Cotton Loans

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UNITED STATES DEPARTMENT OF AGRICULTURE

FARM SERVICE AGENCY FACT SHEET

May 2017

Fees and Charges Assessed by the Commodity Credit Corporation for 

Cotton Loans, Loan Forfeitures and Relocation of Collateral

OVERVIEW

The U.S. Department of Agriculture (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. In place of using MALs, producers 

may elect to take a loan deficiency payment (LDP) 

that provides a payment equal to any net gain from 

an MAL.

This fact sheet explains various fees and charges 

associated with cotton MALs, LDPs and the 

relocation of cotton loan collateral.

LOAN SERVICE FEE

CCC assesses a fee to cover a portion of its 

administrative costs for providing the loan. This 

loan service fee is deducted from the total amount 

of the loan before it is disbursed. The service fee is 

the smaller of one-half of 1 percent (0.5 percent), 

multiplied by the gross loan amount, or $7.50 per 

loan (on the initial loan only, if there are multiple 

loans) plus 90 cents for each bale of cotton. 

No service fees are assessed for processing or 

disbursing LDPs.

RESEARCH AND PROMOTION FEES

CCC deducts research and promotion fees 

from upland cotton loan proceeds and LDPs in 

accordance with regulations for administering the 

Cotton Research and Promotion Act. Research and 

promotion fees do not apply to ELS cotton loan 

disbursements. CCC remits all amounts collected 

to the Cotton Board. For upland cotton loans, the 

fee is $1.00 per bale plus one-half percent of the 

total loan value. For LDPs, the fee is one-half 

percent of the LDP. These fees are established by 

statute.

COTTON CLERK FEE

If a cotton clerk prepares loan documents at the 

request of a producer, the clerk may collect fees 

deducted from the loan proceeds, not to exceed the 

following rates: 25 cents for the first bale plus 

15 cents for bales two through six; for seven or 

more bales, $1.00 plus 10 cents for each bale over 

six.

CHARGES DUE AT TIME OF 

COLLATERAL FORFEITURE

Producers are responsible for certain unpaid 

warehouse charges if they forfeit their cotton loan 

collateral to CCC instead of repaying the loan 

obligation. CCC does not assess any fees of its 

own on forfeited cotton. However, CCC pays any 

unpaid warehouse fees that apply to the forfeited 

cotton and then invoices the producer for such 

charges. These charges are discussed below and 

normally include warehouse receiving charges, 

unpaid warehouse compression, storage charges 

that accrued prior to the loan and storage charges 

that accrued during the loan period but that exceed 

authorized storage credits.

UNPAID WAREHOUSE COMPRESSION 

CHARGES

CCC disburses MALs for cotton with unpaid 

warehouse compression charges. However, CCC 

holds the producer responsible for such charges. If 

the cotton under MAL is forfeited, CCC invoices 

the producer for all warehouse compression 

charges listed as unpaid on the warehouse receipt.

WAREHOUSING RECEIVING AND 

PRE-LOAN STORAGE CHARGES

The cotton producer (or designated agent repaying 

the loan) is responsible for any warehouse 

receiving charges for forfeited cotton. If the 

cotton under an MAL is forfeited, CCC pays any 

unpaid warehouse receiving charges along with 

any storage charges that accrued from the date 

the warehouse received the cotton to the date the 

loan began. CCC invoices the producers for these 

charges.
FACT SHEET

Fees and Charges Assessed by CCC May 2017

STORAGE CHARGES DURING THE 

LOAN PERIOD OF FORFEITED COTTON

A producer’s responsibility for paying storage 

charges is different for forfeited upland cotton than 

it is for Extra Long Staple (ELS) cotton. This is 

because current authority provides storage credits 

for upland cotton so that upland loan obligations 

can be repaid at a value equal to the adjusted world 

price level. Thus, if ELS loan collateral is forfeited 

to CCC, the producer is responsible for all storage 

charges that accrued from the time the warehouse 

received the cotton to the date of forfeiture. CCC 

pays these accrued charges to the warehouse and 

subsequently invoices the producer.

For upland cotton loan collateral that is forfeited, 

CCC will pay all or a portion of warehouse storage 

charges that accrue, but only for the period that the 

cotton was pledged as loan collateral. CCC storage 

credits begin on the “documents received date” 

of the loan. This date is the latter of 1) the date all 

loan application documents were received or 2) the 

date warehouse receipts were received by CCC. 

Under this definition, CCC may calculate storage 

credits starting on a date previous to the loan 

disbursement date.

Storage credits are based on the lower of the actual 

warehouse storage rate or the maximum storage 

credit rate as established according to statutory 

limits. For the 2014 through 2018 crops of upland 

cotton, CCC calculates storage credits based on 

the lesser of the warehouse’s 2006 crop tariff rate 

or the maximum rate where stored. For the 2014 

through 2018 crops, the maximum storage credit 

rates are $3.9330 per bale per month for Arizona 

and California, and $2.394 per bale per month for 

all other states. These monthly rates are converted 

to an equivalent daily-rate basis.

If the cotton loan collateral is forfeited, CCC 

automatically pays the warehouse any unpaid 

receiving charges and all accrued storage charges 

from the date the cotton was received based on 

the warehouse’s storage rate for loan cotton. CCC 

then invoices the producer for any warehouse 

charges paid by CCC including unpaid warehouse 

receiving charges, unpaid compression charges, 

warehouse storage charges that accrued before the 

date all documents required from the producer for 

the loan were provided to the county office and 

warehouse storage charges that accrued starting the 

date all documents were received that exceed the 

storage credit rate.

LOAN OFFSET AND ASSIGNMENT 

CHARGES

A loan offset charge is an amount deducted from 

a loan or LDP to pay an amount owed to CCC, 

the Farm Service Agency (FSA) or other federal 

creditors, or for other debts having lien status 

under state law. An assignment charge is a transfer 

of a person’s right to receive a payment to another 

party.

CHARGES ASSOCIATED WITH COTTON 

TRANSFERS

CCC does not assume responsibility for charges 

associated with relocating warehouse-stored 

loan collateral to another warehouse, regardless 

of the reason the cotton is relocated. This policy 

applies even if CCC informs a producer that cotton 

loan collateral must be moved, such as when a 

warehouse closes or loses its authority to store 

loan bales. CCC approves requests from agents 

authorized by producers to transfer loan cotton 

only if such agents agree to pay all such charges 

associated with the transfer. Thus, in most cases, 

the producer is not billed for any charges incurred 

due to a relocation made by the producer’s agent. 

However, producers may be responsible for 

relocation charges incurred but not paid by their 

agent. Individual transfer charges are explained in 

the table on page 3.

FOR MORE INFORMATION

This fact sheet is for informational purposes only; 

other restrictions may apply. For more information 

on this and other FSA programs, visit FSA’s web 

site at www.fsa.usda.gov or contact your local 

FSA county office or USDA service center. To find 

your local office, visit http://offices.usda.gov.

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Charge Loan Without Transfer Transfer of Loan Collateral

Original Storing 

Warehouse

Shipping 

(Original) 

Warehouse

Receiving Warehouse

Receiving at 

Warehouse

Paid by buyer upon loadout. If collateral is forfeited, 

paid by CCC and billed to 

producer.

Paid by requestor 

of transfer.

Paid by requestor of transfer at load-out. If 

forfeited, paid by CCC, then billed to producer.

Pre-Loan 

Storage

Paid by producer or buyer. 

If collateral is forfeited, 

paid by CCC and billed 

to producer based on the 

Cotton Storage Agreement 

(CSA) rate for loan cotton.

Paid by requestor 

of transfer.

Not applicable. Cotton is under loan when 

received under a transfer.

Accrued Storage 

During Loan 

Period

Paid by buyer for redeemed 

cotton. CCC may reduce 

the loan repayment amount 

by all or a portion of the 

storage charges during the 

loan period based on CCC’s 

storage credit rate for the 

warehouse. If cotton forfeits, 

charges are paid by CCC and 

any amount exceeding the 

storage credit rate is billed to 

producer.

Paid by requestor 

of transfer.

Paid by buyer for redeemed cotton. The loan 

redemption amount may be reduced based on 

the CCC storage credit rate applicable at the 

shipping warehouse for the entire loan period; 

credits are reduced by a fixed two-day period for 

time in transit and may be subject to the 75-day 

limit from the date a new electronic warehouse 

receipt is issued by receiving warehouse. If 

cotton forfeits, CCC pays receiving warehouse 

based on its rate for loan cotton; any amount 

exceeding the storage credit rate at receiving 

warehouse is billed to producer.

After Loan 

Storage

Paid by buyer. If forfeited, 

CCC pays the warehouse 

at the CSA rate for CCCowned cotton.

Not applicable 

because under 

a transfer any 

after-loan 

storage charges 

would occur at 

the receiving 

warehouse.

Paid by buyer. If forfeited, CCC pays the 

warehouse at the CSA rate for CCC-owned 

cotton.

Compression Paid by buyer upon load-out, 

regardless of whether loan is 

repaid or if cotton is bought 

from CCC. If cotton forfeits, 

billed by CCC to producer.

Paid by requestor 

of transfer.

Paid by buyer upon load-out, regardless of 

whether loan is repaid or if cotton is bought 

from CCC. If cotton forfeits, billed by CCC to 

producer based on rate at receiving warehouse.

Load-Out Paid by buyer. Paid by requestor 

of transfer.

Paid by buyer.

Freight to 

Receiving 

Warehouse

Paid by producer. N/A Paid by requestor of transfer.

FACT SHEET

Fees and Charges Assessed by CCC May 2017

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