FACT SHEET

UNITED STATES DEPARTMENT OF AGRICULTURE

FARM SERVICE AGENCY

Page 1

January 2011

 Beneficial Interest Requirements for Marketing Assistance Loans and 

 Loan Deficiency Payments (Excluding Sugar)

Overview

USDA Farm Service Agency (FSA) 

marketing assistance loans (MALs) 

provide producers interim financing to store, rather than sell, their 

commodities when market prices are 

typically at harvest-time lows. Storing production facilitates more orderly 

commodity marketing throughout the 

year. More information on marketing assistance loans is available 

on or through the FSA fact sheet, 

Nonrecourse Marketing Assistance 

Loan and Loan Deficiency Payment 

Program.

Beneficial Interest Requirements

To be eligible for a MAL or a loan 

deficiency payment (LDP), producers must have beneficial interest in 

the commodity, in addition to other 

requirements. A producer retains beneficial interest when he/she maintains 

control of and title to the commodity.

For a MAL, the producer must retain 

beneficial interest in the commodity from the time of planting through 

either the date the loan is redeemed or 

the date USDA’s Commodity Credit 

Corporation (CCC) takes title to the 

commodity.

For an LDP, the producer must retain 

beneficial interest in the commodity 

from the time of planting through the 

date the producer files Form CCC633EZ (page 1) in the FSA county 

office.

When a producer loses beneficial 

interest in the commodity, the commodity becomes ineligible for a loan 

or LDP even if the producer later 

regains beneficial interest; however, if 

the buyer rejects the commodity and 

returns it to the producer, the producer 

will regain beneficial interest and the 

commodity will once again become 

eligible for a loan or LDP.

Control of Commodity

A producer controls the commodity when he/she retains the ability 

to make all decisions affecting the 

commodity, including movement, sale 

and the request for and repayment of a 

loan or LDP.

Events Causing Loss of Beneficial 

Interest

Producers lose beneficial interest in a 

commodity when the earliest of one of 

the following events occurs: 

• The producer obtains a payment 

for the commodity (without option to purchase);

• The date the commodity is invoiced from the buyer;

• The commodity is loaded from 

farm storage bins or other bins 

for shipment to the buyer regardless of who pays for the delivery; 

• The commodity is loaded for 

shipment from the warehouse to 

the buyer regardless of who pays 

for the delivery, or; 

• The buyer or agent receives delivery of warehouse receipts.

Commodity Title

A producer has title to the commodity if he/she has not sold or delivered 

the commodity, including delivering 

warehouse receipts.

Deceased Producers

Upon a producer’s death, beneficial 

interest in the commodity passes to:

• The producer’s estate;

• The producer’s heirs or; 

• A person to whom title has 

passed by state law.

The same terms and conditions that 

applied to the deceased producer apply to the new producer.

Selling Equity

If a producer receives any payment 

that gives the buyer a share of the 

commodity’s equity, the commodity 

immediately becomes ineligible for a 

loan or LDP. If a producer sells any 

equity in the commodity after pledging it as loan collateral, CCC requires 

the producer to repay all principal, 

fees and interest.

Purchased Commodities

A producer who purchases or otherwise acquires a commodity from 

another producer does not hold beneficial interest in that commodity, whether the purchase or acquisition is made 

before or after harvest. CCC will 

make an exception if, before harvest, 

a producer obtains title to the growing 

commodity and the risk of producing 

the commodity at the same time he/

she obtains title to the land where the 

commodity is growing.

Option-to-Purchase Contracts

An option-to-purchase is an agreement between the producer and buyer, 

allowing the buyer, at the buyer’s option, to enter into a contract to buy the 

commodity at a later date. The option 

does not give the buyer any interest in 

the commodity and expires at a specified time.

If a producer enters into an option-topurchase contract, the producer retains 

beneficial interest and can receive a 

loan or LDP payment if the following 

provision is written into the contract:

“Notwithstanding any other provision 

of this option to purchase, title and 

control the commodity and beneficial 

interest in the commodity, as specified 

in [7CFR1421, -1427 or -1434, see 

below], shall remain with the producer 

until the buyer exercises this option to 

purchase the commodity. This option 

to purchase shall expire, notwithstand-
FACT SHEET

Beneficial Interest Requirements for MALs 

and LDPs (Excluding Sugar)

January 2011

ing any action or inaction by either the 

producer or the buyer, at the earlier 

of: (1) the maturity of any Commodity Credit Corporation loan which is 

secured by such commodity; (2) the 

date the Commodity Credit Corporation claims title to such commodity; 

or (3) such other date as provided in 

this option.”

The applicable Code of Federal Regulations references are:

• 7CFR1421 (wheat, feed grains, 

oilseeds, rice and farm-stored 

peanuts);

• 7CFR1427 (cotton), or;

• 7CFR1434 (honey).

Sales Contracts and Loss of Beneficial Interest

Sales contracts (including advance 

sales contracts, contracts to sell, pricelater contracts and contracts for future 

delivery) give the buyer an interest in 

the commodity at a time set forth in 

the contract or implied by law.

In many cases, deferred price, priceforward or price-later contracts allow 

producers to select the sales price of 

the commodity at the time the contract 

is entered into, or at later dates.

Producers under these contracts will 

be considered to have:

• Beneficial interest in the commodity, if there are no restrictive 

or contradictory clauses within 

the contract that may cause 

the producer to lose beneficial 

interest in the commodity until 

the earlier of the date payment 

is received or the commodity 

is applied in fulfillment of the 

contract, or; 

• Lost beneficial interest at a specific time, if the contract states 

that ownership or title in the 

commodity transfers at the time 

the commodity is priced, date of 

signing the contract or the date 

the commodity is delivered.

A producer loses beneficial interest 

when he/she receives a payment in return for a sales contract. In addition, 

a producer loses beneficial interest 

upon signing any contract containing 

clauses that restrict the producer’s decision to obtain a loan or LDP. Such 

clauses include:

• The buyer requires the producer 

to obtain a loan or LDP, or;

• The producer may obtain a loan 

or LDP only with the buyer’s 

prior approval.

The producer must have sole discretion to make marketing decisions.

Seed Contract Producers

Seed can be pledged as loan or LDP 

collateral if it was produced under a 

contract where the buyer retains title 

to the seed and provides the seed to 

the producer. This includes contracts 

for hybrid and other specialty seeds. 

Beneficial interest is lost the earlier of 

the date:

• The producer receives payment 

for the commodity; or

• The commodity is delivered to 

the seed contract company.

MAL and LDP Open Storage Policy

Producers who deliver commodities to 

a federally- or state-licensed warehouse and the commodity is placed in 

open storage must be able to receive, 

from the warehouse a negotiable 

warehouse receipt or other form of 

acceptable production evidence, if 

requested.

Unapproved Facilities

A producer loses beneficial interest 

and becomes ineligible for a loan or 

LDP on the date his/her commodity is delivered to a facility that is 

not federally or state-licensed. In 

addition, a producer loses beneficial 

interest if his/her commodity is commingled at a facility (not federally or 

state-licensed) with other producers’ 

commodities, unless state or federal 

law authorizes commingling.

Feedlot, Feedyard, or Grain Bank

If the commodity is delivered to, but 

not limited to, a feedlot, feedyard, 

dairy, pit, poultry facility or grain 

bank, beneficial interest in the commodity is considered to be lost at the 

time of delivery, unless other events 

cause beneficial interest to be lost 

before delivery.

Loans and LDPs Subject to CCC 

Determination

CCC has the right to determine producers’ eligibility for a loan or LDP, 

based on a review of an option to 

purchase or a sales contract involving 

the commodity.

For More Information

For more information about FSA and 

FSA programs, visit a local FSA office, USDA Service Center or online 

at http://www.fsa.usda.gov. 

A PDF version of this fact sheet is 

posted online at: http://www.fsa.usda.

gov/Internet/FSA_File/benint11.pdf. 

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 Ave. 

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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