Marketing assistance loans provide producers interim financing at harvest time to meet cash flow needs without having to sell their commodities when market prices are typically at harvest-time lows. Allowing producers to store production at harvest facilitates more orderly marketing of commodities throughout the year.
Marketing assistance loans for covered commodities are non-recourse because the commodity is pledged as loan collateral and producers have the option of delivering the pledged collateral to the Commodity Credit Corporation (CCC) in satisfaction of the repayment of the outstanding loan for the loan at maturity. A settlement value is determined and applied to the outstanding loan principal and interest.
Market loan repayment provisions specify, under certain circumstances, that producers may repay loans at less than principal plus accrued interest and other charges. Alternatively, loan deficiency payment (LDP) provisions specify that, in lieu of securing a loan, producers may be eligible for an LDP. For ELS cotton, LDP provisions do not apply and ELS cotton marketing assistance loans must be repaid at the loan rate plus interest.
Recourse loans must be repaid at principal plus interest. The recourse loan commodity cannot be delivered or forfeited in satisfaction of the outstanding loan.
For a commodity to be eligible for a marketing assistance loan or a loan deficiency payment (LDP), the producer must have beneficial interest in the commodity in addition to other eligibility requirements. To find out more, read the Marketing Assistance Loan and LDP Eligibility Fact Sheet.