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UNITED STATES DEPARTMENT OF AGRICULTURE

FARM SERVICE AGENCY FACT SHEET

December 2017

Seed Cotton Recourse Loans for Upland and Extra Long Staple Cotton

OVERVIEW

The U.S. Department of Agriculture’s (USDA) 

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 keeps the records for the farm.

Seed cotton recourse loans help upland and extra 

long staple (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 provide 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 (LDP).

This fact sheet explains eligibility requirements, 

loan terms and loan rates for seed cotton recourse 

loans.

ELIGIBILITY REQUIREMENTS

Producer Eligibility

To be eligible for a seed cotton recourse loan, the 

producer must:

• Complete form CCC Cotton A-5 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; and

• Have and retain beneficial interest in the 

commodity until the loan is repaid.

For approved cotton cooperatives, the producer 

member must:

• Meet the eligible requirements listed above; 

and

• Give the cooperative, through a marketing 

agreement, authority to pledge the cotton for 

loan.

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; and

• Insured at the full loan value against damage 

by fire. Additional insurance may be required 

for losses of 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.
FACT SHEET

Seed Cotton Recourse Loans for Upland and ELS Cotton December 2017

All seed cotton loans are due the earlier of:

• May 31 of the year after the calendar year the 

cotton was planted; or

• 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:

• $0.4949 per pound for 2017 upland seed 

cotton; or

• $0.7977 per pound for 2017 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 is 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 smaller of the following:

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

amount; or

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

1 percent.

Seed cotton loans are subject to offset. If a 

producer owes an amount to CCC, Farm Service 

Agency (FSA) or other federal creditors, or for 

other debts having lien status under state law, it 

will be deducted from the loan amount.

Research and promotion fees do not apply to seed 

cotton recourse loans.

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 the Cooperative Marketing 

Association (CMA) or Loan Servicing Agent 

(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); and

• 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 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 form 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 form CCC-880, Ginner’s 

Seed Cotton Agreement, after:

• CCC representative visits the gin to determine 

the conditions and related documents are 

correct;

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FACT SHEET

Seed Cotton Recourse Loans for Upland and ELS Cotton December 2017

• 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; and

• Ensuring the gin is a reputable concern.

FOR MORE INFORMATION

This fact sheet is provided for informational 

purposes; other restrictions may apply. More 

information on this and other FSA programs is 

available on FSA’s web site at 

http://www.fsa.usda.gov or from local FSA 

offices. To find your local FSA office, visit 

http://offices.usda.gov.

_________________________________________

In accordance with Federal civil rights law and U.S. Department of Agriculture (USDA) civil rights regulations and policies, 

the USDA, its Agencies, offices, and employees, and institutions 

participating in or administering USDA programs are prohibited 

from discriminating based on race, color, national origin, religion, 

sex, gender identity (including gender expression), sexual orientation, disability, age, marital status, family/parental status, income 

derived from a public assistance program, political beliefs, or reprisal or retaliation for prior civil rights activity, in any program 

or activity conducted or funded by USDA (not all bases apply to 

all programs). Remedies and complaint filing deadlines vary by 

program or incident.

Persons with disabilities who require alternative means of communication for program information (e.g., Braille, large print, 

audiotape, American Sign Language, etc.) should contact the 

responsible Agency or USDA’s TARGET Center at (202) 720-2600 

(voice and TTY) or contact USDA through the Federal Relay 

Service at (800) 877-8339. Additionally, program information may 

be made available in languages other than English.

To file a program discrimination complaint, complete the USDA 

Program Discrimination Complaint Form, AD-3027, found online 

at http://www.ascr.usda.gov/complaint_filing_cust.html and at any 

USDA office or write a letter addressed to USDA and provide in 

the letter all of the information requested in the form. To request 

a copy of the complaint form, call (866) 632-9992. Submit your 

completed form or letter to USDA by:

1) mail: U.S. Department of Agriculture Office of the Assistant

 Secretary for Civil Rights 1400 Independence Avenue, SW

 Washington, D.C. 20250-9410;

2) fax: (202) 690-7442; or

3) email: program.intake@usda.gov.

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