The Food, Conservation, and Energy Act of 2008 (the 2008 farm bill) authorizes nonrecourse marketing assistance loans (MALs) and loan deficiency payment (LDPs) for the 2008-2012 crops of wheat, corn, grain sorghum, barley, oats, upland cotton, extra-long staple cotton, long grain rice, medium grain rice, soybeans, other oilseeds (including sunflower seed, rapeseed, canola, safflower, flaxseed, mustard seed, crambe and sesame seed), dry peas, lentils, small chickpeas, large chickpeas, graded and nongraded wool, mohair, honey, unshorn pelts and peanuts. The American Taxpayer Relief Act of 2012 extends the MAL and LDP provisions from the 2008 Farm Bill to the 2013 crop year; however, mohair is not eligible for 2013 MALs or LDPs, as required by Continuing Appropriations Resolution, 2013.

See the fact sheet Fees and Warehouse Storage Credits Applicable to Cotton Loans and Transfers for additional information about MALs for cotton.

MALs and LDPs are marketing tools available to producers beginning upon harvest or shearing. The MAL provides an influx of cash when market prices are typically at harvest-time lows, which allows the producer to delay the sale of the commodity until more favorable market conditions emerge. Allowing producers to store production at harvest or shearing provides for a more orderly marketing of commodities throughout the year.

MALs for commodities are considered nonrecourse when the MAL can either be redeemed by the repayment of the MAL or by delivering the pledged collateral to the Commodity Credit Corporation (CCC) as full payment for the MAL at maturity. MAL repayment provisions specify, under certain circumstances, that producers may repay MALs at less than loan rate (principal) plus accrued interest and other charges. Alternatively, loan deficiency payment (LDP) provisions specify that, in lieu of securing a MAL, producers may elect to receive an LDP.

MAL repayment and LDP provisions are intended to minimize potential delivery of loan collateral to CCC, accumulation of CCC-owned stocks, storage costs, discrepancies in marketing loan benefits across State and county boundaries, and allow U.S. produced-commodities to be marketed freely and competitively. Accumulating CCC-owned stocks tends to make U.S.-produced commodities less competitive in world markets and can result in substantial storage costs to taxpayers.

A producer who is eligible to obtain a loan, but who agrees to forgo the loan, may obtain an LDP. The LDP rate equals the amount by which the applicable loan rate where the commodity is stored exceeds the alternative loan repayment rate for the respective commodity. The LDP equals the LDP rate times the quantity of the commodity for which the LDP is requested. Table 2 provides an example of how corn marketing loan gains and LDPs are calculated.

Does not include accrued interest