a/ Other commodities and programs include soybeans, minor oilseeds, tobacco, peanuts and peanut products, vegetable oil products, honey, sugar, administrative equipment, ocean transportation for export donations, export enhancement, and market promotion. b/ Other costs include depreciation costs associated with administrative equipment and miscellaneous expenses.

a/ Other commodities and programs include rye, soybeans, tobacco, peanuts and peanut products, blended food products, vegetable oil products, extra long staple cotton, honey, sugar, sunflower seed, flaxseed, canola, rapeseed, mustard seed, ocean transportation for export donations, export enhancement, and market promotion.

b/ Other costs include ocean transportation for export donations, administrative equipment, and dairy export incentive payments.

COMMODITY CREDIT CORPORATION

STATUS OF PROGRAM

Introduction

The Commodity Credit Corporation carries out operations on a nationwide basis involving many agricultural commodities. These actions have an economic impact on domestic and international markets. The Corporation makes loans on agricultural commodities and may barter agricultural commodities for materials, goods, services, and equipment. CCC operations, including the purchase, sale, storage, and handling of commodities and materials, involve many different trade practices. The Corporation uses normal trade facilities to the fullest practicable extent in its operations. Such facilities include commercial banks, growers organizations, brokers, exporters, cooperative associations, warehouses, and others.

Although ASCS, through its personnel and facilities, administers support operations, the programs are financed by the Corporation.

The principal activities carried out by the Corporation involve:

1. Support and related activities 2. Commodity export activities

3. Storage activities

Commodities Covered

4. Supply and foreign purchase

5. Acquisition and disposal activities 6. Special activities

SUPPORT AND RELATED ACTIVITIES

ASCS administers support programs for corn, grain sorghum, barley, oats, wheat, rye, cotton (upland, extra long staple, and seed), rice, dairy products, tobacco, peanuts, sugar beets and cane, honey, oilseeds (soybeans, sunflower seed, canola, rapeseed, safflower seed, flaxseed, and mustard seed), wool, and mohair.

Purpose of Support Activity

CCC support activity provides a more orderly marketing environment for farmers, particularly in periods when bountiful harvests threaten to push prices of farm commodities down to unprofitable levels. Inventories accumulated during these periods are released into the marketplace as needed to stabilize supplies and prices.

Technique for Administering Support Operations

Support is achieved through loans, purchases, and payments for selected commodities at announced or guaranteed levels. The Food, Agriculture, Conservation, and Trade Act of 1990 (FACT Act) continued the target price and loan rate system for the 1991 through 1995 crops, providing income support and price protection to farmers. Income to growers is protected through an established target price mechanism for the major commodities: feed grains, rice, wheat, and cotton. If the average market price for the stated period drops below the target level, a deficiency payment is made to eligible producers equal to the difference between the target price and the higher of the loan level or the market price. The FACT Act of 1990 continues to allow CCC to issue generic commodity certificates as well as cash in making such payments. These certificates are generic in that they may be exchanged for any commodity either owned by CCC or under loan.

For the 1990 and 1991 crops, wheat, feed grain, cotton and rice producers received 40 percent of their estimated deficiency payment in advance and in cash. In fiscal years 1990 and 1991, 981,068 farms received $6,783.7 million in 1990 crop cash deficiency payments. In fiscal year 1991, $6,233.5 million in total cash deficiency payments were made. Of this amount -$11.5 million was for 1989 crops,

$3,553.4 million for the 1990 crops, and $2,707.4 million for the 1991 crops. In fiscal year 1991, 954,794 enrolled farms received $2,707.4 million in 1991 crop cash deficiency payments.

Beginning with the 1982 crops, disaster payments are authorized only for wheat, feed grain, upland cotton, and rice producers for whom Federal crop insurance was not available and who were prevented from harvesting a designated percentage of their normal production because of natural disaster. The 1985 Food Security Act extended eligibility to receive disaster payments to peanut, soybean, and sugar producers in addition to wheat, feed grain, upland cotton, and rice producers. The Secretary may also authorize disaster payments if losses create an economic emergency too serious to be relieved by crop insurance or other Federal assistance. Payments may be made in cash, in kind from CCC-owned stocks, or in generic certificates. The FACT Act continues these authorities. Disaster payments were legislated for selected crops in 1988 and 1989.

Eligibility for support loans, purchases, and payments is conditional on compliance with program requirements for the particular commodity, including acreage reduction and land diversion provisions, if in effect. Support loans to producers are "nonrecourse." With this type of loan, producers are guaranteed at least the support price for the commodity they have put up as collateral. If market prices are above support levels, producers can pay off their loans and market their commodity. If market prices fail to rise above support levels, producers can deliver the commodity to the Corporation and discharge their obligations in full. Under the 1985 Act the Secretary of Agriculture had, for the first time, authority to permit commodity loan repayments at less than the original loan principal--the so-called "marketing loan" provision. The marketing loan reduces the likelihood of loan collateral forfeitures and enhances market competitiveness for U.S. commodities. Under the FACT Act, marketing loans must be available for cotton, rice, soybeans, and minor oilseeds, and are discretionary for wheat, feed grains, and honey. Marketing loans were in effect for 1985 through 1989 crops of rice and 1986 through 1989 crops of upland cotton and honey. Marketing loans are currently in effect for these same commodities for the 1990 and 1991 crops.

CCC is authorized to make recourse loans to producers for on-farm storage facilities. However, the CCC Charter Act, as amended, mandates that facility loans be available in areas where the Secretary determines there is a shortage of farm storage. These loans are carried in the accounts at the unpaid principal balance and are secured by chattel or real estate mortgages. Seed cotton loans are made on a recourse basis during cotton ginning operations. For most commodities, loans are made directly to producers on the unprocessed commodity through ASCS county offices. Some commodities are also purchased directly from processors. Milk prices are supported through purchases of processed dairy products from processors. Support on tobacco and peanuts is carried out through loans to producer associations that, in turn, make support available to producers. Loans may also be made available through cooperative marketing associations for cotton and grains instead of through ASCS county offices. In order to more effectively recover the cost of money to CCC, a variable interest rate is charged by CCC on commodity and storage facility loans. The initial interest charged to producers by CCC is the rate charged CCC by the U.S. Treasury during the month the loan is disbursed. The average CCC loan interest rate in fiscal year 1991 was 7.1 percent. In fiscal year 1992 the monthly interest rate was 5.375 percent in November and 5.125 percent in December.

Loan and Purchase Volume - Fiscal Year 1991

Dollar volume of support extended through loans in fiscal year 1991 totaled $6,630.5 million, with acquisitions of commodities under loan amounting to $993.1 million. Purchases of dairy products, purchases of products of wheat, corn, oats, peanuts, and vegetable oils for donations and purchases of grains, soybeans,

54-888 0-92--22

and oilseeds on which loans are also made totaled $1,690.3. Of this amount, $756.8 million was for dairy products. Also, $440.6 million of total purchases was for commodity certificates transferred from the loan account. These certificate purchases represent a required accounting transaction to show the effect on inventory of certificate payments to producers used to redeem outstanding commodity loans. The associated reduction in outstanding loans is recorded as a loan repayment receipt, which fully offsets the inventory purchase expenditure. Therefore, no net expenditures result from this required certificate accounting treatment.

Loan availability varies by commodity. For the major commodities, the loan availability period is as follows:

The Food, Agriculture, Conservation, and Trade Act of 1990 (FACT Act), as amended by the Omnibus Budget Reconciliation Act of 1990 (OBRA) continues the Secretary's authority to reduce acreage planted for the 1991 through 1995 crops when supplies are excessive through acreage reduction (ARP) and paid land diversion (PLD) programs, or through a combination of these. Specific acreage reduction programs continue to be required when carryover stocks are expected to exceed certain levels. ARP levels are determined by stocks-to-use ratios with minimum and maximum levels specified for each crop. Zero ARPs are allowed, as well as separate ARP levels for each feed grain. For the 1990 crops, acreage reduction requirements were 10 percent for corn, grain sorghum, and barley, 5 percent for oats, 20 percent for rice, 12.5 percent for upland cotton, and 5 percent for wheat and ELS cotton. For the 1991 crops, acreage reduction requirements are 7.5 percent for corn, grain sorghum and barley, 0 percent for oats (mandated level through 1995), 5 percent for rice, upland cotton, and ELS cotton, and 15 percent for wheat.

The Secretary is also authorized to make land diversion payments to assist in adjusting the acreage of commodities to desirable goals. These payments may be made in cash, in kind, or in generic certificates which may be redeemed for CCC-owned commodities. No diversion programs were in effect for the 1990 and 1991 wheat, feed grain, cotton, and rice crops.

The FACT Act provides for planting flexibility, in which producers can choose to plant up to 25% of the crop acreage base with any CCC-specified crop without a reduction in the program crop acreage base on the farm. The 1990 Budget Act amends the 1949 Act to reduce the acreage on which deficiency payments would be paid by an amount equal to 15 percent of the crop acreage base for the 1991-95 crops, to be known as normal flex acreage. The remaining 10 percent is known as optional acreage.

Certificate Programs

The 1985 Food Security Act authorized, and the FACT Act continues, a number of programs that provide for payments to be made in generic certificates. These programs include the Market Promotion Program (formerly known as the Targeted Export Assistance Program) and the Export Enhancement Program, designed to maintain and expand export markets for U.S. agricultural commodities and counter unfair