The Commodity Credit Corporation: In Brief
Released: 2019-09-04T00:00:00

T he Commodity Credit Corporation (CCC) has served as the financial institution for carrying out federal farm commodity price support and production programs since 1933. It is a wholly government-owned entity that exists solely to finance authorized programs that support U.S. agriculture. It is subject to the supervision and direction of the Secretary of Agriculture at the U.S. Department of Agriculture (USDA). The CCC mission was conceived mostly as one of commodity support, but over time it has expanded to include an increasingly broad array of programs, including export and commodity programs, resource conservation, disaster assistance, agricultural research, and bioenergy development.

While CCC operates according to a large number of statutory authorities, its broad powers allow it to carry out almost any operation required to meet the objectives of supporting U.S. agriculture. This broad mandate, and its significant borrowing authority, has traditionally drawn little attention. For most of its history, CCC's responsibilities have been expanded through legislative directives such as the farm bill. In past years, Congress took actions to limit the discretional uses of CCC funds through restrictions in appropriations language. These restrictions highlight a tension between authorizers and appropriators when it comes to the use of the CCC (see "Tension Between Authorizers and Appropriators" box). While these restrictions are no longer included, questions remain about what the CCC is, how it operates, what its current uses are, and what it may be used for in the future. This report provides a brief review of CCC's unique history, funding structure, general operation, and recent issues associated with its use. Other CRS reports cover in detail programs and activities authorized through CCC.

Origin of the CCC

For over a decade prior to the creation of CCC in 1933, the farm economy struggled with low levels of income from depressed commodity prices and increasing costs for needed supplies and services. The first major federal effort to boost commodity prices was through the Federal Farm Board, established by the Agricultural Marketing Act of 1929. An inadequate and ultimately failed effort to eliminate surpluses was attempted by making loans to cooperative associations for the purpose of carrying out surplus purchase operations. Without the ability to control production, it was impossible to eliminate surplus stocks. This led to proposals to regulate the harvested acreage of farm commodities and quantities sold. The concept of acreage and marketing controls was incorporated in to the Agricultural Adjustment Act of 1933 (AAA).

The AAA sought to reduce production by paying producers to participate in acreage control programs. Funding came from a tax on companies that processed farm products. Additional provisions of the law dealt with fair marketing practices and voluntary agreements between producers and handlers of commodities to regulate marketing. A financial institution was needed to carry out the newly authorized farm legislation, and this was accomplished with the creation of the Commodity Credit Corporation. Executive Order 6340 of October 17, 1933, directed the incorporation of CCC in the state of Delaware.

The Delaware charter authorized CCC, among other things, to buy and sell farm commodities; lend; undertake activities for the purpose of increasing production, stabilizing prices, and insuring adequate supplies; and facilitate the efficient distribution of agricultural commodities. It was originally capitalized with $3 million appropriated by Congress. In 1936, sufficient stock was acquired to raise the capitalization to $100 million. Its capital stock remains at this level today. In 1939, Executive Order 8219 ordered that all rights of the United States arising out of the ownership of CCC be transferred to the Secretary of Agriculture.

At that time, low prices became so critical for cotton and corn producers that waiting for another season for supply controls to impact the market was judged to be untenable. With the establishment of CCC, it became possible to make nonrecourse loans so that farmers would have funds to hold their products off the market until prices improve. The first loans were made to cotton farmers at the rate of 10 cents per pound, while the average market price was between eight and nine cents per pound. Since loans were higher than the market price and were nonrecourse, they could be satisfied by forfeiting the cotton pledged as collateral against the loan, they served as a form of price support and set the floor for the domestic market. Funding for these first loan operations came from a tax on commodity processing and from CCC's $3 million capital account, which was appropriated under authority of the National Industrial Recovery Act and the Fourth Deficiency Act.

Constitutional difficulties with some provisions of the AAA, and practical shortcomings with elements of the law, led to additional legislation in the 1930s that continues today as permanent authority for many USDA activities. Subsequent omnibus "farm bills" now set most of the policy goals and program constraints for farm price and income support operations that are funded through CCC .

CCC Charter Act

The Government Corporation Control Act of 1945 (GCCA) required all wholly owned government corporations to be reincorporated as agencies or instrumentalities of the United States. Accordingly, Congress passed the Commodity Credit Corporation Charter Act of 1948 (Charter Act). All CCC rights, duties, assets, and liabilities were assumed by the federal corporation, and the Delaware corporation was dissolved.

According to the Charter Act, the purpose of CCC is to stabilize, support, and protect farm income and prices; assist in maintaining balanced and adequate supplies of agricultural commodities; and facilitate the orderly distribution of commodities. A list of some of CCC's authorities (paraphrased from Section 5 of the Charter Act, 15 U.S.C. Â§714(c)) conveys a sense of its broadly stated powers:

Support agricultural commodity prices through loans, purchases, payments, and other operations. Make available materials and facilities in connection with the production and marketing of agricultural products. Procure commodities for sale to other government agencies; foreign governments; and domestic, foreign, or international relief or rehabilitation agencies and for domestic requirements. Remove and dispose of surplus agricultural commodities. Increase the domestic consumption of commodities by expanding markets or developing new and additional markets, marketing facilities, and uses for commodities. Export, or cause to be exported, or aid in the development of foreign markets for commodities. Carry out authorized conservation or environmental programs.

Over time, Congress has authorized CCC to fund an increasing number of diverse programs and activities related to its charter (see text box below). In carrying out operations, CCC is directed, to the maximum extent practicable, to use the usual and customary channels, facilities, and arrangements of trade and commerce.

Management of CCC

The Charter Act makes CCC an agency and instrumentality of the United States within USDA, subject to the supervision and direction of the Secretary of Agriculture. A board of directors appointed by the President, consisting of the Secretary and seven other USDA officials, is responsible for the management of CCC. CCC officers and advisorsâalso USDA officialsâare charged with maintaining liaisons with other governmental and private trade operations on the CCC's behalf.

The CCC has no personnel of its own. Rather, USDA employees and facilities carry out all of its activities. Administrative functions generally fall to the USDA agencies directed to administer the various CCC programs. The majority of its functions are administered by the Farm Service Agency (FSA), which operates most of the commodity and income support programs. Other agencies that administer CCC programs include the Natural Resources Conservation Service, the Agricultural Marketing Service, the Foreign Agricultural Service, and the United States Agency for International Development (USAID). CCC reimburses other agencies for their administrative costs.

CCC cannot acquire property or interest in property unless it is related to providing storage for program implementation or protecting CCC's financial interests. CCC is allowed to rent or lease space necessary to conduct business (e.g., warehousing of commodities).

Financing CCC

CCC is responsible for the direct spending and credit guarantees used to finance the federal government's agricultural commodity price support and related activities that are undertaken by authority of agricultural legislation (such as farm bills) or the Charter Act itself. It is, in brief, a broadly empowered financial institution. The money CCC needs comes from its own funds (including its $100 million capital stock, appropriations from Congress, and its earnings) and from borrowings. In accordance with government accounting statutes and regulations, CCC is required to submit an annual business-type budget statement to Congress. This is typically released annually with the President's budget request.

The Office of Management and Budget (OMB) also plays a role in how CCC funds are administered through an apportionment process, which allows OMB to set a limit on the funds available for obligation and subsequent outlay. OMB apportions funds for select CCC programs and operating expenditures. OMB is precluded, however, from apportioning funds "for price support and surplus removal of agricultural commodities."

Borrowing Authority

Most CCC-funded programs are classified as mandatory spending programs and therefore do not require annual appropriations in order to operate. CCC instead borrows from the U.S. Treasury to finance its programs. CCC has permanent indefinite authority to borrow from the Treasury (and also private lending institutions) within limits set by Congress. As the amount of money needed to carry out its activities has grown over time, the borrowing limit has been steadily increased ( Figure 1 ). At present, CCC's borrowing authority is limited to $30 billion, an amount that has not been increased since 1987.

CCC activity is often described using two similar but different measures. The first is net expenditures , which is a combination of outlays and receipts. The second is net realized losses , which are expenditures that will never be recovered.

Net Expenditures

CCC recoups some money from authorized activities (e.g., sale of commodity stocks, loan repayments, and fees), though not nearly as much money as it spends, resulting in net expenditures. Net expenditures include all cash outlays minus all cash receipts, commonly referred to as "cash flow." CCC outlays or expenditures represent the total cash outlays of the CCC-funded programs (e.g., loans made, conservation program payments, commodity purchases, and disaster payments). Outlays are offset by receipts (e.g., loan repayment, sale of commodities, and fees). In practice a portion of these net expenditures may be recovered in future years (e.g., through loan repayments).

Net Realized Losses

CCC also has net realized losses, also referred to as nonrecoverable losses. These refer to the outlays that CCC will never recover, such as the cost of commodities sold or donated, uncollectible loans, storage and transportation costs, interest paid to the Treasury, program payments, and operating expenses. The net realized loss is the amount that CCC, by law, is authorized to receive through appropriations to replenish the CCC's borrowing authority (see Figure 2 ).

The annual appropriation for CCC varies each year based on the net realized loss of the previous year. For example, the FY2019 appropriation ( P.L. 116-6 ) continues to provide an indefinite appropriation, covering the net realized loss for FY2018, which was $15.41 billion, 8% more than the net realized loss in FY2017 of $14.28 billion. The increase does not indicate any action by Congress to change program support but rather changes in farm program payments and other CCC activities that fluctuate based on economic circumstances and weather conditions. Also, CCC's assets, which include loans and commodity inventories, are not considered to be "losses" until CCC ultimately disposes of the asset (e.g., by sales, exports, or donations). At that time, the total cost is realized and added to other program expenses less any other program income.

Non-Borrowing Authority Appropriations

Some CCC operations are financed through appropriated funds and are unrelated to the permanent indefinite borrowing authority described above. These activities include a specific statutory authority for separate reimbursementâfor example, export credit guarantee programs, foreign donations, concessional sales under the Food for Peace Program (P.L. 83-480, also known as P.L. 480), and disaster aid.

CCC has what it refers to as a "parent/child" account relationship with USAID. CCC allocates funds (as the parent) to USAID (as the child) to fund P.L. 480 Title II and Bill Emerson Humanitarian Trust transportation costs and other administrative costs in connection with foreign commodity donations. CCC then reports USAID's budgetary and proprietary activities in its financial statements.

Issues for Congress

Expansion of CCC Activities

Over time, a number of new activities have been added to CCC's original mission, including conservation, specialty crop support, and bioenergy development. Some have suggested adding other agriculture-related activities to CCC. The idea of expanding CCC's activities generates both concern and support. Some consider this expansion to be beyond CCC's chartered purpose. Others, however, prefer the stability and consistency of mandatory funding to that of the annual appropriations process. Any expansion of mandatory funding authority, however, would require a spending or revenue offset under current budgetary rules.

Although Congress as a whole makes final funding decisions, the rise in the number of agricultural programs with mandatory budget authority from the authorizing committees has not gone unnoticed or untouched by appropriators. In previous years, appropriations bills have reduced mandatory program spending below authorized levels. These reductions, as estimated by the Congressional Budget Office, are commonly referred to as changes in mandatory program spending (CHIMPS). CHIMPS can be used to offset increases in discretionary spending that are above discretionary budget caps.

Restrictions on Use

From FY2012 to FY2017, annual appropriation acts limited USDA's discretion to use CCC's authority to remove surplus commodities and support prices (see text box below). The FY2018 omnibus appropriation did not include this limitation, effectively allowing USDA to use CCC's full authority, including its discretion for surplus removal and price support activities, along with other authorized uses.

USDA's ability to use its administrative powers in the Charter Act, however, may be restricted by executive budgetary rules such as "administrative PAYGO"ââthat is, the need to offset additional spending created by administrative action. Administrative PAYGO has been cited as a potential roadblock to undertaking certain CCC actions but has also been waived or not raised as an issue in other cases involving CCC.

Administrative Discretion

The majority of CCC operations are directed by statutory authorities that specifically direct USDA on how to administer CCC activities and in what amounts to fund them. The broad CCC authorities, however, also allow USDA a level of discretion to carry out effectively any operation that supports U.S. agriculture. This discretion has been used throughout CCC's history for a number of different purposes, including responses to natural disasters, economic conditions, and administrative priorities. The scope and scale of this discretion has traditionally been targeted to specific events, crops, or domestic needs. In the decade before FY2018, administrative discretion was partially restricted (see " Restrictions on Use "). USDA's use of the unrestricted portion of CCC's authority during this period totaled in the hundreds of millions of dollars (see examples below).

This changed in summer 2018, when USDA announced that it would be taking several actions to assist farmers in response to trade damage from retaliatory tariffs targeting various U.S. products. USDA used its administrative discretion to authorize up to $12 billion in assistanceâreferred to as the "trade aid" packageâfor certain agricultural commodities. This authority was then used again in summer 2019, when USDA announced a second trade aid package authorizing up to an additional $16 billion in assistance.

Congressional support for discretionary use of CCC typically varies depending on purpose. Some in Congress have questioned how USDA has used CCC, but few have advocated for a restriction or repeal of the discretionary authority in the last two years. Some Members have called on USDA to use CCC for similar assistance to industries within their states and districts. Congress did require USDA to expand payments under the trade aid program in the FY2019 supplemental appropriations. This expansion could be viewed as congressional support for the trade aid package.

Conclusion

CCC is a government-owned and broadly empowered financial institution that has a mandate to support U.S. agriculture. Its activities are derived from authorities granted by Congress. While it is the primary funding mechanism used in omnibus farm bills, its existence, use, and operations are frequently misunderstood and often confused with USDA itself. One reason for this confusion may be because much of CCC's functional operations support USDA's program activitiesââCCC has no staff of its own; rather, it operates through USDA agencies.

These broad authorities that Congress has granted to CCC allow it to carry out almost any operation that is consistent with the objective of supporting U.S. agriculture. It is these same broad powers that make CCC the object of attention from various interest groups and from Congress.

The mandatory funding nature of CCC activities makes it an attractive funding mechanism. Any expansion of mandatory funding authority by Congress, however, may require a spending/revenue offset or an amendment to current budgetary rules. Recent congressional action restoring CCC's authority have allowed for the Trump Administration's use of CCC to mitigate commodity price declines from retaliatory tariffs on a variety of U.S. agricultural products.

The use of CCC's discretionary authority for the FY2018 and FY2019 trade aid packages is perhaps less controversial than the total amount authorized. Each package is close to the total amount expended by CCC annually in recent fiscal years, effectively doubling the annual net realized loss. This increase in spending brings CCC close to its borrowing authority limit of $30 billion. If the borrowing authority limit were reached before Congress appropriates the net realized loss reimbursement, all functions and operations of CCC would be suspended, including those authorized in the recently enacted 2018 farm bill. Additionally, since the two trade aid packages were undertaken using CCC's discretionary authority, no congressional budget offset was required, and administrative PAYGO was not raised. The corporation's permanent, indefinite funding authority means that trade aid expenditures are reimbursed annually as a net realized loss, thus increasing total federal spending.