Ag Policy Blog
Chris Clayton DTN Ag Policy Editor

Saturday 10/19/13

Senators Question USDA Cut on Marketing Loans

A bi-partisan group of 15 senators from southern states want to know why USDA applied sequestration reductions to Marketing Assistance Loans.

USDA sent out a notice Sept. 30 stating that marketing loans would be reduced by 5.1% and loans would be delayed while software is updated.

Fourteen of the senators stated in a letter to Agriculture Secretary Tom Vilsack that cutting the loan would hurt farmers and businesses by "substantially reducing cash flow during harvest which make require some to secure unanticipated loans from other, more costly credit sources." Further, there would be income losses for growers who have forward contracted their crops using an option-to-purchase contract. Also, the changes in loans could alter the terms of future contracts.

In a news release, Sen. Thad Cochran, R-Miss., ranking member of the Senate Agriculture Committee, stated the decision by USDA could result in price reductions for peanut and cotton yields.

The senators also questions why the decision was made so late without any early warning. USDA effectively announced the cut in loans one day before it went into effect. The senators questioned the lack of transparency. "Most notable is the fact that the news release did not specify whether loan redemptions would also be impacted by sequestration. This will have a direct bearing on how growers, marketing cooperatives, private merchandizing firms, and agribusinesses adjust their current and future marketing strategy."

The senators had several questions, including asking, why was sequestration applied only to new loans after Oct. 1? Why wasn't the announcement made earlier? Why weren't software changes done earlier to avoid delays in loan processing? Did USDA consider the impact on farmers and agribusinesses?

Cochran and Sen. Saxby Chambliss, R-Ga., ranking member on the Agriculture Subcommittee on Commodities, Markets, Trade and Risk Management took the lead on the letter. Also signing were John Boozman, R-Ark., Richard Burr, R-N.C., John Cornyn , R-Texas, Lindsey Graham, R-S.C., Kay Hagan, D-N.C.), James Inhofe , R-Okla., Johnny Isakson, R-Ga., Mary Landrieu, D-La., Mark Pryor, D-Ark., Richard Shelby, R-Ala., David Vitter, R-La., and Roger Wicker, R-Miss.

Sen. Jeff Sessions, R-Ala., wrote his own letter to Vilsack raising similar questions.

USDA's Sept. 30 news release on marketing loans: http://dld.bz/…

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Posted at 1:44PM CDT 10/19/13 by Chris Clayton
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