Wool & Mohair Marketing Assistance Loans (MAL) & Loan Deficiency Program (LDP)

CURRENT MAL & LDP RATES

 

CATEGORY2022 LOAN RATEEFFECTIVE
REPAYMENT RATE
9/27/2022
LDP RATE
GRADED WOOL
CLEAN PRICES in $ per Pound
<18.6 Micron3.874.63Not Available
18.6 - 19.53.563.96Not Available
19.6 - 20.53.443.47Not Available
20.6 - 22.03.403.17$.23 LDP Available
22.1 - 23.53.062.75$.31 LDP Available
23.6 - 25.92.961.99$.97 LDP Available
26.0 - 28.9.98.99Not Available
> 29 Micron.40.61Not Available
GREASE PRICES in $ per Pound
Ungraded Wool40 cents0 cents$.40 LDP Available
Unshorn PELT6.865 lbs x Ungraded Wool LDP$2.746 LDP Available

 

PROGRAM INFORMATION

For questions about these programs, to apply, and for more information, contact your local USDA Farm Service Agency (FSA) office. CLICK HERE for the USDA/FSA Center Locator.

Wool Marketing Assistance Loans (MAL’s) and Loan Deficiency Payments (LDP’s) are funded by the Farm Bill. These programs 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.

Loan and payment options:

  • Marketing Assistance Loan (MAL) – Graded Wool
  • Marketing Assistance Loan (MAL) – Ungraded Wool
  • Loan Deficiency Payment (LDP) – Graded Wool
  • Loan Deficiency Payment (LDP) – Ungraded Wool
  • Loan Deficiency Payment (LDP) – Pelts

Growers can choose the option(s) most financially beneficial for their operation.

Eligibility:

To be eligible a producer must:

  • have beneficial interest in the wool
  • meet the definition of an eligible producer
  • sheep must be grown and shorn in the U.S.
  • have ownership of the sheep at least 30 days before shearing
  • wool must be shorn and in storable condition
  • Other eligibility and documentation requirements may apply

Difference in Programs

MAL
LDP
Wool is used as collateral for a loanDifference between loan rate and weekly effective repayment rate
Loan available for up to 9 months (currently extended to 12 months until Sept. 30, 2020, CARES Act – Co-Vid)Only available when repayment rate is below loan rate (i.e.- low wool prices)
Costs – Low FSA interest rate + filing feeThink of an LDP as an “on the spot” price payment for low wool prices
Repay loan anytime (currently 12 months) at either loan rate or repayment rate – whichever is lower!Need to file with FSA before you sell wool
Operating capital ($$$ vs LDP)Pick the day you want to take LDP
Cannot sell the wool until loan is repaidSell wool later when prices improve

Marketing Assistance Loans (MAL’s)

MAL’s provide interim financing by providing money for continued operation while allowing the wool to be marketed at a later time. Producers may apply for a loan, using the wool as collateral, at the yearly loan rate (set annually by USDA) on graded and/or ungraded wool. After wool is shorn, the 9-month loan may be taken with a small initial filing fee and will include interest. (The term is currently extended to 12 months for loans requested before September 30, 2020.) The wool CANNOT be sold while under loan.

A grower can repay the loan at any time during the 9 months by: (1) repaying the loan at either the loan rate or the announced repayment rate (whichever is lower) and reclaim the wool, (2) requesting a settlement.

Settlement

MAL’s not repaid by the loan maturity date, will be secured by FSA, sold, and producer paid a settlement amount which is the difference between loan value and price of wool sold. Contact your local FSA for more.

Loan Deficiency Payments (LDP’s)

Producers can choose to forgo a Marketing Assistance Loan and receive an “on-the-spot” payment on their wool when global prices are lower than expected. An LDP is only available when the yearly Loan Rate is above the Effective Repayment Rate (announced weekly, dependent on international wool market prices and currency exchange rates).

LDP’s on Pelts

Producers can also collect an LDP on unshorn slaughter lamb pelts. The be eligible, must meet the definition of an eligible producer, own the lambs for at least 30 days before slaughter, sell the unshorn lamb for immediate slaughter or slaughter the unshorn lamb for personal use, have beneficial interest in the pelts, sheep must be of U.S. origin, the pelt must be unshorn, and submit production evidence.

Graded vs. Ungraded Programs
GRADED
UNGRADED
Loan rate is established yearly based on 8 micron categoriesLoan Rate is set at 40 cents per pound
Participation requires core test information on your woolDoes NOT require core test
Graded Wool LDPs are reported in Clean Prices – and calculations are made based upon core test dataUSDA announces weekly Effective Repayment Rate for Ungraded Wool
Ungraded LDP is the difference between Loan Rate (40 cents) and Effective Repayment Rate

Both Graded and Ungraded programs require a weigh of the wool.

Graded rates/prices are reported on a clean basis (accounting for wool yield). Ungraded wool is reported on a grease basis.

The Graded program requires producers to also provide a core test report/certificate from a CCC-approved testing facility; currently only New Zealand Wool Testing Authority (NZWTA) is approved.

Growers can participate in a Graded or Ungraded programs or a combination of both, whatever is most beneficial to them. For example, a grower could choose to use the Graded LDP program for their fleece wool and Ungraded LDP program for off-sorts (tags, crutchings, bellies, pieces).

Wool Pools and Cooperatives

Ungraded and Graded LDP’s are available to wool pools; loans are not permitted as delivery to a pooling location is considered the day that growers lose beneficial interest of the wool.

Steps to Take:

  1. Contact your local USDA/FSA Office – preferably before wool/pelts are harvested.
  2. Fill out forms and discuss plans and documentation needed.
  3. Documentation on your wool:
    1. Total weight of wool
    2. Micron and yield core test report/certificate (only needed for Graded wool programs)
    3. Other (may include storage documentation, delivery documentation, etc.)
  4. Complete forms and documentation with your local FSA Office.