USDA Update

By Rod Johnson

September 17, 2004

The U.S. Senate has passed, as an amendment to funding for the Department of Homeland Security, disaster legislation that includes coverage for drought and other disasters. The House of Representatives passed their version of the funding bill in June but it did not include the disaster funding for agriculture. Due to the devastating losses from hurricanes in the south, enough political support was gained to include funding for other disasters. The Senate and House will need to work out differences in the two pieces of legislation in Conference Committee. We will keep you updated as the legislation moves forward.

Producers planting certified, registered and foundation hard white wheat for 2005 harvest can apply for the $2.00 per acre incentive payment. Producers must submit an acceptable seed receipt for the seed. The certified seed must be documented with certified seed tags or a bulk sales certificate. Production from certified seed plantings in a prior year held over for planting this year would not be eligible for the planting incentive payment but may be eligible for the production incentive payment after harvest next year.

The hard white wheat incentive payment program is limited to $20 million of CCC funds on not more than 2 million acres or an equivalent volume of 120 million bushels of production for the 2003 through 2005 crop years. In the event that the 2 million acre limitation is reached under this program before the authorized $20 million for the program is distributed, the 120 million bushels shall become the cap for implementing the program. A national factor could be imposed to limit the number of acres or bushels to avoid expending more than the $20 million provided by law.

As we enter the fall harvest season, we want to remind producers of the availability of commodity loans and repayment options when crop prices are low. Crop loans are available on wheat, grain sorghum, corn, sunflowers (and other oilseeds), barley, and oats, stored on the farm or in a commercial elevator. Crop loans may be paid back at any time by repaying the loan principal plus interest. If grain market prices are low, the producer may be able to pay back loans at less than principal plus interest, based on the posted county price that is also used for LDP’s (Loan Deficiency Payments). This option often times allows the producer to repay the loan rather than forfeiting the grain to the government.

To be eligible for loan, the grain must have been produced by an eligible producer, meet grade requirements, and not be substituted, purchased, bartered or received as a gift. Producers must retain "beneficial interest" in the grain during the loan period. If a producer has a contract on the grain, the contract must be provided to the FSA Office to determine if beneficial interest is retained. Producers must have also filed acreage reports of all cropland on the farm.

Loans mature at the end of the 9^th month following the month in which the loan is disbursed. Crop loans receive the interest rate in effect for the month in which the loan is disbursed. This interest rate remains in effect until January 1 at which time all outstanding loans are adjusted to the January interest rate for the remainder of the loan period.

Producers may pay for a measurement of farm stored grain or certify the grain in storage based on scale tickets, their own bin measurements, load summaries, etc. If grain is stored in a commercial warehouse, storage must be paid or arranged for through the maturity of the loan.

The FSA Office has a loan program for remodeling existing facilities or purchasing and installing new permanent storage facilities or permanently affixed drying or handling equipment. New concrete foundations, aprons, pits or pads, replacing deteriorated bin walls or roofs, and other items essential to the proper operation are eligible. Equipment must have a useful life of at least 10 years. New electrical equipment integral to the proper operation of the storage and handling equipment (excludes installation of the electrical service to the electrical meter) is also eligible. Equipment to improve, maintain or monitor the quality of stored facility loan commodities, such as cleaners, moisture testers, and heat detectors in conjunction with a proposed storage facility can be included. Structures to be used for commercial purpose weigh scales or for hay storage are ineligible. Loans must be approved before any site preparation or other construction work begins.

To be eligible for the loan the producer must demonstrate a need for storage capacity based on two years normal production on their farms. The maximum term of the loan is 7 years on not more than 85% of the net cost, not to exceed $100,000 for each borrower signing the promissory note. A lien on the real estate on which the storage facility will be located is required on all loans over $50,000 or if the County Committee determines as a result of financial analysis that additional security is required. A nonrefundable application fee of $45 is required at time of application. Contact the FSA Office for complete details of this loan program.