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A Guide to Commodity Marketing Assistance Loans

Dec 16, 2007
Due to the growing increase of huge quantities of commodities forfeitures in the non-recourse loans, during the 1980's Congress decided to institute a fundamental change to CCC loan programs when market prices are not more than the CCC loan rate. Other than giving producers the option of forfeiting the commodity they have pledged as collateral for non-recourse loans, the producers were also allowed to settle the non-recourse loan at a price determined by CCC. This was also used for retaining the repayment of loans at market price and the difference between the amounts of the loan made using the established county loan rates. These loans later came to be known as 'marketing assistance loans'.

The Harvesting season is a very important time. These marketing assistance loans recommend a variety of provisional financial options to producers. These options offer security and help the producer to cope and handle the pressure during harvest time lows. The loans help the producer in evenly distributing commodity sales facilitating production storage and a more orderly marketing strategy.

Commodity Credit Corporation (CCC) offers marketing assistance loans. The goal of this organization is to provide lower interim financing or completely remove the risk of rushing and overriding processes related to a launch of a produce. The organization promotes modulation and orderly distribution of commodities during the year. For example, the CCC non-recourse loan offers a producer the option to store produce and guarantee his crop as collateral. The loan assists the producer in paying the bills that depend on the sale of the produce during harvest, thus avoiding the problems of becoming a defaulter. The prices of a produce fluctuates during harvest time, and by avoiding selling commodities during the dip time can save the producer from an inevitable loss.

Even if the favorable market conditions last only for a week, these loans can support a producer in creating enough opportunities to increase his sales. Once a sale is successful, the producer can repay the loan. The proceedings of a marketing loan are based on loan rates set by law and the available quantity of collateral commodity.

The uniqueness of CCC Marketing loan is the supportive repayment provision. In times of extreme circumstances, where there is complete loss in produce, the producer can repay the loan without the interest and other charges. Such provisions come under the loan deficiency payment (LDP) clause, which is activated at the time of securing a loan. The clause is not applicable for ELS cotton; the marketing assistance loans for ELS cotton must be repaid at the loan rate plus interest.

Eligible commodity for a marketing assistance loan are lentil, corn, grain sorghum, barley, oats, upland cotton, wool, extra long staple cotton, small chickpeas, rice soybeans, other oilseeds, dry peas, wheat, honey and mohair. These commodities are non-recourse and the producer must deliver the organization the pledged collateral quantity of commodity. The aim of the CCC organization is to help producers in need, and under the loan deficiency payment, producers under pressure can evade paying the interest.
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