A number of factors, including favorable weather conditions in the U.S. and large production around the globe, have contributed to incredibly low prices for wheat throughout rural America. Prices have dipped so low that loan rates have been triggered in many areas, meaning that Marketing Assistance Loans (MALs) and Loan Deficiency Payments (LDPs) through USDA’s Farm Service Agency (FSA) are available to producers in order to help farmers meet cash-flow needs without having to sell their commodities during harvest time and to wait for more favorable marketing conditions. With a MAL, farmers can repay the loan at less than the loan rate (plus accrued interest) or receive an LDP.
The availability of MALs and LDPs can vary day to day based on the Posted County Price, which is based on the Terminal Market. This figure is updated every morning on the Farm Service Agency’s website. Additionally, in order to be eligible for MALs and LDPs, the farmer must retain “beneficial interest” in the commodity (both control of the commodity and title to the commodity). Additional information and forms to show that the farmer retains beneficial interest can be obtained from your local FSA office.
Producers should also note that the MAL and LDP programs have implications for payment limitations. If the MAL is repaid at less than the principal, the difference is referred to as a “marketing loan gain,” which is subject to the aggregate $125,000 payment limit; this single limitation applies to payments made through the Agriculture Risk Coverage (ARC) program, Price Loss Coverage (PLC) program, MALs and LDPs. However, a farmer also has the option of purchasing a Commodity Certificate, which can be exchanged for their outstanding loan collateral instead of forfeiting the commodity. Gains through the use of Commodity Certificate are not subject to the payment limitation. More information can be found in this FSA fact sheet.