2014 Farm Bill

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UNITED STATES DEPARTMENT OF AGRICULTURE

FARM SERVICE AGENCY FACT SHEET February 2016

Nonrecourse Marketing Assistance Loans and Loan Deficiency Payments

OVERVIEW

The Agricultural Act of 2014 (2014 Farm Bill) 

authorizes nonrecourse marketing assistance loans 

(MALs) and loan deficiency payments (LDPs) for 

wheat, corn, grain sorghum, barley, oats, 

upland cotton, extra-long staple cotton, long grain 

rice, medium grain rice, soybeans, other oilseeds 

(including sunflower seed, rapeseed, canola, 

safflower, flaxseed, mustard seed, crambe and 

sesame seed), dry peas, lentils, small chickpeas, 

large chickpeas, graded and nongraded wool, 

mohair, unshorn pelts, honey and peanuts.

MALs and LDPs are marketing tools available to 

producers beginning upon harvest or shearing. The 

MAL provides interim financing at harvest time 

for to help agricultural producers to meet cash flow 

needs without having to sell their commodities 

when market prices are typically at harvest-time 

lows, allowing the producer to delay the sale of the 

commodity until more favorable market conditions 

emerge. Allowing producers to store production 

at harvest (or at shearing in the case of wool and 

mohair) also provides for a more orderly marketing 

of commodities throughout the year.

MALs for commodities are considered 

“nonrecourse” because the loan can be redeemed 

by repayment, or by delivering the agricultural 

commodity that was pledged as collateral to the 

Commodity Credit Corporation (CCC) as full 

payment for the loan upon maturity.

MAL repayment provisions specify that, under 

certain circumstances, producers may repay at less 

than the loan rate (principal) plus accrued interest 

and other charges. Alternatively, LDP provisions 

specify that in lieu of securing a MAL producers 

may elect to receive an LDP.

MAL repayment and LDP provisions are intended 

to minimize potential delivery, storage, and related 

costs of agricultural commodities to CCC. The 

provisions also are designed to avoid discrepancies 

in marketing loan benefits across state and county 

boundaries and to allow U.S.-produced 

commodities to be marketed freely and 

competitively.

PRODUCER ELIGIBILITY

 

To be eligible for a MAL or LDP, the producer 

must:

• 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 MAL is repaid or CCC 

takes title to the commodity; and

• Meet adjusted gross income limitations 

(described in a later section).

 

COMMODITY ELIGIBILITY

 

To be eligible for a MAL or LDP, the commodity 

must:

• Have been produced, mechanically harvested 

or shorn from live animals, by an eligible 

producer and be in storable condition;

• Be merchantable for food, feed or other uses, 

as determined by CCC; and

• Meet specific CCC minimum grade and quality 

standards for nonrecourse MALs.

BENEFICIAL INTEREST

 

A producer retains beneficial interest in the 

commodity if both of the following remain with 

the producer:

• Control of the commodity. The producer 

retains the ability to make all decisions

 affecting the commodity, including movement,

 sale and the request for a MAL or LDP.

• Title to the commodity. The producer has not 

sold, or has not delivered, the commodity or 

warehouse receipt to the buyer. If delivered, 
FACT SHEET

Nonrecourse MALs and LDPs February 2016

title may be considered to be transferred 

before the producer receives payment for the 

commodity. For example, title is considered 

transferred if a producer executes an option to 

purchase, without a provision that states that 

title and control remain with the producer, until 

the buyer exercises the option to purchase and 

the option to purchase expires at the earlier of:

 1. The maturity of any CCC loan secured by

 such commodity;

 2. The date CCC claims title to such

 commodity, or

 3. Another date provided in the option.

Once beneficial interest in the commodity is lost, 

the commodity loses eligibility for a MAL or LDP 

and remains ineligible even if the producer later 

regains beneficial interest.

If the commodity is delivered to a buyer, processor, 

feedlot or mill that rejects the commodity because 

minimum standards are not met, beneficial interest 

shall not be considered lost by the producer if the 

commodity is returned to the producer.

The commodity is not considered rejected if the 

producer receives a reduced contract price for the 

commodity.

FINAL LOAN/LDP AVAILABILITY DATES

Producers may obtain MALs or receive LDPs on 

all or part of their eligible production anytime 

during the loan availability period. The loan 

availability period runs from when the commodity 

is normally harvested (or sheared for wool) until 

specified dates in the following calendar year. The 

final loan/LDP availability dates for the respective 

commodities are listed in Table 1.

NONRECOURSE MARKETING 

ASSISTANCE LOANS

Loan Rates

The 2014 Farm Bill sets national loan rates at the 

levels shown in Table 2.

County and regional loan rates are based on each 

commodity’s national loan rate, and they:

• Vary by county or region and;

• Are based on the average prices and production 

of the county or region where the commodity 

is stored.

Loan Premiums and Discounts

Loan premiums and discounts are determined 

according to the grade and quality of a specific 

quantity of a commodity that a producer pledges 

as loan collateral. Premium and discount schedules 

vary by commodity and are applied to the loan 

rate in the county where the commodity is stored. 

On a per-unit basis, premiums are added to and 

discounts are subtracted from the loan rate only 

when the MAL is forfeited to CCC for all loan 

commodities except cotton and peanuts for which 

premiums and discounts are applied at the time a 

loan is made.

Interest

The interest rate charged on a commodity 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.

Accrued interest is the amount of interest that 

accumulates while a loan is outstanding starting 

with the day the loan is made. Accrued interest 

is calculated by multiplying: (i) the applicable 

interest rate times, (ii) the ratio of the number of 

days under loan (starting with the initial day and 

continuing through the day prior to the day a loan 

is repaid) to the number of days in a year (i.e., 365) 

times, (iii) the loan principal. Table 3 provides an 

example of how accrued interest is calculated.

Loan Settlement

MALs mature on the last day of the ninth calendar 

month following the month in which the MAL is 

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approved. A producer may settle an outstanding 

nonrecourse MAL:

• Before maturity period by repaying the MAL 

or;

• Upon maturity by forfeiting the commodity to 

CCC.

For all loan-eligible commodities except extra-long 

staple (ELS) cotton, a producer may repay a MAL 

any time during the loan period at the lesser of the:

• Loan rate plus accrued interest and other 

charges or;

• Alternative loan repayment rate as determined 

by CCC.

For wheat, feed grains and oilseeds, the CCCdetermined alternative loan repayment rate is often 

referred to as the posted county price (PCP). PCPs 

are established and available at each local USDA 

service center. PCPs are based upon market prices 

at appropriate U.S. terminal markets, adjusted to 

reflect quality and location. PCPs are announced 

daily for wheat, feed grains, soybeans, canola, 

flaxseed and sunflower seed, and weekly for other 

oilseeds.

For peanuts, CCC determines national posted 

prices (NPP) for four types of peanuts and 

announces them weekly. For dry peas and lentils, 

CCC determines and announces regional posted 

prices weekly. For wool and large and small 

chickpeas, CCC determines and announces a 

national posted price weekly. For honey, CCC 

determines and announces the national survey 

price monthly. For long and medium grain rice and 

upland cotton, a producer may repay a MAL any 

time during the loan period at the lesser of the:

• Loan rate plus accrued interest and other 

charges or;

• Adjusted world price (AWP).

The AWP is the prevailing world market price 

adjusted to U.S. quality and location. Separate 

AWPs for long grain, medium grain rice and 

upland cotton are announced weekly.

Commodity Certificate Exchange

Commodity certificates are available to 

producers, beginning with the 2015 crop, to 

exchange collateral pledged to CCC for a MAL. 

Commodity certificates will be available for sale 

at USDA service centers to producers with 

outstanding nonrecourse MALs. The exchange rate 

will be the AWP for upland cotton or rice, the NPP 

for peanuts, or the PCP for other commodities, as 

applicable on the date the commodity certificate 

is purchased. Realized gains from the certificate 

exchange gains equal the amount by which the 

loan rate exceeds the repayment rate. Commodity 

certificate exchanges will not be available when 

the exchange rate exceeds the applicable loan rate. 

Payment limitation provisions do not apply to 

commodity certificate exchanges.

For further information, see the Commodity 

Certificate Exchange (CCE) fact sheet at 

www.fsa.usda.gov/factsheets, contact a local 

USDA service center or visit the FSA website at 

www.fsa.usda.gov/pricesupport.

Marketing Loan Gains

 

A producer realizes a marketing loan gain (MLG) 

if the MAL is repaid at less than the loan principal. 

The MLG rate equals the amount by which the 

applicable loan rate exceeds the MAL repayment 

rate.

Commodity loan gains realized from the 

commodity certificate exchange are not subject to 

payment limits or Adjusted Gross Income (AGI) 

provisions.

LOAN DEFICIENCY PAYMENT

 

A producer who is eligible to obtain a MAL, but 

who agrees to forgo the MAL, may obtain an LDP 

under certain market conditions. The LDP rate 

equals the amount by which the applicable loan 

rate where the commodity is stored exceeds the 

effective MAL repayment rate for the respective 

commodity. The LDP amount equals the LDP rate 

times the quantity of the commodity for which the 

LDP is requested. Table 4 provides an example of 

how MLGs and LDPs are calculated.

FACT SHEET

Nonrecourse MALs and LDPs February 2016

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FACT SHEET

Nonrecourse MALs and LDPs February 2016

OTHER REQUIREMENTS

Production Evidence

A producer who repays a MAL at less than the 

loan rate plus accrued interest and other charges 

or receives an LDP may be subject to a spot check 

and must provide production evidence acceptable 

to CCC, such as evidence of sales, warehouse 

receipts, or load summary or assembly sheets.

Adjusted Gross Income Limitation

Beginning with the 2014 crop year, producers or 

legal entities whose average AGI exceeds $900,000 

are not eligible for MLGs and LDP payments; but 

are eligible for MALs that must be repaid at 

principal plus interest, or with a commodity 

certificate exchange.

Payment Limitations

 

Beginning with the 2014 crop year, there are 

payment limitations on MLGs and LDPs associated 

with the MAL or LDP programs. The total amount 

of payments received, directly or indirectly, by 

a person or legal entity (except joint ventures or 

general partnerships) for Price Loss Coverage, 

Agricultural Risk Coverage, MLGs, and LDPs (for 

commodities other than for peanuts), is limited to 

no more than $125,000 annually. A person or legal 

entity that receives, directly or indirectly, payments 

for peanuts has a separate $125,000 payment limit 

for those payments. Producers exceeding this limit 

are still eligible for MALs but must repay at 

principal plus interest. The indirect benefit 

realized by producers who forfeit their loan 

quantity to CCC is not subject to the payment limit.

For additional information on payment limitations 

for marketing loan gains and LDPs, visit 

www.fsa.usda.gov/limits.

Payment limitation provisions do not apply to 

commodity certificate exchanges.

FOR MORE INFORMATION

This fact sheet is for informational purposes only; 

other restrictions or details may apply. To learn 

more about commodity certificates, visit 

www.fsa.usda.gov/pricesupport or contact your 

local FSA office. 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.

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FACT SHEET FACT SHEET

Nonrecourse MALs and LDPs February 2016

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Table 1. Final Loan/LDP Availability Dates by Commodity

Final Loan/LDP Availability Date Commodity

Jan. 31 Peanuts, Wool, Mohair and LDP only for Unshorn Pelts

March 31 Barley, Canola, Crambe, Flaxseed, Honey, Oats, Rapeseed, 

Sesame seed and Wheat

May 31

Corn, Dry peas, Grain sorghum, Lentils, Mustard seed, Long 

grain rice, Medium grain rice, Safflower, Small chickpeas, 

Large chickpeas, Cotton, Soybeans and Sunflower seed

Table 2. National Loan Rates, 2014-2018 Crops (per production unit)

Commodity Production Unit 2014-2018

Wheat bushel $2.94

Corn bushel $1.95

Grain Sorghum bushel $1.95

Barley bushel $1.95

ELS Cotton pound $0.7977

Upland Cotton pound *

Oats bushel $1.39

Long Grain Rice cwt $6.50

Medium Grain Rice cwt $6.50

Soybeans bushel $5.00

Other Oilseeds cwt $10.09

Dry Peas cwt $5.40

Lentils cwt $11.28

Small Chickpeas cwt $7.43

Large Chickpeas cwt $11.28

Wool, graded pound $1.15

Wool, nongraded pound $0.40

Honey pound $0.69

Peanuts ton $355.00

Mohair Pound $4.20

* The upland cotton loan rate is the simple average of the adjusted prevailing world price for the 2 immediately 

preceding marketing years, but not more than 52 cents per pound nor less than 45 cents per pound. The loan rate 

for the 2015 crop year was announced April 15, 2015, at 52 cents per pound.

Table 3. Accrued Interest Calculation Examples

Facts Accrued Interest for Loan A

Applicable Interest 2.250 %

Loan Principal $1,000

Scenario 1 Scenario 2 Scenario 3

Days Loan Outstanding 90 120 150

Days in a Year 365 365 365

Accrued Interest $5.55 $7.40 $9.25

Table 4. Marketing Loan Gain/Loan Deficiency Payment Examples

County A MAL Repayment Rate Scenario

($ per bushel)

Loan Rate 1.95

Scenario 1 Scenario 2 Scenario 3

Loan Rate Plus Interest 1.98 1.98 1.98

Effective Posted County Price (PCP) 2.05 1.90 1.98

MLG or LDP Rate 0.00 0.05* 0.00

*Does not include accrued interest of $0.03.