Marketing Loans, Loan Deficiency Payments, and Commodity Certificates

Publication Date: December 2004

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Agriculture, forestry and fishing

Type:

Abstract:

Marketing assistance loans are one of the three primary subsidies in U.S. farm commodity programs. Since the loan program is tied to current production, it is a source of controversy in international trade negotiations. The 2002 farm bill continues the marketing loan program and sets loan prices through 2007. Policy issues for the 109th Congress regarding loans include payment limitations (especially the unlimited use by farmers of commodity certificates to avoid the limits), and the U.S. response to international pressure over the trade-distorting nature of marketing loans.

One purpose of the loan program is to provide short-term financing to allow farmers to pay their bills soon after harvest and facilitate orderly marketing throughout the rest of the year. The loan program also provides significant income support when market prices are below statutory loan rates. Marketing loan benefits to farmers averaged $6 billion from FY1999-FY2002, but have since declined to under $500 million as market prices have increased. This report will be updated as events warrant.