April 17, 2009
Changes to the way loan repayment rates are calculated for both wool Marketing Assistance Loans and for the Loan Deficiency Payment (LDP) program went into effect on April 15.
The most noticeable change is that there will now be a new 30-day average repayment rate in addition to the familiar weekly repayment rate. The repayment rate that will be in effect for the following week will be the lower of the two calculations.
The Farm Service Agency (FSA) will publish loan repayment rates for graded and non-graded wool once a week to be effective from Wednesday morning through the following Tuesday evening as has been the case since the initiation of the program. The new format for reporting prices incorporates the two programs.
"Adding the 30-day rate will be helpful for producers, especially when the wool market rises quickly," explains Peter Orwick, executive director of the American Sheep Industry Association, adding that the 2009 wool season so far is the perfect example of when this type of marketing assistance is crucial. "Slow sales due to the weakened economy and major changes in currency exchange rates have producers looking for the benefit of additional revenue through a deficiency payment or the cash flow of a marketing loan for spring expenses."
The 30-day average repayment rate allows producers to watch the market signals for the past few weeks and determine when it is financially beneficial to either repay the marketing loans or to take out an LDP. The 30-day average also helps to smooth price spikes in the market due to weekly market volatility. In the past, the weekly repayment rates and subsequently wool LDP rates have changed dramatically from one week to the next. The new adjustments will help stabilize program benefits and allows for time needed to make better informed marketing decisions for wool.
These changes are in response to requirements in the 2008 Farm Bill legislation mandating the addition of a 30-day repayment rate calculation.
Additional information is available at your county FSA office or online at www.fsa.usda.gov/FSA/webapp?area=home&subject=prsu&topic=col-nl-wm