Report to Congressional Requesters

United States General Accounting Office

GAO

September 2001 FARM PROGRAMS

Changes to the

Marketing Assistance

Loan Program Have

Had Little Impact on

Payments

GAO-01-964
Page i GAO-01-964 Farm Programs

Letter 1

Results in Brief 3

Background 4

Changes to the Marketing Assistance Loan Program Had Only a

Modest Impact on Total Payments 7

Certificate Gains Were Generally Used to Reduce the

Administrative Burden for Cooperatives Rather Than to Avoid

Payment Limits 15

USDA’s Oversight of Payments to Cooperatives Is Inadequate 18

Conclusions 20

Recommendation 20

Agency Comments 20

Appendix I Scope and Methodology 22

Appendix II Crops and Loan Quantities Redeemed With

Certificates, Crop Years 1999 and 2000 25

Appendix III Farmers, by State, Receiving More than $75,000

Due to Increase in the Payment Limit, Crop Years

1999 and 2000 26

Appendix IV State-by State Analysis of Certificate Gains, Crop

Years 1999 and 2000 28

Appendix V State-by State Analysis of Total Marketing Loan

Program Benefits in Excess of $75,000, Crop Years

1999 and 2000 31

Appendix VI GAO Contacts and Staff Acknowledgments 33

Contents
Page ii GAO-01-964 Farm Programs

Tables

Table 1: Amount of Crops Placed in the Marketing Loan Program,

Crop Year 2000, and Percent Eligible for Marketing Loan

Gains, as of June 13, 2001 22

Table 2: Amount of Crop Under Loan Redeemed With Certificates,

Crop Years 1999 and 2000 25

Table 3: Farmers Receiving More Than $75,000 in Total Loan

Deficiency Payments and Marketing Loan Gains by State,

Crop Years 1999 and 2000 26

Table 4: Total Certificate Gains by State, Including Number of

Users, Percent of Total Certificate Gains Received, and

Percent of Gains Obtained by Cooperatives and Individual

Farmers, Crop Year 1999 28

Table 5: Total Certificate Gains by State, Including Number of

Users, Percent of Gains Each State Received and Percent

of Gains Obtained by Cooperatives and Individual

Farmers, Crop Year 2000 29

Table 6: Number of Farmers Who Received Total Marketing Loan

Program Benefits (Market Loan Gains, Loan Deficiency

Payments and Certificate Gains Combined) Between

$75,000 and $150,000 and in Excess of $150,000, Crop

Years 1999 and 2000 31

Figures

Figure 1: Distribution of Marketing Loan Benefits, by Crop, for

Crop Years 1999 and 2000 7

Figure 2: Percentage of Farmers Within Various Payment

Categories, Crop Year 2000 9

Figure 3: Distribution of Market Loan Benefits, Crop Year 2000 10

Figure 4: Percentage Distribution of Total Certificate Gain

Payments, by Crop, for Crop Years 1999 and 2000 11

Figure 5: Distribution of Certificate Gains by State Percentages,

Crop Years 1999 and 2000 12

Figure 6: Distribution of Certificate Gains by Percent of Farmers

and by Percent of Dollars, Crop Year 2000 14

Figure 7: Distribution of Total Marketing Assistance Loan Program

Payments for Farmers Who Used Certificates, Crop Years

1999 and 2000 17
Page 1 GAO-01-964 Farm Programs

September 28, 2001

The Honorable Tom Harkin

Chairman, Committee on Agriculture,

 Nutrition, and Forestry

United States Senate

The Honorable Thad Cochran

Ranking Minority Member

Subcommittee on Agriculture, Rural Development,

 and Related Agencies

Committee on Appropriations

United States Senate

Federal payments to farmers have reached an historic high—over

$26 billion in fiscal year 2000. Much of this assistance was targeted to help

farmers cope with persistently low commodity prices and was provided

principally through the Marketing Assistance Loan Program, which is

administered by the U.S. Department of Agriculture (USDA). This program

was designed originally to provide short-term financing so that farmers

could pay their bills right after harvest and spread their sales over the

entire marketing year. However, at times of low commodity prices—as in

1999 and 2000—the Marketing Assistance Loan Program has become a

major source of income for farmers growing wheat, rice, feed grains,

oilseeds (primarily soybeans), and upland cotton.

Under the Marketing Assistance Loan Program, the federal government

accepts harvested crops as collateral for interest-bearing loans (marketing

assistance loans) that are typically due in 9 months. When market prices

drop below the loan rate (the loan price per pound or bushel), the

government allows farmers to repay the loans at a lower rate and retain

ownership of their commodities for eventual sale. The difference between

the loan rate and the lower repayment rate is called the “marketing loan

gain.” Conversely, farmers who do not have marketing assistance loans

can also receive a benefit when prices are low called a “loan deficiency

payment.” The loan deficiency payment is equal to the marketing loan gain

that the farmer would have received if he had a loan. Farmers may choose

to obtain either a marketing loan gain or a loan deficiency payment—both

of which are known as the marketing loan benefit. Prior to the 1999 crop

United States General Accounting Office

Washington, DC 20548
Page 2 GAO-01-964 Farm Programs

year, farmers were limited annually to a total of $75,000 in marketing loan

benefits.1

Farmers who have reached their payment limit can still get some help

from the government if crop prices are below the loan rate. They can

always obtain a marketing loan and collect the loan payment, then, after

9 months, forfeit the crop to the government. In this way, farmers keep the

loan amounts and the government owns their crops, incurring storage

costs and, most likely, losses when it sells the crops. To discourage

forfeitures, the Congress raised the payment limit for marketing loan

benefits to $150,000 per farmer in crop year 1999 and again for crop year

2000. In addition to this increase, the Congress authorized the use of a new

commodity certificate program, which USDA implemented in February

2000. Commodity certificates also discourage forfeitures because they, in

effect, eliminate the payment limit and allow farmers to continue

collecting benefits if market prices are below the loan rate. Under this

program, farmers who took out loans may purchase certificates for their

crops at the alternative repayment rate and use them to repay their loan. In

this way, farmers benefit from a “certificate gain”—the difference between

the loan rate and the lower alternative repayment rate. Unlike market loan

gains and loan deficiency payments, “certificate gains” do not count

against a farmer’s payment limit. Farmers may use certificates at any time,

even if they are not near the payment limit.

You asked us to provide information on how the Marketing Assistance

Loan Program worked for crop years 1999 and 2000. This report discusses

the extent to which (1) the increased payment limit and the availability of

commodity certificates increased payments through the Marketing

Assistance Loan Program and (2) farmers used commodity certificates to

receive gains that would have otherwise have been denied by the payment

limit.

In conducting our work, we used USDA’s payment data for crop years

1999 and 2000. The data for crop year 1999 are complete, but data on crop

year 2000 do not reflect the total payments that will eventually be made for

this crop year. To examine the extent of payments over the payment limit

of $75,000, we focused only on payments made to farmers through USDA’s

county offices. Approved cooperative marketing associations and loan

 1

 A crop year is the year in which a crop is produced. The final date on which farmers who

produced a crop in 2000 can receive marketing loan benefits is February 28, 2002.
Page 3 GAO-01-964 Farm Programs

servicing agents (we refer to both of these as cooperatives in our report)

also obtain market loan benefits from USDA for their members’ crops and

distribute the benefits according to cooperative rules. There were 30

cooperatives that received market loan program payments in crop years

1999 and 2000. USDA does not have information on how these funds were

distributed to cooperative members. Therefore, our analysis does not

include payments made by cooperatives. Marketing loan payments to

cooperatives represented 14 percent of payments in crop year 1999 and

5 percent in crop year 2000. In assessing the extent to which commodity

certificates were used to receive gains over $75,000, we obtained the total

amount of certificate gains per farmer and cooperative marketing

association. Again, we do not have detailed information on how the

cooperatives distributed the certificate gains to their members.

Accordingly, we were unable to determine precisely the extent to which

cooperative members obtained certificates to receive gains over the

payment limit. To address this data limitation, we obtained information

from two rice and four cotton cooperatives that together made up

98 percent of certificate gains obtained by cooperatives in 1999 and

92 percent in 2000. See appendix I for a more detailed discussion of our

data analysis.

The increase in the payment limit and the availability of commodity

certificates had only modest effects on the total $15 billion in marketing

assistance loan payments provided for crop year 1999 and for crop year

2000 through May 2001. Because of the increase in the payment limit, total

payments over the 2-year period were 1.9 percent more than they would

have been under the previous limit, or an additional $261.1 million. In each

year, less than 1 percent of farmers benefited from the increase in the

payment limit. In 1999, the states with the most farmers exceeding the

previous $75,000 limit were Arkansas, South Dakota, and Texas; in 2000,

the states were Illinois, North Dakota, and South Dakota. Similarly,

commodity certificates represented a small proportion of all marketing

assistance loan payments—$380 million of the more than $15 billion in

total payments made over the period. Cooperatives collected about

70 percent of these commodity certificate benefits for distribution to their

members. In terms of crops, almost all certificate gains were for rice and

cotton in 1999; in 2000, most gains were for rice and cotton, followed by

corn and soybeans. Arkansas leads the states in certificate gains in both

years because Arkansas rice cooperatives collected a significant portion of

certificate gains for their members.

Results in Brief
Page 4 GAO-01-964 Farm Programs

Although certificates were put in place, in part, to allow farmers to receive

payments once they reached the payment limit, most certificates were not

used for this purpose. For cooperatives, certificates were primarily used to

reduce the administrative burden of tracking individual members’ payment

limits and to provide more flexibility in making marketing decisions.

However, a few cooperatives did use certificates to obtain gains for an

estimated 340 farmers who would have reached the payment limit in crop

year 1999. With respect to farmers who received payments through USDA

county offices, the vast majority received less than $75,000 in combined

market benefits and certificate gains and hence did not reach the original

payment limit. While most farmers did not use certificates to receive gains

over the payment limit, a small number of farmers did benefit from the

program. According to the best available data from USDA county offices,

47 farmers used certificates to receive more than $150,000 in 1999 and 100

farmers did so in 2000. While certificates were intended to save the

government money by discouraging forfeitures and eliminating the costs

associated with storing and disposing of forfeited crops, they may lead to

higher expenditures if they are used to collect payments in excess of

payment limits. The Congressional Budget Office estimates that these

government savings and costs roughly offset each other.

During our review, we found that USDA was not adequately monitoring

cooperatives’ internal controls for distributing billions of dollars of

marketing loan benefits to their members. Accordingly, we are

recommending steps USDA can take to correct this problem.

We provided USDA with a draft of this report for review and comment.

USDA concurred with our findings and recommendation.

The Federal Agriculture Improvement and Reform Act of 1996, referred to

as the 1996 Farm Bill, continued a commodity loan program that has

existed in various forms since the 1930s. The Marketing Assistance Loan

Program is aimed at helping farmers with the orderly marketing of their

crops through short-term financing. Farmers secure these loans after

harvest, when prices frequently are the lowest. The loans give farmers upfront capital to use until they market their crops. However, at times of low

prices, the program becomes part of the federal safety net for farmers by

providing income support. In essence, the program provides a minimum

guaranteed price that farmers will receive for certain commodities and

Background
Page 5 GAO-01-964 Farm Programs

provides them with income support payments. Marketing assistance loans

are available to the farmers of various crops, including wheat, rice, feed

grains, oilseeds, and upland cotton.2

Farmers obtain marketing loans by using their crops as collateral. The

loan amount is based on a statutory national loan rate (a per unit price for

each crop). To determine the loan amount, USDA multiplies the loan rate

by the amount of crop offered as collateral. Farmers may repay the loan’s

principal and interest at any time within the loan period (usually

9 months). In lieu of repaying their loans, farmers may forfeit their crops

to the government when the loans mature and keep the loan principal.

Forfeitures typically occur when the price farmers can receive for their

crops falls below the loan rate. In such cases, farmers receive greater

revenue by forfeiting the crops than by marketing them.

Because the government incurs costs in obtaining and selling forfeited

crops, the commodity loan program has provisions that allow farmers to

repay their commodity loans at prevailing market prices. Basically, when

the price farmers will receive for their crops falls below the loan rate, they

can repay their loans at a lower alternative repayment rate, also known as

the posted county price. USDA calculates the repayment rate on the basis

of local market prices (for cotton and rice, USDA uses an adjusted world

price that it calculates weekly).

Farmers keep the difference between the loan rate and the lower

alternative repayment rate. This difference is known as a “marketing loan

gain” and is considered a cash payment to farmers. Farmers retain their

crops and have the opportunity to later sell them at prices higher than

their loan repayment rate.

Farmers who do not choose to obtain marketing loans may still receive

similar help from USDA when prices are low. In lieu of securing loans,

eligible farmers may choose to receive payments for the difference

between the alternative repayment rate and the loan rate. These direct

payments are called “loan deficiency payments.”

The sum of the marketing loan gains and loan deficiency payments for all

crops during the crop year is normally limited by law to $75,000 per

person. For payment limitations, persons can be individuals as well as

 2

 Honey was added to the program for crop year 2000.
Page 6 GAO-01-964 Farm Programs

entities such as limited partnerships, corporations, and trusts, which all

may only receive up to $75,000. However, a partnership or a joint

operation may have several members, each of whom can receive up to

$75,000. To monitor limitations, USDA tracks payments to the individuals

who are members of partnerships and joint operations. Farmers can

receive payments for more than one farming operation. However, no

individual may receive payments for more than three entities (i.e.,

partnerships, corporations) in which that individual holds a substantial

beneficial interest.3

Owing to concerns that low prices were causing numerous farmers to

reach the payment limit, for crop years 1999 and 2000, the Congress lifted

the cap on the loan subsidy payments that farmers could receive. It

doubled this payment limit, so that each person was eligible to receive

$150,000.

In October 1999, the Congress amended the 1996 Farm Bill to provide for

the issuance of commodity certificates. USDA implemented the

commodity certificate program in February 2000. Certificates are available

for crop years 1998 through 2002. The commodity certificate program is

intended to discourage marketing loan forfeitures. Commodity certificates

are essentially another option for providing a government payment to

farmers if market prices are below the loan rate. Unlike marketing loan

gains or loan deficiency payments, however, certificate gains do not count

against a farmer’s payment limit. In effect, certificates do away with the

payment limit.

Farmers use commodity certificates to redeem their marketing assistance

loans at a lower repayment rate. By purchasing these certificates, farmers

can immediately reclaim their commodities under loan. The purchase

price for their commodity is the posted county price multiplied by the

quantity of crop to be redeemed from the loan. No paper certificates are

actually issued. The commodity certificate is only valid for immediate use

and expires immediately upon repayment of the loan and exchange of the

certificate for the commodity under loan.

Because of low commodity prices, payments through marketing assistance

loan program have been significant. In crop year 1999, the combination of

 3

 A person who owns 10 percent or more of a corporation or other entity receiving

payments is considered to have a substantial beneficial interest.
Page 7 GAO-01-964 Farm Programs

marketing loan gains, loan deficiency payments, and certificate gains

totaled more than $8 billion, and crop year 2000 payments were more than

$7 billion. Figure 1 shows the distribution of these benefits, by crop, for

crop years 1999 and 2000.

Figure 1: Distribution of Marketing Loan Benefits, by Crop, for Crop Years 1999 and

2000

Note: Other crops include barley, crambe, canola, flaxseed, mustard seed, oats, rapeseed, safflower,

sorghum, sunflower seed, and sunflower oil in crop year 1999 and barley, canola, crambe, flaxseed,

honey, oats, rapeseed, sorghum, sunflower seed, and sunflower oil in crop year 2000.

Source: GAO’s analysis of Farm Service Agency report PSL-82R, “Price Support Division Loan

Deficiency Payment and Price Support Cumulative Activity as of June 13, 2001”, and certificate

payment files as of April 2001.

The increase in the payment limit and the introduction of commodity

certificates had a limited impact on total payments made through the

Marketing Assistance Loan Program in crop years 1999 and 2000. Because

of the increase in the payment limit, 1999 payments for loan deficiency

payments and marketing loan gains were 2.5 percent, or $170.7 million,

more than they would have been otherwise. In 2000, these payments were

1.4 percent, or $90.4 million more than they would have been otherwise.

Total payments over $75,000 were less in 2000 than 1999 because cotton

payments decreased. In both years, the farmers who collected payments of

more than $75,000 represented less than 1 percent of all farmers receiving

Changes to the

Marketing Assistance

Loan Program Had

Only a Modest Impact

on Total Payments
Page 8 GAO-01-964 Farm Programs

benefits, and most of these farmers did not reach the increased limit of

$150,000. Commodity certificates also composed a small proportion of all

program payments—$380 million of the $15 billion in marketing loan

assistance payments made over the 2-year period. Members of

cooperatives collected most of these certificate gains. In terms of crops,

—94 percent of certificate gains went to rice and cotton farmers (both

cooperative members and individual farmers) in 1999; in 2000, 70 percent

of the gains went to rice and cotton farmers and 22 percent to corn and

soybean farmers. Arkansas was the leading state in certificate gains in

both years because its rice cooperatives collected a significant amount of

certificate gains on behalf of their members.

In both crop years 1999 and 2000, over 925,000 farmers received marketing

loan benefits from USDA’s county offices.4

 Most farmers collected less

than $15,000—85 percent in 1999 and 86 percent in 2000. In both years,

less than 1 percent of farmers obtained more than $75,000 in combined

market loan gains and loan deficiency payments. Figure 2 shows the

percentage of farmers in various payment categories for total marketing

loan gains and loan deficiency payments for crop year 2000. The

percentages were roughly the same for crop year 1999.

 4

 Our analysis is based on payment limits for individuals, whether they are acting alone or

as members of a partnership or other entity. For example, each member of a partnership is

listed as a farmer.

The Increase in Payment

Limits Benefited Only a

Small Percentage of

Farmers
Page 9 GAO-01-964 Farm Programs

Figure 2: Percentage of Farmers Within Various Payment Categories, Crop Year

2000

Note: This figure does not include payments made by cooperatives, which represented 5 percent of

total marketing loan gains and loan deficiency payments in crop year 2000.

Source: GAO’s analysis of USDA’s payment data.

Of the 1 percent of farmers who collected more than $75,000 each year,

the majority did not reach the increased payment limit of $150,000. Most

farmers collected less than $20,000 over the original payment limit of

$75,000, or less than $95,000 in total benefits. Farmers who obtained more

than $75,000 in benefits came from about 40 states in each year. The

leading states in 1999 were Arkansas and Texas, which together accounted

for 19 percent of the farmers who received more than $75,000 in payments;

in 2000, the leading states were North Dakota, Illinois, and South Dakota,

which together accounted for 32 percent of the farmers who received

more than $75,000 in payments. (App. III provides the number of farmers

by state who received more than $75,000 due to the increased payment

limit.)

Commodity certificate gains totaled over $98 million in crop year 1999 and

increased to over $282 million in crop year 2000. These certificate

payments represented 1.2 percent of total marketing assistance loan

program payments in crop year 1999 and 3.9 percent in crop year 2000. In

both years, the majority of certificate gains were distributed by

Commodity Certificates

Did Not Substantially Add

to Program Payments
Page 10 GAO-01-964 Farm Programs

cooperatives to their members. Seventy-eight percent of certificate gains

went to 12 cooperatives in 1999 and 67 percent to 17 cooperatives in 2000.

The remaining certificate gains were issued to 671 farmers in 1999 and

2,713 farmers in 2000 by USDA county offices.5

 Figure 3 shows the

distribution of marketing assistance loan benefits by payment type in

relation to the distribution of certificate payments by farmers and

cooperatives for crop year 2000.

Figure 3: Distribution of Market Loan Benefits, Crop Year 2000

Source: GAO’s analysis of USDA’s payment data.

The majority of certificate gains in both years were for cotton and rice. In

crop year 1999, over 90 percent of certificate gains were for these two

crops—58 percent for rice and 36 percent for cotton. In crop year 2000,

while rice and cotton farmers were still receiving the bulk of the payments

 5

 The number of farmers is not based on the members in partnerships or joint ventures for

this analysis because USDA maintains this information at the entity level.
Page 11 GAO-01-964 Farm Programs

(33 percent for rice and 37 percent for cotton), farmers of other crops,

such as corn and soybeans, used the certificate program more in 2000 than

they had in 1999. While the percentage of total certificate payments for

cotton stayed about the same and rice decreased, total certificate

payments for each of these crops increased from 1999 to 2000—from

$57 million to $94 million for rice, and from $36 million to $104 million for

cotton. Figure 4 shows the percentage distribution of certificate gain

payments by crop for crop years 1999 and 2000. (App. II provides the total

quantity of each crop that was redeemed from a marketing loan with a

certificate.)

Figure 4: Percentage Distribution of Total Certificate Gain Payments, by Crop, for

Crop Years 1999 and 2000

Note: Other crops include barley, oats, sorghum, and sunflower oil in crop year 1999 and barley,

canola, crambe, flaxseed, oats, sorghum, sunflower seed, and sunflower oil in crop year 2000.

Source: GAO’s analysis of USDA’s certificate data.

Farmers and cooperatives in 35 states in 1999 and 34 states in 2000 used

certificates. In 1999, the leading states in terms of total certificate gains

were Arkansas, 59 percent; California, 20 percent; and Texas, 9 percent. In

2000, Arkansas was still the leader with 33 percent of certificate gains,

followed by Mississippi, 20 percent; Texas, 12 percent; and California,

7 percent. The leading states were the homes of the cooperatives that
Page 12 GAO-01-964 Farm Programs

obtained the majority of certificate gains. In both years, most of the

remaining states received 1 percent or less of the certificate gains for their

members. However, these other states obtained a larger share of the total

certificate gains in 2000 than they did in the previous year. If only the

payments made by USDA county offices to farmers are considered, the

results differ. In 2000, the states that collected the most gains were North

Dakota, South Dakota, and Illinois; farmers in these states used

certificates to collect gains for corn, soybeans, rice, and wheat. Figure 5

shows the certificate gains by the leading states for crop years 1999 and

2000. Appendix III provides a complete list of certificate gains by state.

Figure 5: Distribution of Certificate Gains by State Percentages, Crop Years 1999 and 2000

Source: GAO’s analysis of USDA’s certificate data.

Payments to cooperatives varied considerably. The cooperatives obtained

total certificate gains that ranged from $55,000 to $35 million in 1999 and

from $7,000 to $57 million in 2000 to distribute to their members. The

cooperative that received the largest certificate funds in both crop years

1999 and 2000 distributed these funds to about 6,000 members.
Page 13 GAO-01-964 Farm Programs

Farmers who received certificate gains from USDA county offices realized

gains that were typically less than $25,000. However, several farmers

obtained larger certificate gains.6 In crop year 1999, 42 farmers received

over $100,000 in certificate gains. Nine of these received more than

$250,000 and two received more than $1 million. The farmer realizing the

most in payments received a total of $2.7 million in certificate gains for

cotton. In crop year 2000, no farmers received gains in excess of

$1 million, but 24 farmers received gains of between $250,000 and

$750,000. In both years, at the lower total range of certificate gains, a high

percentage of farmers received a low percentage of gains. Conversely, at

the higher range of certificate gains, a low percentage of farmers received

a high percentage of gains. For example, in crop year 2000, the 57 percent

of farmers who received $25,000 or less in certificate gains received

17 percent of the dollars, while the 6 percent of farmers who received

more than $100,000 received 31 percent of the total dollars. Figure 6 shows

the relationship between the percentage of farmers for different payment

categories and the total percentage of payments these farmers received in

crop year 2000.

 6

 The number of farmers is not based on the members in partnerships or joint ventures for

this analysis because USDA maintains this information at the entity level.
Page 14 GAO-01-964 Farm Programs

Figure 6: Distribution of Certificate Gains by Percent of Farmers and by Percent of

Dollars, Crop Year 2000

Note: This analysis does not include payments made by cooperatives. Some farmers may have

received payments from both the county office and the cooperatives. In addition, the number of

farmers is not based on the members in partnerships or joint ventures for this analysis because

USDA maintains this information at the entity level.

Source: GAO’s analysis of USDA’s certificate data.
Page 15 GAO-01-964 Farm Programs

Although commodity certificates allow users to receive payments in

excess of the amount they could receive otherwise, cooperative officials

told us that they primarily used commodity certificates to reduce

administrative burdens. According to these officials, certificates eliminate

the time-consuming and costly need to track when their members reach

their payment limits. Moreover, according to the rice and cotton

cooperative officials we spoke to, certificates provide more flexibility in

marketing crops. Similarly, the majority of farmers who obtained

certificate gains from USDA county offices did not exceed the $75,000

payment limit. According to USDA officials, most farmers used certificates

early in the year to avoid the possibility of reaching the payment limit later

in the year. While most certificates were not used by farmers to exceed the

payment limit, certificates did potentially reduce forfeitures for the small

number of farmers who were at the payment limit and used certificates.

Although certificates can benefit the government by avoiding the

associated costs of storing and selling crops that would otherwise be

forfeited, they also lead to more marketing assistance loan payments. The

net effect of this trade-off is difficult to determine precisely, but the

Congressional Budget Office has estimated that it is, for all practical

purposes, “a wash.”

The two rice cooperatives we met with obtained 70 percent of certificate

gains distributed by all cooperatives in 1999 and 43 percent in 2000. These

cooperatives used certificates in both years, rather than obtaining

marketing loan gains or loan deficiency payments, because the certificates

eliminated the need to monitor compliance with the payment limit for

each of their members. These cooperatives were not using certificates

because their members were reaching the payment limit. They reported

that they had few members affected by the increased $150,000 payment

limitation. The cooperatives’ certificate gains were about the same as they

would have been if they had chosen to obtain market gains or loan

deficiency payments. Combined, the two rice cooperatives distributed the

certificate gains to over 8,000 members in 1999 and 2000.

We discussed the use of certificates with four cotton cooperatives that

represented 28 percent of certificate gains obtained by all cooperatives in

1999 and 49 percent in 2000. In crop year 1999, cotton prices were much

lower than the loan rate, and these four cotton cooperatives had members

who reached the payment limit. Nevertheless, the cooperatives made

limited use of certificates because certificates were not available until late

in the crop year. By the time certificates became available, two of the

cooperatives had already obtained marketing loan benefits for most of

their crops so their use of certificates was limited. If the cooperatives had

Certificate Gains

Were Generally Used

to Reduce the

Administrative

Burden for

Cooperatives Rather

Than to Avoid

Payment Limits
Page 16 GAO-01-964 Farm Programs

been able to use certificates for their members who reached the payment

limit for the entire crop year, they could have gained more in benefits.

According to its calculations, one of the cooperatives told us it could have

gained about $5 million in benefits for 150 members who had reached the

payment limit. The other two cotton cooperatives were able to use

certificates. Officials at these two cooperatives estimate that they were

able to help about 340 of their large farmers who would have reached their

limit if they used marketing loan gains and loan deficiency payments and

not been able to receive any additional payments for their crops. These

two cooperatives received over $17 million in certificate gains to distribute

to their members. They would not have been able to receive all of these

funds without the availability of certificates.

In crop year 2000, however, these cooperatives shifted from obtaining loan

deficiency payments and marketing loan gains to receiving the majority of

their members’ loan program benefits through certificates. However, this

decision was not primarily to receive benefits over the payment limit

because the cooperatives did not have many farmers who would reach the

limit in that year. According to the cooperative officials, most members

were unlikely to reach the payment limit because cotton prices were not

that different from the loan rate—therefore, marketing loan gains per

pound were small. Like the rice cooperatives, the cotton cooperatives said

they used certificates primarily because the certificates eliminated the

administrative burden of monitoring payment limits. Cooperative officials

told us this is a laborious, inexact, and time-consuming process. More

importantly, certificates assist cooperatives with the orderly marketing of

their crops. Certificates provide cooperatives with flexibility in their

marketing decisions because the cooperatives do not have to make

marketing decisions according to when, or if, members reach the payment

limit.

Most of the farmers who purchased certificates through county offices did

not use them to receive benefits above the payment limit. For each farmer

who received certificate gains, we determined total certificate gains, loan

deficiency payments, and marketing loan gains by payment limit

individuals, whether they were acting alone or as members of a

partnership or other entity. The available data show that the majority of

farmers who used certificates did not receive more than $75,000 in total

benefits. In crop years 1999 and 2000, 86 and 84 percent, respectively,

received less than $75,000. In crop years 1999 and 2000, only 5 percent and

3 percent, respectively, of farmers who used certificates obtained more

than $150,000 in total benefits. That is, 47 farmers in 1999 and 100 farmers

in 2000 received more than $150,000. In 1999, 2 of the 47 farmers received
Page 17 GAO-01-964 Farm Programs

more than $1 million in payments; in 2000, 8 of the 100 farmers received

over $350,000. Figure 7 shows the percent distribution of total payments at

the payment limit level for farmers who used certificates in crop years

1999 and 2000.

Figure 7: Distribution of Total Marketing Assistance Loan Program Payments for

Farmers Who Used Certificates, Crop Years 1999 and 2000

Note: This analysis is based on payment limit persons (i.e., payments to partnerships and joint

operations are divided among their members). These data do not include payments made by

cooperatives to these farmers. Some farmers may have received payments from both USDA county

offices and cooperatives.

Source: GAO’s analysis of USDA’s payment data.

We spoke with several county office officials about the reasons farmers in

their county used certificates. The county officials said that some farmers

chose to use certificates instead of marketing loan gains or loan deficiency

payments at the beginning of the harvest because they were concerned

they might eventually reach the $75,000 payment limit. However, the

Congress subsequently raised the payment limit to $150,000. If the limit
Page 18 GAO-01-964 Farm Programs

had been raised earlier, these farmers might not have used certificates,

according to these officials.

While most farmers did not use the majority of the certificates to receive

benefits in excess of the payment limit, a handful of farmers did so.

Furthermore, in 2000, the number of farmers who needed certificates

would have been slightly higher if the Congress had not increased the

payment limit to $150,000. With certificates, farmers reaching the payment

limit can continue to obtain payments when posted county prices are

lower than loan rates, retain their crops, and sell them later when market

prices are higher than the loan rate. With program payments, and possibly

higher prices, farmers might receive a total return higher than the loan

rate. Without certificates, the farmers at the payment limit might forfeit

their crops. When farmers forfeit their crops, they receive the loan rate for

their crops, but they lose the crops and the potential for greater revenue.

Also, except for cotton, farmers are responsible for the costs of storing the

crops during the 9-month loan period before they can forfeit it.

Because certificates reduce the potential for forfeitures, they save the

government the costs associated with storing and disposing of forfeited

crops. However, certificates also lead to higher expenditures if farmers

use them to collect payments in excess of the payment limit. The

Congressional Budget Office estimates that these government savings and

costs roughly offset each other. However, according to USDA officials at

the Economic Research Service, farmers could respond to increased loan

program benefits by increasing their production of eligible crops. Because

certificates could increase overall loan program benefits, they might result

in increased federal spending for commodity loan programs.

During the course of our work, we found that, until recently, USDA had

not been reviewing cooperatives’ internal controls to ensure that the

market loan benefits they distributed to their members were valid and

accurate. In crop years 1999 and 2000, the 30 cooperatives obtained over

$1.8 billion in marketing loan program benefits to distribute to their

members. USDA is responsible for monitoring whether the controls in

place ensure that (1) cooperative members are eligible for payments, (2)

members do not exceed their payment limit, and (3) duplicate benefits are

not provided for the same crop. We have issued standards for internal

control in government that provide the overall framework for establishing

USDA’s Oversight of

Payments to

Cooperatives Is

Inadequate
Page 19 GAO-01-964 Farm Programs

and maintaining internal control.7 These standards define the minimum

level of quality acceptable for internal control in government and provide

the basis against which internal control is to be evaluated. One standard

provides that agencies should monitor the effectiveness of internal control

to assess the quality of performance over time. In considering the extent to

which the continued effectiveness of internal control is monitored, both

ongoing monitoring activities and separate evaluations of the internal

control system, or portions thereof, should be considered.

In addition, USDA guidance has a provision to review cooperative

operations. Agency officials stated that although they have not been

reviewing the cooperatives, other controls provide some assurance of

compliance with farm eligibility and payment limitation provisions. One

control procedure is USDA’s automated weekly update process, which

provides the cooperatives with information on eligible farms and payment

limits for individual persons. However, cooperative officials said that the

automated update process does not work very well at times. For example,

one cooperative official told us that erroneous USDA computer data had

contributed to the cooperative’s internal compliance report showing that

the cooperative collected over $60 million in excess of the payment limit

or for ineligible production. The data discrepancy was later resolved after

cooperative officials contacted USDA. Another control is an end-of-year

process when cooperatives report the volume in bushels, or other units of

measure, of crop placed under loan or on which they received benefits.

While USDA has these processes in place, it has yet to develop

reasonableness tests on the total payments the cooperatives received.

Without effective monitoring, USDA cannot determine how well its

internal controls are functioning or determine what, where, and how

improvements, when needed, should be implemented. Specifically,

without periodically reviewing cooperative operations, USDA cannot be

assured that only eligible farmers and eligible crops are receiving

payments or that the amount of payments is valid.

USDA has recently taken some steps to ensure that cooperatives are

operating properly. In 2001, the agency held a training session for

cooperative officials on determining their members’ payment eligibility.

They have also completed work on an audit program and recently

conducted reviews at two cooperatives. USDA officials acknowledged that

 7 Standards for Internal Control in the Federal Government (GAO/AIMD-00-21, Nov.

1999).
Page 20 GAO-01-964 Farm Programs

these reviews are important and that they should conduct more of them.

However, they told us that they did not have the resources necessary

because high turnover had resulted in a shortage of staff with the

necessary expertise to conduct the reviews. Currently, USDA has two staff

working part-time to conduct these reviews. The officials said that with

current resources, they could continue to review two cooperatives a year.

At this rate, it would take USDA about 15 years to complete the reviews.

With over $1.8 billion in payments made to cooperatives during a 2-year

period, it is important for USDA to have controls in place to ensure the

validity and accuracy of these payments. Without timely reviews of these

payments, the stewardship of public resources is at risk.

To ensure that marketing loan benefit payments made to cooperatives are

appropriate, we recommend that the Secretary of Agriculture ensure that a

sufficient number of staff with requisite skills are available to conduct

timely reviews of such payments. Specifically, the reviews should ensure

that payments are made only for eligible producers and that the payments

are valid.

We provided USDA with a draft of this report for review and comment.

The Acting Deputy Administrator for Farm Programs concurred with our

finding that oversight of payments to cooperatives is inadequate and with

our recommendation to address this problem.

We performed our work from December 2000 through August 2001 in

accordance with generally accepted government auditing standards. We

did not independently assess the accuracy and reliability of the USDA

payment files we used.

As we agreed with your offices, unless you publicly announce the contents

of this report earlier, we plan no further distribution of it until 30 days

from the date of this letter. We will then send copies of this report to the

congressional committees with jurisdiction over farm programs, the

Secretary of Agriculture, the Director of the Office of Management and

Budget, and other interested parties. We will also make copies available

upon request.

Conclusions

Recommendation

Agency Comments
Page 21 GAO-01-964 Farm Programs

If you have any questions about this report, please contact me at (202) 512-

3841. Major contributors to this report are listed in appendix IV.

Lawrence J. Dyckman

Director, Natural Resources

and Environment
Appendix I: Scope and Methodology

Page 22 GAO-01-964 Farm Programs

To determine the extent to which the increased payment limit of $150,000

raised payments under the marketing assistance loan program, we used

U.S. Department of Agriculture’s (USDA) payment data (“payment file”)

from the Price Support Loans System for crop years 1999 and 2000. While

the data for crop year 1999 are complete, the analysis for crop year 2000 is

as of May 2001. Farmers will continue to receive payments for crop year

2000 until February 2002 and, consequently, the crop year 2000 data do not

fully reflect total payments that will eventually be made for this crop year

(see table 1 for amount of crops still eligible to receive marketing loan

gains as of June 13, 2001). We used the payment file to identify the

marketing loan gains and loan deficiency payments USDA made to

farmers. This file provided by USDA has these payments allocated to

persons by identification number. We did not independently assess the

accuracy and reliability of the Price Support Loans System’s database.

Table 1: Amount of Crops Placed in the Marketing Loan Program, Crop Year 2000, and Percent Eligible for Marketing Loan

Gains, as of June 13, 2001

Crop Unit of measure

Total quantity under loan

or applied to loan

deficiency payment

Outstanding loan

quantity

Percent eligible for

marketing loan gains

as of June 13, 2001

Rapeseed Hundredweight 47,980 0 0

Canola Hundredweight 19,350,750 30,390 0.2

Oats Bushels 152,433,290 323,960 0.2

Crambe Hundredweight 344,960 1,240 0.4

Flaxseed Hundredweight 5,350,590 31,780 0.6

Sunflower seeds Hundredweight 5,591,140 84,130 1.5

Sunflower oil Hundredweight 26,644,680 405,030 1.5

Barley Bushels 260,612,470 3,976,110 1.5

Sorghum Hundredweight 169,228,600 3,036,710 1.8

Wheat Bushels 1,961,035,460 39,419,830 2.0

Soybeans Bushels 2,724,837,500 119,993,680 4.4

Rice Hundredweight 186,859,830 12,152,460 6.5

Corn Bushels 9,624,814,010 795,556,040 8.3

Cotton Pounds 7,815,693,620 1,015,011,920 13.0

Honey Hundredweight 212,864,390 30,011,150 14.1

Mustardseed Hundredweight 22,730 4,300 18.9

Safflower Hundredweight 36,080 15,900 44.1

Source: GAO’s analysis of Farm Service Agency report PSL-82R, Price Support Division Loan

Deficiency Payment and Price Support Cumulative Activity as of June 13, 2001.

To examine the extent to which payments rose above the prior payment

limit of $75,000, we totaled the payments for each identification number.

We identified 951,948 persons who received marketing loan gains and loan

Appendix I: Scope and Methodology
Appendix I: Scope and Methodology

Page 23 GAO-01-964 Farm Programs

deficiency payments for crop year 1999 and 925,482 for crop year 2000. We

focused on USDA payments made directly to these farmers and excluded

payments made through cooperative marketing associations and loan

servicing agents (referred to as cooperatives). These cooperatives, which

market the members’ crops, obtain the benefits for their members from

USDA and distribute them according to cooperative rules. Accordingly, we

were not able to identify payments received by individual farmers and to

determine if these payments exceeded payment limits. USDA provided

separate files with the total marketing loan gains and loan deficiency

payments made to each cooperative in crop years 1999 and 2000.

Cooperatives received about 14 percent of the total payments in 1999 and

about 5 percent in 2000.

To determine the extent to which the availability of commodity certificates

increased payments under the marketing assistance loan program, we

used USDA’s commodity certificate data from the Price Support Loans

System (“certificate file”) for crop years 1999 and 2000 for farmers and

cooperatives that received benefits through USDA county offices. These

data are as of April 2001. To determine the reliability of the certificate

data, we validated the data for a random sample of 50 certificates, 25 for

each crop year. We contacted 43 county offices that processed the sample

certificates to determine the accuracy of selected data fields. The data

fields we validated include producer, loan number, transaction date, crop,

certificate value, certificate gain, and the outstanding amount. We found

the error rate contained in the sample was less than 1 percent in 1999 and

zero in 2000.

Cotton cooperatives apply for marketing benefits, including certificate

gains, using an automated process managed by the Kansas City

Management Office (KCMO) in Kansas City, Kansas, instead of the USDA

county offices. For each cotton cooperative, we obtained total marketing

loan benefits and the total certificate gains from the Automated Cotton

Reporting System in KCMO. These data are as of March 2001.

To determine the extent to which farmers used commodity certificates to

receive gains that would otherwise exceed the payment limits, we

performed a computerized match to compare farmer identification

numbers from the certificate file to the payment file. For each matching

identification number, we totaled the certificate gains and marketing loan

benefits. We compared these payments to the original dollar limit—

$75,000—and to the new dollar limit of $150,000. We identified 526 of 671

identification numbers in the certificate file that matched the payment file

for crop year 1999 and 2,291 of 2,713 that matched in crop year 2000.
Appendix I: Scope and Methodology

Page 24 GAO-01-964 Farm Programs

For the identification numbers that did not match, we conducted further

analysis to determine the total certificate gains and marketing loan

benefits. The certificate file does not have farm entities that are

partnerships or joint operations broken down by the number of persons

receiving the payment, but the payment file does. We provided KCMO a list

for each year of the identification numbers in the certificate file that did

not have a match in the payment file. KCMO used the Permitted Entity file

for crop years 1999 and 2000 to provide us a list of the members of each

partnership and joint operation as well as their individual identification

number and share of payments. Using this information, we determined the

certificate gains for each individual member. This information was

matched with the payment file to obtain each member’s total certificate

gains and marketing loan benefits.

While we have the total certificate gains for each cooperative, we do not

have data on how the cooperatives distributed these funds to their

members. Without these data, we cannot determine the number of

cooperative members who obtained certificate gains over the payment

limit. To address this data limitation, we interviewed officials from two

rice and four cotton cooperatives to discuss their reasons for using

certificates. These cooperatives accounted for 98 percent of the certificate

gains obtained by cooperatives in 1999 and 92 percent in 2000.

Finally, to obtain information on how the marketing loan assistance

program operates, we reviewed relevant laws, regulations, and notices and

handbooks from USDA’s Farm Service Agency. We also interviewed

officials from USDA’s Farm Service Agency and Economic Research

Service officials in Washington, D.C. In addition, we visited four USDA

county offices in Arkansas and Texas and discussed certificates via

telephone with 43 county offices. Finally, we met with academia and

representatives from the National Cotton Council in Memphis, Tennessee,

and Plains Cotton Growers, Inc., in Lubbock, Texas.

We performed our work from December 2000 through August 2001 in

accordance with generally accepted government auditing standards.
Appendix II: Crops and Loan Quantities

Redeemed With Certificates, Crop Years 1999

and 2000

Page 25 GAO-01-964 Farm Programs

Table 2: Amount of Crop Under Loan Redeemed With Certificates, Crop Years 1999

and 2000

Loan quantities redeemed with

certificates

Crop Crop year 1999 Crop year 2000

Barley 119,455 2,077,697

Canola 0 588,091

Corn 9,146,862 88,561,202

Cotton 604,028 5,517,117

Crambe 0 231,924

Flaxseed 0 109,603

Oats 1,306 89,260

Rice 23,883,058 31,174,330

Sorghum 99,112 1,645,365

Soybeans 3,538,048 32,775,955

Sunflower seed 0 61,617

Sunflower oil 183,108 932,033

Wheat 984,207 22,944,892

Notes: Crop year 2000 data are as of April 2001. Quantities are in bushels for barley, corn, oats,

soybeans and wheat; hundredweight for canola, crambe, flaxseed, rice, sorghum, sunflower seed,

and sunflower oil; and pounds for cotton.

Source: GAO’s analysis of USDA’s Price Support Loans System payment files and Automated Cotton

Reporting System payments to cotton cooperatives marketing associations and loan servicing agents.

Appendix II: Crops and Loan Quantities

Redeemed With Certificates, Crop Years 1999

and 2000
Appendix III: Farmers, by State, Receiving

More than $75,000 Due to Increase in the

Payment Limit, Crop Years 1999 and 2000

Page 26 GAO-01-964 Farm Programs

In both crop years 1999 and 2000, less than 1 percent of farmers who

received marketing loan benefits from USDA’s county offices received

over $75,000 in market loan gains and loan deficiency payments combined.

Table 3 provides the number of payment limit individuals in each state

who received more than $75,000.

Table 3: Farmers Receiving More Than $75,000 in Total Loan Deficiency Payments

and Marketing Loan Gains by State, Crop Years 1999 and 2000

Total number of farmers receiving

benefits over $75,000

State Crop Year 1999 Crop Year 2000

Alabama 92 5

Alaska 0 0

Arizona 98 10

Arkansas 520 344

California 269 126

Colorado 126 44

Connecticut 1 0

Delaware 15 30

Florida 30 5

Georgia 384 10

Hawaii 0 0

Idaho 6 36

Illinois 335 491

Indiana 203 254

Iowa 321 296

Kansas 384 140

Kentucky 36 151

Louisiana 176 85

Maine 0 0

Massachusetts 0 0

Maryland 53 88

Michigan 79 51

Minnesota 376 323

Mississippi 376 110

Missouri 264 324

Montana 22 19

Nebraska 228 212

Nevada 0 1

New Hampshire 0 0

New Jersey 1 3

New Mexico 33 9

New York 5 0

North Carolina 246 95

Appendix III: Farmers, by State, Receiving

More than $75,000 Due to Increase in the

Payment Limit, Crop Years 1999 and 2000
Appendix III: Farmers, by State, Receiving

More than $75,000 Due to Increase in the

Payment Limit, Crop Years 1999 and 2000

Page 27 GAO-01-964 Farm Programs

Total number of farmers receiving

benefits over $75,000

State Crop Year 1999 Crop Year 2000

North Dakota 174 621

Ohio 98 169

Oklahoma 32 18

Oregon 1 10

Pennsylvania 3 11

Rhode Island 0 0

South Carolina 75 3

South Dakota 413 434

Tennessee 194 49

Texas 683 138

Utah 0 0

Vermont 0 0

Virginia 71 48

Washington 2 21

West Virginia 0 0

Wisconsin 75 32

Wyoming 0 2

Total 6,500 4,818

Note: These data does not include payments made by cooperatives. Cooperative payments

represented 14 percent of total marketing loan gains and loan deficiency payments in crop year 1999

and 5 percent in crop year 2000.

Note: Although the payment limit for total marketing loan gains and loan deficiency payments is

$150,000 for crop years 1999 and 2000, in a few cases the data provided by USDA has individuals

that received more than $150,000.

Source: GAO’s analysis of USDA’s payment data.
Appendix IV: State-by State Analysis of

Certificate Gains, Crop Years 1999 and 2000

Page 28 GAO-01-964 Farm Programs

Table 4: Total Certificate Gains by State, Including Number of Users, Percent of Total Certificate Gains Received, and Percent

of Gains Obtained by Cooperatives and Individual Farmers, Crop Year 1999

State

Total number of

individuals and

cooperatives

using certificates

Total certificate

gains

Percent of total

certificate gains

Percent of gains

received by

cooperatives

Percent of gains

received by

individual farmers

Alabama 3 $87,474 a100

Arizona 7 136,685 a100

Arkansas 68 58,160,351 59.1 94 6

California 30 19,611,423 19.9 89 11

Colorado 11 200,171 a100

Florida 1 24,202 a100

Georgia 25 811,863 a100

Idaho 1 6,975 a100

Illinois 39 391,037 a100

Indiana 23 198,911 a100

Iowa 55 600,125 a100

Kansas 17 111,280 a100

Kentucky 1 1,360 a100

Louisiana 59 2,903,295 3.0 100

Maryland 2 2,817 a100

Michigan 10 149,509 a100

Minnesota 34 318,953 a100

Mississippi 25 954,676 a6 94

Missouri 31 636,820 a100

Montana 4 22,471 a100

Nebraska 21 515,684 a100

New Mexico 3 113,293 a100

New York 1 315 a100

North Carolina 13 185,219 a59 41

North Dakota 10 134,224 a100

Ohio 9 24,919 a100

South Carolina 5 105,827 a 100

South Dakota 59 1,565,011 1.6 100

Tennessee 19 459,133 a42 58

Texas 76 9,261,526 9.4 47 53

Utah 1 426 a 100

Virginia 16 228,410 a100

Washington 1 3,708 a 100

West Virginia 1 770 a100

Wisconsin 8 459,033 a 100

Total 689 $98,387,896

a

Less than 1 percent.

Appendix IV: State-by State Analysis of

Certificate Gains, Crop Years 1999 and 2000
Appendix IV: State-by State Analysis of

Certificate Gains, Crop Years 1999 and 2000

Page 29 GAO-01-964 Farm Programs

Note: The following states did not receive certificate gains for crop year 1999: Alaska, Connecticut,

Delaware, Hawaii, Maine, Massachusetts, Nevada, New Hampshire, New Jersey, Oklahoma,

Oregon, Pennsylvania, Rhode Island, Vermont, and Wyoming.

Source: GAO’s analysis of USDA’s Price Support Loans System payment files and Automated

Cotton Reporting System payments to cotton cooperative marketing associations and loan servicing

agents.

Table 5: Total Certificate Gains by State, Including Number of Users, Percent of Gains Each State Received and Percent of

Gains Obtained by Cooperatives and Individual Farmers, Crop Year 2000

State

Total number of

individuals and

cooperatives using

certificates

Total certificate

gains

Percent of total

certificate gains

Percent of state

gains received

by cooperatives

Percent of state

gains received by

individual farmers

Alabama 2 $70,553 a100

Arkansas 159 91,975,265 32.6 91 9

California 19 18,565,241 6.6 93 7

Colorado 8 731,096 a100

Delaware 16 423,387 a100

Georgia 5 158,143 a100

Idaho 10 339,898 a100

Illinois 342 9,730,436 3.5 100

Indiana 249 7,458,596 2.6 100

Iowa 107 2,754,687 a100

Kansas 92 2,129,147 a a 100

Kentucky 84 3,281,929 1.2 100

Louisiana 161 4,459,712 1.6 100

Maryland 25 1,016,002 a100

Michigan 12 319,375 a100

Minnesota 124 4,214,530 1.5 21 79

Mississippi 26 56,477,316 20 98 2

Missouri 202 6,942,070 2.5 100

Montana 12 321,899 a100

Nebraska 79 2,376,856 a100

New Mexico 1 92,765 a 100

North Carolina 67 4,630,648 1.6 59 41

North Dakota 342 11,716,235 4.2 100

Ohio 54 1,644,086 a100

Oklahoma 13 409,408 a100

Oregon 6 245,953 a100

Pennsylvania 2 50,142 a100

South Carolina 5 488,609 a 100

South Dakota 255 11,017,550 3.9 100

Tennessee 86 3,563,470 1.3 68 32

Texas 134 32,901,833 11.7 81 19

Virginia 38 1,203,428 a 100

Washington 10 510,724 a100
Appendix IV: State-by State Analysis of

Certificate Gains, Crop Years 1999 and 2000

Page 30 GAO-01-964 Farm Programs

State

Total number of

individuals and

cooperatives using

certificates

Total certificate

gains

Percent of total

certificate gains

Percent of state

gains received

by cooperatives

Percent of state

gains received by

individual farmers

Wisconsin 3 17,840 a100

Totals 2750 282,238,829

a

Less than 1 percent.

Notes: Data for crop year 2000 are as of April 2001. The following states did not receive certificate

gains for crop year 2000: Alaska, Arizona, Connecticut, Florida, Hawaii, Maine, Massachusetts,

Nevada, New Hampshire, New Jersey, New York, Rhode Island, Utah, Vermont, West Virginia, and

Wyoming.

Source: GAO’s analysis of USDA’s Price Support Loans System payment files and Automated

Cotton Reporting System payments to cotton cooperative marketing associations and loan servicing

agents.
Appendix V: State-by State Analysis of Total

Marketing Loan Program Benefits in Excess

of $75,000, Crop Years 1999 and 2000

Page 31 GAO-01-964 Farm Programs

Table 6: Number of Farmers Who Received Total Marketing Loan Program Benefits (Market Loan Gains, Loan Deficiency

Payments and Certificate Gains Combined) Between $75,000 and $150,000 and in Excess of $150,000, Crop Years 1999 and

2000

State

Total number of farmers

receiving benefits between

$75,000 and $150,000

in crop year 1999

Total number of farmers

receiving benefits over

$150,000 in crop

year 1999

Total number of farmers

receiving benefits

between $75,000 and

$150,000 in crop

year 2000

Total number of

farmers receiving

benefits over

$150,000 in crop

year 2000

Alabama 90 2 5 1

Alaska 0 0 0 0

Arizona 86 15 8 1

Arkansas 495 47 357 47

California 227 49 125 6

Colorado 111 16 41 6

Connecticut 1 0 0 0

Delaware 15 0 22 14

Florida 30 1 5 0

Georgia 341 44 9 4

Hawaii 0 0 0 0

Idaho 7 0 32 8

Illinois 324 17 493 163

Indiana 195 8 290 102

Iowa 319 11 272 60

Kansas 372 11 133 52

Kentucky 35 1 146 35

Louisiana 173 14 87 14

Maine 0 0 0 0

Massachusetts 0 0 0 0

Maryland 53 1 74 18

Michigan 77 4 54 4

Minnesota 369 11 307 72

Mississippi 367 18 109 5

Missouri 252 17 300 87

Montana 21 3 15 11

Nebraska 221 12 205 42

Nevada 0 0 1 0

New Hampshire 0 0 0 0

New Jersey 1 0 3 0

New Mexico 27 7 6 1

New York 5 0 0 0

North Carolina 238 8 92 23

North Dakota 172 4 567 228

Ohio 96 2 174 14

Oklahoma 31 1 11 10

Oregon 1 0 10 3

Appendix V: State-by State Analysis of Total

Marketing Loan Program Benefits in Excess

of $75,000, Crop Years 1999 and 2000
Appendix V: State-by State Analysis of Total

Marketing Loan Program Benefits in Excess

of $75,000, Crop Years 1999 and 2000

Page 32 GAO-01-964 Farm Programs

State

Total number of farmers

receiving benefits between

$75,000 and $150,000

in crop year 1999

Total number of farmers

receiving benefits over

$150,000 in crop

year 1999

Total number of farmers

receiving benefits

between $75,000 and

$150,000 in crop

year 2000

Total number of

farmers receiving

benefits over

$150,000 in crop

year 2000

Pennsylvania 3 0 10 1

Rhode Island 0 0 0 0

South Carolina 72 3 3 2

South Dakota 388 39 382 140

Tennessee 187 7 46 15

Texas 623 70 135 45

Utah 0 0 0 0

Vermont 0 0 0 0

Virginia 67 8 36 21

Washington 2 0 15 8

West Virginia 0 0 0 0

Wisconsin 71 4 32 1

Wyoming 0 0 2 0

Total 6,165 455 4,614 1,264

Note: These data represent payments made by USDA county offices. These data do not include

payments made by cooperatives to their members. Cooperative payments represented 14 percent of

total marketing loan gains and loan deficiency payments in crop year 1999 and 5 percent in crop year

2000. Cooperative payments to members represented 78 percent of total certificate gains in crop

year 1999 and 67 percent in crop year 2000.

Note: The number of farmers is based on payment limits for individuals, whether they are acting

alone or as members of a partnership or other entity. For example, each member of a partnership is

listed as a farmer.

Note: Certificate gains are not typically allocated to payment limits for individuals because the

payment limit does not apply to certificate gains. We obtained information from USDA to allocate

certificate gains to payment limit individuals for this analysis.

Source: GAO’s analysis of USDA’s payment data.
Appendix VI: GAO Contacts and Staff

Acknowledgments

Page 33 GAO-01-964 Farm Programs

Lawrence Dyckman (202) 512-3841

Gregory Kosarin (202) 512-6526

In addition to those named above, Leigh White; Cleofas Zapata, Jr.; Charles

W. Bausell, Jr.; James W. Turkett; and Carol Herrnstadt Shulman made key

contributions to this report.

Appendix VI: GAO Contacts and Staff

Acknowledgments

GAO Contacts

Staff

Acknowledgments

(360031)

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