after harvest causing oversupply in the market and downfall of prices.

In order to be eligible for such government loans, the individual concerned must be having professional experience in agricultural farming or production. For a farmer who has to wait to sell his produce to get some cash, taking agriculture loans would be a more practical option. Such loans can be availed of only if the market prices are below the loan price. This loan category is normally given for actual crop produced.

It usually operates in 3 ways:

Loan Deficiency Payments – farmers may choose to opt this in lieu of marketing loans. This is a direct payment which is calculated as the difference between the loan rate and the posted county price or the alternative repayment rate.

Marketing Loan Gains – farmers have the option of repaying back the government loans at posted county prices or the prevailing local prices while retaining the ownership of the produce.

Commodity Certificates – where certificates are purchased at the posted county price for the quantity of produce pledged and the same can be traded to recover the pledged commodities.

Such government loans are obtained by pledging the harvested produce as collateral. The loan price as multiplied by the pledged quantity is the value of the loan. These loans usually last for 9 months but repayment can be made earlier. Details of the local loan prices, commodity marketing assistance loans and loan deficiency payments under agriculture loans category and the interest rates charged are available on the US Government website under respective sections.