ORIGINALLY WRITTEN WILLIAM J. HARMON – FSA
Under provisions of the Federal Agriculture Improvement and Reform Law, 1996 and all future crop-year commodity loans accrue interest at a rate 1 percentage point higher than the Commodity Credit Corp. borrowing interest rate from the U.S. Treasury.
The interest rate in effect Jan. 1 of each year is also CCC’s rollover interest rate. The interest rate applied on commodity loans with an outstanding balance on Dec. 31 is rolled over to the January rate.
The January interest rate on those “rolled over” loan balances remain in effect until the loan is either repaid, forfeited, or the succeeding Jan. 1 arrives, whichever occurs first. Thus, many of the loans taken out by producers on 2001 crops that have not yet been settled are subject to this interest rate adjustment.
The January 2002 CCC loan interest rate is 3.25 annual percentage rate.
In recent related news, the U.S. Department of Agriculture said today it will wait for final congressional action on the farm bill before determining annual loan rates for the 2002 crops.
“We feel it is prudent and responsible to wait to announce loan rates until the intent of the Congress becomes more clear through the farm bill process in order to avoid confusion for farmers,” said Agriculture Secretary Ann M. Veneman.
The House of Representatives has passed HR 2646, which is applicable to the 2002 crops. The senate is expected to resume consideration of a farm bill upon its return later this month. Timely completion of a senate bill and a subsequent conference committee are likely to produce new authorities applicable to the spring- planted crops. That legislation would specify loan rates for the 2002 crops.
The 1996 Federal Agriculture Improvement and Reform Act 1996 provides no statutory deadline for loan rate determination. Announcements in previous years have varied from as early as Dec. 18 to as late as April 23.
This act also established the marketing-assistance loan programs for the 1996-2002 wheat, feed grains, oilseeds, upland cotton, extra long staple cotton and rice crops.
Loan rates for wheat, corn, soybeans, minor oilseeds, and ELS cotton are based on an Olympic average formula-85 percent of the average farm price during the last five years, excluding the highest and lowest years-constrained by maximum (grains, cotton and oilseeds) and minimum (upland cotton and oilseeds) levels. The act provides the secretary some discretion in setting loan rates for these commodities.
National loan rates for the 2001 crops have been as follows:
–Wheat: $2.58 per bushel
–Rice: $6.50 per hundredweight (fixed rate)
— Corn: $1.89 per bushel
–Sorghum: $1.71 per bushel
–Barley: $1.65 per bushel
–Oats: $1.21 per bushel
–Soybeans: $5.26 per bushel
— Minor oilseeds: $9.30 per hundredweight
— Upland cotton: 51.92 cents per pound
— ELS cotton: $0.7965 per pound
Bill Harmon is executive director for the Farm Service Agency office in Marion County.