The 2002 Farm Bill provides for Marketing Assistance Loans and Loan Deficiency Payments (LDPís) for the 2002 through 2007 crop years. Marketing Assistance Loans and Loan Deficiency Payments are intended to:
- minimize potential loan forfeitures;
- subsequent government accumulation of stocks;
- minimize the cost incurred by the Federal Government in storing the commodity; and
- allow a commodity produced in the United States to be marketed freely and competitively both domestically and internationally.
Producers of commodities who are eligible for loans can request marketing assistance loans or LDPís on their harvested commodities.
Marketing assistance loans are 9-month loans. Producers may repay the loan at a rate that is less than the original loan rate plus interest when market prices are below the commodity loan rates, which are established by law. Marketing assistance loans accomplish two objectives. First, they provide producers with interim financing by providing money for continued farming operations while not requiring the crop to be marketed during a period which commonly coincides with a producerís peak labor demands. Second, they facilitate the orderly marketing and distribution of loan eligible commodities throughout the year, since it gives the producer another option beyond sale of the crop whenever funds may be needed.
As an alternative to a marketing assistance loan, a producer may obtain an LDP on his/her crop. An LDP is available to a producer who, although eligible to obtain a marketing assistance loan, agrees to forgo a marketing assistance loan for the commodity in return for an LDP. The payment is the established loan rate for the applicable loan commodity less the repayment rate multiplied by the eligible quantity of the commodity.
The Farm Service Agency division of the U.S. Department of Agriculture carries detailed information about the Wool and Mohair Marketing Assistance Loan and Loan Deficiency Program at: http://www.fsa.usda.gov/dafp/psd/mohair.htm