Farm Programs:

Changes to the Marketing Assistance Loan Program Have Had Little Impact on Payments

GAO-01-964: Published: Sep 28, 2001. Publicly Released: Nov 5, 2001.

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Under the Department of Agriculture's (USDA) Marketing Assistance Loan Program, the federal government accepts harvested crops as collateral for interest-bearing loans (marketing assistance loans) that are typically due in nine months. When market prices drop below the loan rate (the loan price per pound or bushel), the government allows farmers to repay the loan at a lower rate and retain ownership of their commodity for eventual sale. The difference between the loan rate and the lower repayment rate is called the "marketing loan gain." Conversely, farmers who do not have marketing assistance loans can also receive a benefit when prices are low called a "loan deficiency payment." The loan deficiency payment is equal to the marketing loan gain that the farmer would have received if he or she had a loan. Farmers may choose to obtain either a marketing loan gain or a loan deficiency payment--both of which are known as the marketing loan benefit. The increase in the payment limit and the availability of commodity certificates had only modest effects on the $15 billion in marketing assistance loan payments provided for crop year 1999 and for crop year 2000 through May 2001. Because of the increase in the payment limit, total payments over the two-year period were 1.9 percent more than they would have been under the previous limit, or an additional $261.1 million. Most farmers did not use commodity certificates to receive gains more than the payment limit, but a small number of farmers did benefit from the program. According to the best available data from USDA's county offices, 47 farmers used certificates to receive more than $150,000 in 1999, and 100 farmers did so in 2000.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: Beginning in FY 2002, USDA provided additional resources and increased its compliance reviews of approved cooperatives focusing on the largest coops first.

    Recommendation: To ensure that marketing loan benefit payments made to cooperatives are appropriate, the Secretary of Agriculture should ensure that a sufficient number of staff with requisite skills are available to conduct timely reviews of such payments. Specifically, the reviews should ensure that payments are made only for eligible producers and that the payments are valid.

    Agency Affected: Department of Agriculture


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