(C) minimize the cost incurred by the Fed-
eral Government in storing the commodity; 
(D) allow the commodity produced in the 
United States to be marketed freely and competi-
tively, both domestically and internationally; 
and 
(E) minimize discrepancies in marketing 
loan benefits across State boundaries and across 
county boundaries, if applicable. 
(b) REPAYMENT RATES FOR UPLAND COTTON AND 
RICE.—The Secretary shall permit producers to repay a 
marketing assistance loan under section 1201 for upland 
cotton, long grain rice, medium grain rice, and short grain 
rice at a rate that is the lesser of— 
(1) the loan rate established for the commodity 
under section 1202, plus interest (determined in ac-
cordance with section 163 of the Federal Agriculture 
Improvement and Reform Act of 1996 (7 U.S.C. 
7283)); or 
(2) the prevailing world market price for the 
commodity (adjusted to United States quality and lo-
cation), as determined by the Secretary. 
(c) REPAYMENT RATES FOR EXTRA LONG STAPLE 
COTTON.—Repayment of a marketing assistance loan for 
extra long staple cotton shall be at the loan rate established 
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for the commodity under section 1202, plus interest (deter-
mined in accordance with section 163 of the Federal Agri-
culture Improvement and Reform Act of 1996 (7 U.S.C. 
7283)). 
(d) PREVAILING WORLD MARKET PRICE.—For pur-
poses of this section and section 1207, the Secretary shall 
prescribe by regulation— 
(1) a formula to determine the prevailing world 
market price for upland cotton, which shall be based 
on the Far East price of upland cotton; 
(2) a formula to determine the prevailing world 
market price for— 
(A) long grain rice; and 
(B) medium and short grain rice; 
(3) a mechanism by which the Secretary will an-
nounce periodically the prevailing world market price 
for upland cotton, long grain rice, and medium and 
short grain rice; and 
(4) a mechanism by which the Secretary will 
make the adjustments, required by subsection (e), to 
the prevailing world market price for upland cotton, 
long grain rice, and medium and short grain rice. 
(e) ADJUSTMENT
OF PREVAILING WORLD MARKET 
PRICE FOR UPLAND COTTON AND RICE.— 
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(1) RICE.—The prevailing world market price 
for long grain, medium grain, and short grain rice 
determined in subsection (d) shall be adjusted to 
United States quality and location. 
(2) COTTON.—The prevailing world market price 
for upland cotton, determined in subsection (d) shall 
be— 
(A) adjusted to United States quality and 
location, with such quality adjustment to in-
clude— 
(i) any existing United States loan 
schedule premiums for Comparable United 
States Quality; and 
(ii) a reduction equal to any United 
States Premium Factor to upland cotton of 
a quality higher than Middling (M) 13⁄32- 
inch; and 
(B) adjusted to take into account average 
costs to market the commodity, including average 
transportation costs, as determined by the Sec-
retary. 
(f) ADDITIONAL ADJUSTMENT AUTHORITY REGARDING 
PREVAILING WORLD MARKET PRICE FOR UPLAND COT-
TON.— 
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(1) IN GENERAL.—During the period beginning 
on the date of the enactment of this Act through July 
31, 2013, the Secretary may further adjust the pre-
vailing world market price for upland cotton (ad-
justed under subsection (d)) if the Secretary deter-
mines such adjustment necessary— 
(A) to minimize potential loan forfeitures; 
(B) to minimize the accumulation of stocks 
of the commodity by the Federal Government; 
(C) to allow the commodity produced in the 
United States to be marketed freely and competi-
tively, both domestically and internationally; 
(D) to ensure that United States cotton is 
competitive in world markets; and 
(E) to ensure an appropriate transition be-
tween current-crop and forward-crop price 
quotations, except that the Secretary may use 
forward-crop price quotations prior to July 31 of 
the current marketing year only if there are less 
than three current-crop price quotations and 
only if such forward-crop price quotation is the 
lowest such quotation available. 
(2) GUIDELINES
FOR
ADDITIONAL
ADJUST-
MENT.—In further adjusting the prevailing world 
market price for upland cotton under this subsection, 
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the Secretary shall establish a mechanism for deter-
mining and announcing such adjustments in order to 
avoid undue disruption in the United States market. 
(g) REPAYMENT RATES
FOR CONFECTIONERY
AND 
OTHER KINDS
OF SUNFLOWER SEEDS.—The Secretary 
shall permit the producers on a farm to repay a marketing 
assistance loan under section 1201 for confectionery and 
each other kind of sunflower seed (other than oil sunflower 
seed) at a rate that is the lesser of— 
(1) the loan rate established for the commodity 
under section 1202, plus interest (determined in ac-
cordance with section 163 of the Federal Agriculture 
Improvement and Reform Act of 1996 (7 U.S.C. 
7283)); or 
(2) the repayment rate established for oil sun-
flower seed. 
(h) QUALITY GRADES FOR DRY PEAS, LENTILS, AND 
SMALL CHICKPEAS.—The loan repayment rate for dry 
peas, lentils, and small chickpeas shall be based on the qual-
ity grades for the applicable commodity. 
SEC. 1205. LOAN DEFICIENCY PAYMENTS. 
(a) AVAILABILITY OF LOAN DEFICIENCY PAYMENTS.— 
(1) IN GENERAL.—Except as provided in sub-
section (d), the Secretary may make loan deficiency 
payments available to producers on a farm that, al-
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though eligible to obtain a marketing assistance loan 
under section 1201 with respect to a loan commodity, 
agree to forgo obtaining the loan for the commodity 
in return for loan deficiency payments under this sec-
tion. 
(2) UNSHORN PELTS, HAY, AND SILAGE.— 
(A) MARKETING ASSISTANCE LOANS.—Sub-
ject to subparagraph (B), nongraded wool in the 
form of unshorn pelts and hay and silage derived 
from a loan commodity are not eligible for a 
marketing assistance loan under section 1201. 
(B) LOAN DEFICIENCY PAYMENT.—Effective 
for the 2008 through 2012 crop years, the Sec-
retary may make loan deficiency payments 
available under this section to producers on a 
farm that produce unshorn pelts or hay and si-
lage derived from a loan commodity. 
(b) COMPUTATION.—A loan deficiency payment for a 
loan commodity or commodity referred to in subsection 
(a)(2) shall be computed by multiplying— 
(1) the payment rate determined under sub-
section (c) for the commodity; by 
(2) the quantity of the commodity produced by 
the eligible producers, excluding any quantity for 
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which the producers obtain a marketing assistance 
loan under section 1201. 
(c) PAYMENT RATE.— 
(1) IN GENERAL.—In the case of a loan com-
modity, the payment rate shall be the amount by 
which— 
(A) the loan rate established under section 
1202 for the loan commodity; exceeds 
(B) the rate at which a marketing assist-
ance loan for the loan commodity may be repaid 
under section 1204. 
(2) UNSHORN PELTS.—In the case of unshorn 
pelts, the payment rate shall be the amount by 
which— 
(A) the loan rate established under section 
1202 for ungraded wool; exceeds 
(B) the rate at which a marketing assist-
ance loan for ungraded wool may be repaid 
under section 1204. 
(3) HAY AND SILAGE.—In the case of hay or si-
lage derived from a loan commodity, the payment 
rate shall be the amount by which— 
(A) the loan rate established under section 
1202 for the loan commodity from which the hay 
or silage is derived; exceeds 
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(B) the rate at which a marketing assist-
ance loan for the loan commodity may be repaid 
under section 1204. 
(d) EXCEPTION FOR EXTRA LONG STAPLE COTTON.— 
This section shall not apply with respect to extra long staple 
cotton. 
(e) EFFECTIVE DATE FOR PAYMENT RATE DETER-
MINATION.—The Secretary shall determine the amount of 
the loan deficiency payment to be made under this section 
to the producers on a farm with respect to a quantity of 
a loan commodity or commodity referred to in subsection 
(a)(2) using the payment rate in effect under subsection (c) 
as of the date the producers request the payment. 
SEC. 1206. PAYMENTS IN LIEU OF LOAN DEFICIENCY PAY-
MENTS FOR GRAZED ACREAGE. 
(a) ELIGIBLE PRODUCERS.— 
(1) IN GENERAL.—Effective for the 2008 through 
2012 crop years, in the case of a producer that would 
be eligible for a loan deficiency payment under sec-
tion 1205 for wheat, barley, or oats, but that elects to 
use acreage planted to the wheat, barley, or oats for 
the grazing of livestock, the Secretary shall make a 
payment to the producer under this section if the pro-
ducer enters into an agreement with the Secretary to 
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forgo any other harvesting of the wheat, barley, or 
oats on that acreage. 
(2) GRAZING OF TRITICALE ACREAGE.—Effective 
for the 2008 through 2012 crop years, with respect to 
a producer on a farm that uses acreage planted to 
triticale for the grazing of livestock, the Secretary 
shall make a payment to the producer under this sec-
tion if the producer enters into an agreement with the 
Secretary to forgo any other harvesting of triticale on 
that acreage. 
(b) PAYMENT AMOUNT.— 
(1) IN GENERAL.—The amount of a payment 
made under this section to a producer on a farm de-
scribed in subsection (a)(1) shall be equal to the 
amount determined by multiplying— 
(A) the loan deficiency payment rate deter-
mined under section 1205(c) in effect, as of the 
date of the agreement, for the county in which 
the farm is located; by 
(B) the payment quantity determined by 
multiplying— 
(i) the quantity of the grazed acreage 
on the farm with respect to which the pro-
ducer elects to forgo harvesting of wheat, 
barley, or oats; and 
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(ii) the payment yield in effect for the 
calculation of direct payments under sub-
title A with respect to that loan commodity 
on the farm or, in the case of a farm with-
out a payment yield for that loan com-
modity, an appropriate yield established by 
the Secretary in a manner consistent with 
section 1102 of the Farm Security and 
Rural Investment Act of 2002 (7 U.S.C. 
7912). 
(2) GRAZING
OF
TRITICALE
ACREAGE.—The 
amount of a payment made under this section to a 
producer on a farm described in subsection (a)(2) 
shall be equal to the amount determined by multi-
plying— 
(A) the loan deficiency payment rate deter-
mined under section 1205(c) in effect for wheat, 
as of the date of the agreement, for the county in 
which the farm is located; by 
(B) the payment quantity determined by 
multiplying— 
(i) the quantity of the grazed acreage 
on the farm with respect to which the pro-
ducer elects to forgo harvesting of triticale; 
and 
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(ii) the payment yield in effect for the 
calculation of direct payments under sub-
title A with respect to wheat on the farm or, 
in the case of a farm without a payment 
yield for wheat, an appropriate yield estab-
lished by the Secretary in a manner con-
sistent with section 1102 of the Farm Secu-
rity and Rural Investment Act of 2002 (7 
U.S.C. 7912). 
(c) TIME, MANNER, AND AVAILABILITY OF PAYMENT.— 
(1) TIME AND MANNER.—A payment under this 
section shall be made at the same time and in the 
same manner as loan deficiency payments are made 
under section 1205. 
(2) AVAILABILITY.— 
(A) IN GENERAL.—The Secretary shall es-
tablish an availability period for the payments 
authorized by this section. 
(B) CERTAIN COMMODITIES.—In the case of 
wheat, barley, and oats, the availability period 
shall be consistent with the availability period 
for the commodity established by the Secretary 
for marketing assistance loans authorized by this 
subtitle. 
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