A Reminder Regarding Wool Loan Forfeiture Discounts

Reminder: Wool producers have the option of requesting a loan on their current year's production rather than a loan deficiency payment. However, it must be noted that nearly all producers opt for the payment.

"As a reminder for producers who decide to take a loan rather than the payment, the loan must eventually be repaid or the collateral forfeited," said American Sheep Industry Association Executive Director Peter Orwick. "Several wool loans have been made and repaid during the last two crop years and the producers then sold the wool in the marketplace. Forfeiture of the wool as collateral requires a test and inspection with discounts applied to the loan proceeds for a number of quality factors."

The Farm Bill authorized the wool and mohair non-recourse marketing assistance loans to provide eligible producers interim financing on their production, and to facilitate the orderly marketing of the commodity throughout the year. The loan allows a producer to store the production, pledging the commodity as collateral.

"Producers who are contemplating delivery of their wool or mohair as settlement of their marketing assistance loan must realize they will be subject to discounts and other associated costs," said ASI President Guy Flora. "These deductions, when added together, can be quite substantial.

"We do not anticipate many loans or loan forfeitures this year, but wanted to ensure producers checked into the discounts and settlement costs before making this decision," added Flora.

The schedule of premiums and discounts can be accessed at: ftp://ftp.fsa.usda.gov/public/notices/LP_1908.pdf.

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