Farm Service Agency

Overview

USDA's Commodity Credit Corporation (CCC) 

marketing assistance loans (MAL) are a marketing tool 

producers can use to store their production after 

harvest, which increases their marketing opportunities. 

Eligible producers of seed cotton may obtain a 

recourse seed cotton loan at the County Office that 

maintains the records for the farm.

Seed cotton recourse loans help upland and ELS 

cotton producers meet cash flow needs without having 

to sell their commodities when market prices are 

typically at harvest-time lows. Recourse loans also 

allow producers to store production at harvest and 

provides for a more orderly marketing of cotton 

throughout the year.

Seed cotton loans are considered recourse loans 

because the loan can only be redeemed by cash 

repayment, and the loan collateral is ineligible to be 

delivered to CCC. Seed cotton loans are also ineligible 

for commodity certificate exchanges and loan 

deficiency payments (LDPs).

This fact sheet explains eligibility requirements, loan 

terms, and loan rates for seed cotton recourse loans.

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FACT SHEET 

December 2018

Seed Cotton Recourse Loans for Upland

and Extra Long Staple (ELS) Cotton

Eligibility Requirements

Producer Eligibility

To be eligible for a seed cotton recourse loan, the 

producer must:

• Complete a CCC Cotton A-5 form to request a

seed cotton loan;

• Comply with conservation and wetland protection

requirements;

• Submit an acreage report to account for all

cropland on all farms;

• Have and retain beneficial interest in the

commodity until the loan is repaid.

For approved cotton cooperatives, the producer 

member must:

• Meet the eligibility requirements listed above;

• Give the cooperative, through a marketing

agreement, authority to pledge the cotton for loan.
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SEED COTTON RECOURSE LOANS - DECEMBER 2018

Commodity Eligibility

To be eligible for a seed cotton recourse loan, the 

cotton must be:

• Mechanically harvested, but not ginned, and still in

a module form;

• In storable condition;

• Merchantable for fiber or other uses, as determined

by CCC, 

• Stored in a manner to adequately protect it from

loss or damage;

• Located within a reasonable distance from an

approved gin (approved warehouse will be

considered approved storage);

• Available at all times to both the producer or

producer’s agent and a County Office

representative;

• Insured at the full loan value against damage by fire

- additional insurance may be required for losses

resulting from wind, flood, and rising water.

The producer is responsible for any loss in quality or 

quantity of the seed cotton under loan. If the cotton is 

insured at the market price, loans may only be 

approved if market price is more than the loan value. 

If the insurance policy has a deductible clause, the loan 

amount will be reduced by the deductible amount.

Seed Cotton Recourse Loans

Loan Availability and Maturity Dates

Seed cotton loans are available from harvest through 

March 31 following the year after the cotton was 

planted.

All seed cotton loans are due the earlier of:

• May 31 of the year after the calendar year the

cotton was planted;

• Before May 31, if CCC demands payment to

conform to State or local quarantine regulations or

for other reasons. 

Loan Rates

The loan rate used for seed cotton loans is the base 

quality loan rate, as follows:

• $0.52 per pound for 2018 upland seed cotton;

• $0.7977 per pound for 2018 ELS seed cotton. 

Loan premiums and discounts are not applicable to 

seed cotton loans.

Interest

The interest rate charged on a seed cotton loan is set at 

one percentage point above CCC’s cost of borrowing 

from the U.S. Treasury at the time the loan is made as 

required by Section 163 of the Federal Agricultural 

Improvement and Reform Act of 1996. After a loan is 

made, the rate is fixed except the interest rate for loans 

outstanding on Jan. 1 are adjusted to reflect CCC’s 

cost of borrowing on Jan. 1, plus one percentage point.

Loan Service Fees and Offsets

Service charges will be assessed on all seed cotton 

loans disbursed, including seed cotton loans disbursed 

to approved cooperatives. The service fee will be the 

lesser of the following:

• 1⁄2 of 1 percent (0.005) times the gross loan amount;

• $45 per loan, plus $3 for each module over 1. 

Seed cotton loans are subject to offset. If a 

producer owes an amount to CCC, the FSA, or 

other federal creditors, or for other debts having 

lien status under state law, the outstanding debt will 

be deducted from the loan amount.

Research and promotion fees do not apply to seed 

cotton recourse loans.
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SEED COTTON RECOURSE LOANS - DECEMBER 2018

USDA is an equal opportunity provider, employer, and lender.

Loan Settlement

Seed cotton loans must be redeemed at principal plus 

interest either by:

• Cash repayment from the producer, or

• Proceeds from a ginned-cotton MAL.

To ensure the proceeds from a ginned-cotton loan 

provided by CMA or LSA are used to repay a seed 

cotton loan obligation, FSA County Offices will 

provide written or e-mail notification to every CMA or 

LSA used by the producer of the producer’s:

• Name and farm number (s)

• Module number submitted as collateral for the

seed-cotton loan.

Seed cotton loans must be redeemed by the dates 

specified above regardless of whether or not the 

modules have been ginned. Seed cotton loans not 

redeemed by the maturity date, may be subject to a 

local sale to satisfy the outstanding loan amount.

Other Requirements

Ginner Approval Application for

Seed Cotton Loans

If cotton modules pledged for a seed cotton loan are 

stored on the ginner’s premises, each ginner wanting 

to participate in the recourse Seed Cotton Loan 

Program must file CCC-879, Application For 

Approval of Cotton Gin Under Seed Cotton Loan 

Program, in the County Office where the gin is 

located.

CCC will enter into an agreement with approved 

ginners by completing the CCC-890, Ginner’s Seed 

Cotton Agreement, after:

• A CCC representative visits the gin to determine

the conditions and related documents are correct;

• CCC representative determines the ginner

understands the ginner’s obligations under the

program;

• Reviewing documents and determining the

information is valid;

• Carefully considering the conditions of the

storage area are suitable to protect CCC from

damaged collateral;

• Carefully reviewing and ensuring the ginner

carries fire insurance to cover the full loan value

of the cotton stored on gin premises or premises

under the ginner’s control;

• Ensures the gin is a reputable concern.

For More Information

Further information on this, and other FSA programs,

is available from local FSA offices or on FSA's 

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