[Federal Register Volume 67, Number 198 (Friday, October 11, 2002)]
[Rules and Regulations]
[Pages 63506-63524]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-25969]



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Part II





Department of Agriculture





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Commodity Credit Corporation



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7 CFR Part 1421



2002 Farm Bill Regulations--Marketing Assistance Loans and Loan 
Deficiency Payments for Peanuts, Pulse Crops, Wheat, Feed Grains, 
Soybeans and Other Oilseeds; Final Rule

  Federal Register / Vol. 67, No. 198 / Friday, October 11, 2002 / 
Rules and Regulations  

[[Page 63506]]


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DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1421

RIN 0560-AG72


2002 Farm Bill Regulations--Marketing Assistance Loans and Loan 
Deficiency Payments for Peanuts, Pulse Crops, Wheat, Feed Grains, 
Soybeans and Other Oilseeds

AGENCIES: Commodity Credit Corporation, USDA.

ACTION: Final Rule.

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SUMMARY: This final rule implements a portion of Title I of the Farm 
Security and Rural Investment Act of 2002 (the 2002 Act) relating to 
the farm commodity price support programs of the Farm Service Agency 
(FSA) and Commodity Credit Corporation (CCC). The 2002 Act authorizes 
Marketing Assistance Loans and Loan Deficiency Payments (LDP) for 
peanuts, wool, mohair, pulse crops (lentils, small chickpeas, dry 
peas), wheat, feed grains, soybeans and other oilseeds. Peanuts, wool, 
mohair and pulse crops, have not been eligible for these programs prior 
to enactment of this law and this rule adds these new commodities. 
Other provisions of the 2002 Act will be implemented under separate 
rules. The intended effect of this rule is to implement legislative 
requirements, add new crops to those eligible for assistance and 
increase the number of farm operators who may receive FSA and CCC 
program benefits.

EFFECTIVE DATE: October 8, 2002.

FOR FURTHER INFORMATION CONTACT: Grady Bilberry, Director, Price 
Support Division, FSA/USDA, STOP 0512, 1400 Independence Ave. SW., 
Washington, DC 20250-0512; telephone (202) 720-7901; facsimile (202) 
690-3307; e-mail: [email protected]. Persons with 
disabilities who require alternative means of communication (Braille, 
large print, audio tape, etc.) should contact the USDA Target Center at 
(202) 720-2600 (voice and TDD).

SUPPLEMENTARY INFORMATION: 

Notice and Comment

    Section 1601(c) of the 2002 Act requires that the regulations 
necessary to implement Title I of the 2002 Act are to be promulgated 
without regard to the notice and comment provisions of 5 U.S.C. 553 or 
the Statement of Policy of the Secretary of Agriculture effective July 
24, 1971, (36 FR 13804) relating to notices of proposed rulemaking and 
public participation in rulemaking. These regulations are thus issued 
as final.

Executive Order 12866

    This final rule is economically significant according to Executive 
Order 12866 and has been reviewed by the Office of Management and 
Budget (OMB). A cost-benefit assessment of the changes made by this 
rule was completed and is summarized after the background section.

Federal Assistance Programs

    The title and number of the Federal assistance program in the 
Catalog of Federal Domestic Assistance to which this final rule applies 
is 10.051--Commodity Loans and Loan Deficiency Payments.

Regulatory Flexibility Act

    The Regulatory Flexibility Act is not applicable to this rule 
because the Office of the Secretary, FSA and CCC are not required by 5 
U.S.C. 553 or any other law to publish a notice of proposed rulemaking 
for the subject matter of this rule.

Environmental Review

    An environmental assessment is being completed to consider the 
potential impacts of this proposed action on the human environment in 
accordance with the provisions of the National Environmental Policy Act 
of 1969 (NEPA), 42 U.S.C. 4321 et seq., the regulations of the Council 
on Environmental Quality (40 CFR parts 1500-1508), and FSA's 
regulations for compliance with NEPA, 7 CFR part 799. Section 1601 of 
the 2002 Act mandated that these regulations be promulgated no later 
than 90 days after the law's enactment. Further, this rule affects a 
large number of agricultural producers who are dependent upon its 
provisions for income support and need to know of its details as soon 
as possible because it has a profound effect on their planting and 
marketing decisions. Thus, FSA and CCC are attempting to satisfy both 
the Congressional mandate and their public missions by publishing this 
rule now, while continuing a good faith effort to comply with NEPA in 
as timely a fashion as possible, given the above-mentioned statutory 
and mission requirements. A copy of the draft environmental assessment 
will be made available for public review and comment upon request.

Executive Order 12778

    The final rule has been reviewed under Executive Order 12778. This 
rule preempts State laws that are inconsistent with its provisions. 
This rule is not retroactive. Before any judicial action may be brought 
regarding this rule, all administrative remedies must be exhausted.

Executive Order 12372

    This program is not subject to Executive Order 12372, which 
requires consultation with State and local officials. See the notice 
related to 7 CFR part 3015, subpart V, published at 48 FR 29115 (June 
24, 1983).

Unfunded Mandates

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) does 
not apply to this rule because the Office of the Secretary, FSA and CCC 
are not required by 5 U.S.C. 553 or any other law to publish a notice 
of proposed rulemaking about the subject matter of this rule. Further, 
this rule imposes no unfunded mandates, as define in UMRA, on any 
local, State, or tribal government or the private sector.

Small Business Regulatory Enforcement Fairness Act of 1996

    Section 1601(c) of the 2002 Act requires that the regulations 
necessary to implement Title I of the 2002 Act must be issued within 90 
days of enactment and that such regulations shall be issued without 
regard to the notice and comment provisions of 5 U.S.C. 553. Section 
1601(c) also requires that the Secretary use the authority in section 
808 of the Small Business Regulatory Enforcement Fairness Act of 1996 
(Pub. L. 104-121) (SBREFA), which allows an agency to forgo SBREFA's 
usual 60-day Congressional Review delay of the effective date of a 
major regulation if the agency finds that there is a good cause to do 
so. These regulations affect the planting and marketing decisions of an 
extraordinarily large number of agricultural producers. Accordingly, 
this rule is effective upon the date of filing for public inspection by 
the Office of the Federal Register.

Paperwork Reduction Act

    Section 1601(c) of the 2002 Act provides that the promulgation of 
regulations and the administration of Title I of the 2002 Act shall be 
made without regard to chapter 5 of title 44 of the United States Code 
(the Paperwork Reduction Act). Accordingly, these regulations and the 
forms, and other information collection activities needed to administer 
the program authorized by these regulations, are not subject to review 
by the Office of Management and Budget under the Paperwork Reduction 
Act.

[[Page 63507]]

Government Paperwork Elimination Act

    FSA is committed to compliance with the Government Paperwork 
Elimination Act (GPEA) and the Freedom to E-File Act, which require 
Government agencies in general, and FSA in particular, to provide the 
public the option of submitting information or transacting business 
electronically to the maximum extent possible. The forms and other 
information collection activities required for participation in the 
program are not yet fully implemented for the public to conduct 
business with FSA electronically.
    Currently, however, loan application forms are available 
electronically through the USDA eForms website for downloading. The 
regulation is available at FSA's Price Support Division internet site. 
Applications may be submitted at the FSA county offices, by mail or by 
FAX. At this time, electronic submission is not available. Full 
development of electronic submission is underway.

Background

    The 2002 Act provides for Marketing Assistance Loans and Loan 
Deficiency Payments (LDP's) for the 2002 through 2007 crop years. 
Marketing Assistance Loans and Loan Deficiency Payments are intended 
to: (1) Minimize potential loan forfeitures; (2) subsequent government 
accumulation of stocks; (3) minimize the cost incurred by the Federal 
Government in storing the commodity and; (4) allow a commodity produced 
in the United States to be marketed freely and competitively both 
domestically and internationally.
    Producers of commodities that are eligible for loans can request 
marketing assistance loans or LDP's on their harvested commodities. 
Eligible producers request loans and LDP's on or before the final loan 
availability date for the applicable commodity. Marketing assistance 
loans are 9-month loans. Producers may repay the loan at a rate that is 
less than the original loan rate plus interest when market prices are 
below the commodity loan rates, which are established by law. Marketing 
assistance loans accomplish two objectives. First they provide 
producers with interim financing by providing money for continued 
farming operations while not requiring the crop to be marketed during a 
period which commonly coincides with a producer's peak labor demands. 
Second, they facilitate the orderly marketing and distribution of loan 
eligible commodities throughout the year, since it gives the producer 
another option beyond sale of the crop whenever funds may be needed.
    As an alternative to a marketing assistance loan, a producer may 
obtain an LDP on their crop. An LDP is available to a producer who, 
although eligible to obtain a marketing assistance loan, agrees to 
forgo a marketing assistance loan for the commodity in return for an 
LDP. The payment is the established loan rate for the applicable loan 
commodity less the repayment rate multiplied by the eligible quantity 
of the commodity. The specific material changes made to the marketing 
assistance loan and LDP programs by the 2002 Act being implemented in 
this rule are as follows:

Loan Commodities Eligible

    The previous law that authorized FSA and CCC to make marketing 
assistance loans was the Federal Agriculture Improvement and Reform Act 
of 1996 (the 1996 Act). The 1996 Act limited marketing assistance loans 
to wheat, feed grains, oilseeds, cotton and rice. The specific oilseeds 
were eligible for marketing assistance loans, including sunflower, 
flaxseed, canola, rapeseed, safflower seed, mustard seed, crambe, and 
sesame seed.
    The 2002 Act also authorizes marketing assistance loans for wheat, 
feed grains, oilseeds, cotton and rice. However, using the 2002 Act 
authority, USDA announced that loan eligible oilseeds for the 2002 crop 
year will be sunflower, flaxseed, canola, rapeseed, safflower seed and 
mustard seed. Thus, crambe and sesame seed are NOT eligible loan 
commodities for the marketing assistance loan and LDP programs.
    More significantly, the 2002 Act extended eligibility for marketing 
assistance loans and LDP's to peanuts, wool, mohair, honey, small 
chickpeas, lentils, and dry peas. The 2002 Act refers to these new loan 
commodities as ``first time'' loan commodities in section 1205(f)(1). 
The revisions necessary to incorporate these new commodities into the 
programs covered by 7 CFR part 1421 are made throughout this rule, and 
several major crop specific revisions are discussed below. Conforming 
changes are being made to other CCC regulations in distinct final rules 
as a result of these expanded commodity provisions of the 2002 Act.

Other Eligibility Requirements for Producers

    The 2002 Act also added conditions for a producer to receive a 
marketing assistance loan or LDP. The major requirement added is that 
producers must report all cropland on the applicable farm in which the 
eligible loan commodity is produced. Another restriction is that the 
producer must be in compliance with all wetland conservation 
requirements and other applicable conservation programs.
    Another change that affects both the crop and producer who may be 
eligible is that program eligibility is no longer linked to 
``contract'' commodities. The term ``contract'' commodities refers to 
provisions in the 1996 Act authorizing marketing assistance loans to 
eligible producers who produced commodities on a farm covered by a 
Production Flexibility Contract (PFC). The 2002 Act terminated the PFC 
program and authorizes marketing assistance loans to eligible producers 
of any eligible loan commodity produced on a farm for the 2002 through 
2007 crop years covered. Thus, farms are not required to be covered by 
a PFC to be eligible. This relaxed requirement also applies to 2001-
crop marketing assistance loans. Thus, commodities produced in 2001 on 
a farm not covered by a PFC are eligible for LDP's.

Beneficial Interest

    As used in this rule beneficial interest in a commodity, means that 
all of the following remain with the producer: (1) Control of the 
commodity; (2) risk of loss; (3) title to the commodity. Beneficial 
interest requirements remain unchanged for most loan commodities, and, 
typically, all producers must retain beneficial interest in the 
commodity offered as collateral for a marketing assistance loan or LDP. 
However, the 2002 Act provides special treatment for 2001-crop and the 
``first time'' loan commodities. Producers who lost ``beneficial 
interest'' in an eligible 2001 commodity before applying for a loan or 
LDP on that crop, may be eligible. Furthermore, producers of 2002-crop 
wool, mohair, honey, dry peas, lentils, and small chickpeas who lost 
beneficial interest in the 2002 crop prior to publication of the 
regulations are also eligible for LDP's. Likewise, producers of 2002 
crop peanuts who before applying for a loan or LDP lost beneficial 
interest in a 2002 crop of peanuts are eligible for LDP's. Producers 
must request the LDP on or before the applicable final loan 
availability date which is January 31, 2003, for peanuts. For those LDP 
requests submitted after beneficial interest has been lost, the LDP 
rate will be based on the date it was lost. The exemptions provided in 
the 2002 Act are limited to those specified here. Beneficial interest 
must be maintained in order to receive a loan or an LDP in 2003 and 
subsequent crop years.

[[Page 63508]]

Hay, Silage and Unshorn Pelts

    The 1996 Act authorized marketing assistance loans or LDP's for hay 
or silage. However, the 2002 Act, limits hay or silage and unshorn 
pelts derived from lambs to being eligible for an LDP only.

Warehouse Licensing Requirements

    Eligible loan commodities offered as collateral for marketing 
assistance loans must be stored in an on-farm storage structure or 
warehouse approved by CCC. As the programs were administered under the 
1996 Act, unlicensed storage facilities were not approved for storing 
collateral for a marketing assistance loan. The 2002 Act authorizes 
loan commodities serving as marketing assistance loan collateral to be 
stored in unlicensed warehouses if the producer redeems the marketing 
assistance loan immediately with a commodity certificate.

Treatment of First Time Loan Commodities

    The 2002 Act directed USDA to make ``first time'' loan commodities 
available for marketing assistance loans and LDP's. Thus, for the first 
time, wool, mohair, honey, peanuts, lentils, small chickpeas and dry 
peas are eligible for the marketing assistance loan and LDP programs. 
As with all of the currently eligible loan commodities these loans are 
nonrecourse. Thus, producers may deliver the commodity pledged or repay 
the loan at the alternative repayment rate, a rate less than principal 
plus accrued interest. If such loans were, on the other hand, recourse 
loans, they would have to be repaid with principal plus interest, and 
the collateral could not be delivered or forfeited.

Wool and Mohair

    The National Wool Act (Wool) Act has served as the basis for the 
FSA and CCC wool and mohair price support programs from 1955 to 1995. 
Public Law 103-130 enacted in November, 1993, was passed by Congress 
especially to phase out the USDA Wool Act programs over the 1994 and 
1995 marketing years. However, subsequent legislation provided that the 
Secretary make recourse loans for mohair produced in 1999 and 2000. 
Under the recourse loans, producers had to repay marketing assistance 
loans at principal plus interest and commodities pledged as collateral 
for recourse loans could not be delivered or forfeited to settle a 
outstanding loan. The 2002 Act provides for wool and mohair nonrecourse 
loans. Thus, now, producers who offer wool or mohair as collateral to 
secure a nonrecourse loan may repay their loan at the alternative 
repayment rate or forfeit the wool or mohair to satisfy the loan, just 
like other eligible commodities.

Peanuts

    The 2002 Act made profound changes to the FSA and CCC peanut 
program. Under title III of the Agricultural Adjustment Act of 1938, 
USDA administered a two-tiered price support program for peanuts. 
Eligible producers were limited to an established quota for domestic 
marketing. The old program limited the producers ability to market 
peanuts domestically and the old peanut price support program 
designated and authorized three area Marketing Associations to manage 
the commercial marketing of peanuts grown in the U.S. This program was 
terminated by the 2002 Act, which now extends the marketing assistance 
loan and LDP program coverage to peanuts for the 2002 through 2007 
crops. The 2002 Act provides producers with the responsibility for and 
flexibility of marketing their own peanuts. Producers will be more 
involved in the orderly marketing of their peanuts. The 2002 Act 
revokes the authority of the Marketing Associations to manage and sell 
peanuts on behalf of the Commodity Credit Corporation. Producers may 
request marketing assistance loans from FSA. USDA will pay storage, and 
associated costs, according to this rule, for marketing assistance loan 
peanuts.

National Loan and Repayment Rates

    Congress announced the national loan rates for the 2002 through 
2007 crop years for the eligible loan commodities. The loan rates 
specified by 2002 Act are as follows:

------------------------------------------------------------------------
                                    2002-03 crop year  2004-07 crop year
------------------------------------------------------------------------
Wheat.............................  $2.80/bu.          $2.75/bu.
Corn..............................  1.98/bu.           1.95/bu.
Grain sorghum.....................  1.98/bu.           1.95/bu.
Barley............................  1.88/bu.           1.85/bu.
Oats..............................  1.35/bu.           1.33/bu.
Rice..............................  6.50/cwt.          6.50/cwt.
Soybeans..........................  5.00/bu.           5.00/bu.
Other oilseeds....................  0.096/lb           0.093/lb
Peanuts...........................  355/ton            355/ton
Graded wool.......................  1.00/lb            1.00/lb
Nongraded wool....................  0.40/lb            0.40/lb
Mohair............................  4.20/lb            4.20/lb
Small chickpeas...................  7.56/cwt.          7.43/cwt.
Lentils...........................  11.94/cwt.         11.72/cwt.
Dry peas..........................  6.33/cwt.          6.22/cwt.
------------------------------------------------------------------------

    The 2002 through 2007 crop year loans rates were increased for 
wheat, corn, grain sorghum, and oilseed from those provided in the 1996 
Act.
    In addition, the Secretary may differentiate other oilseed loan 
rates to reflect market price relationships among the different other 
oilseed types--an authority not provided in the 1996 Act. To the extent 
practicable, USDA will make adjustments to ensure ``weight averaged'' 
base county loan rates are consistent and reflect current market 
conditions. Also, the basis for adjustments to base county loan rates, 
will be used when determining alternative repayment rates for the 
applicable loan commodity, considering location and quality of the loan 
commodities. Beyond adjustments for market conditions, the Secretary 
may adjust repayment rate as necessary to minimize loan forfeitures, 
minimize the Federal Government-owned inventory of the commodities, 
minimize the storage costs incurred by the Federal Government 
domestically and internationally, and minimize discrepancies in 
marketing loan benefits between States and counties.

Payments In Lieu Of Loan Deficiency Payments For Grazed Acreage

    The 2002 Act also provides a new payment program for producers who 
graze livestock on land that may otherwise be used to produce LDP 
eligible crops, also known as ``graze-out'' provisions. Producers who 
would be eligible for a wheat, barley, oats, or triticale LDP but 
instead use those planted crops to graze livestock will be eligible for 
LDP's if they agree to forgo harvesting of that acreage. The yield for 
the purposes of calculating the payment on graze-out wheat, barley and 
oats are those established for direct payments under the Direct and 
Counter-Cyclical Payment Program (DCP) authorized by the 2002 Act (7 
U.S.C. 7913). The payment yield for triticale is the farm's wheat 
payment yield for direct payments under the DCP. For farms where a 
program payment yield is unavailable, USDA will establish an 
appropriate payment yield considering the yields applicable to the 
commodity for at least three similar farms. The payment amount per 
commodity is the payment rate multiplied by the payment yield, 
multiplied by the number of acres grazed. Triticale will be based on 
the predominant class of wheat in the county. Graze-out acreage planted 
to this wheat, barley, oat, or triticale will not be eligible for an 
indemnity payment under the Federal Crop Insurance Act (7 U.S.C. 1501 
et seq.) or a payment under the noninsured crop disaster assistance 
program under section 196 of the Federal Agriculture Improvement and 
Reform Act of 1996 (7 U.S.C. 7201 note).

[[Page 63509]]

Cost/Benefit Assessment Summary

    The changes made by the 2002 Act will have a significant impact on 
CCC and FSA funding and expenditures. The 2002 Act expands eligibility 
considerably for marketing assistance loans, loan deficiency payments 
and the price support programs governed by the regulations amended by 
this rule. Also, while the loan rate for soybeans is decreased, the 
rate for wheat, barley, and corn is increased, and other eligible crops 
are added, such as pulse crops, and peanuts. The net fiscal impact of 
the changes made by the 2002 Act and promulgated by this rule compared 
with continuing 1996 Act provisions will be to increase governmental 
outlays as shown in the Table 1.

Table 1.--Average Annual Change in Government Outlays by Program, Fiscal
                             Years 2002-2007
                         [In million of dollars]
------------------------------------------------------------------------
                           Program                             Average 1
------------------------------------------------------------------------
Loan Rates for Covered Commodities 2........................         859
Loan Deficiency-like Payments for Grazed--Wheat, Barley,              12
 Oats.......................................................
Triticale...................................................          26
Pulse Crops 3...............................................          18
Wool and Mohair.............................................           2
Honey.......................................................          80
Peanuts.....................................................         997
                                                             -----------
    Total...................................................      1,994
------------------------------------------------------------------------
1 Average annual outlay change.
2 Includes wheat, corn, grain sorghum, barley, oats, upland cotton,
  rice, soybeans, and other oilseeds.
3 Dry peas, lentils, and small chickpeas.

Covered Commodities, Except Other Oilseeds

    Outlays for marketing assistance loan and loan deficiency payments 
are projected to average about $4.1 billion during FY's 2002-2007. The 
outlays progressively decline during the period. Market prices for each 
commodity are estimated to increase in this period, eroding LDP rates 
and marketing loan benefits. For some crops, outlays disappear 
completely by 2007. Outlays for marketing assistance loans and LDP's 
are projected to be about $859 million higher per year than they were 
under the 1996 Act. The increase is mainly due to higher loan rates 
(except for rice). Soybean projected loan outlays decrease because 
soybean acreage is projected to shift to other crops, demand remain 
constant, soybean supplies decrease and prices increase, according to 
capitalist market forces. For rice, the loan rate is unchanged and 
projected loan outlays decline slightly.

Other Oilseeds

Setting Differentiated National Loan Rates
    Market prices vary substantially among the various types of other 
oilseeds (oil-type sunseed, other-type (confection) sunseed, flaxseed, 
canola, rapeseed, safflower, and mustard seed). The 1996 Act required 
that loan rates be set ``individually'' for the other oilseed types 
based on the all-sunflower seed price. The 2002 Act gives the Secretary 
the latitude necessary to differentiate other oilseed loan rates to 
reflect market price relationships among the different other oilseed 
types.
    Setting loan rates to reflect market price relationships among the 
other oilseed types reduces past market distortions that have resulted 
from using a single loan rate for all the other (minor) oilseeds types. 
Loan rate-driven distortions occur during low-price periods when large 
LDP's for the lower-valued oilseeds (oil-type sunflower seed, canola, 
and flaxseed) have the undesirable effect of creating incentives to 
shift acreage away from the higher-valued oilseeds (confection 
sunflower seed and safflower).
    Establishing differentiated other oilseed loan rates eliminates the 
incentive to shift acreage from higher-valued to lower-valued oilseeds. 
This is particularly important for sunseed where low prices and high 
oil-type sunseed LDP'S during recent years resulted in USDA setting 
2000 and 2001 loan and loan repayment rates equal for oil-type and 
confection sunseed. (Confection repayment rates were not allowed to 
drop more than $3.00 per cwt. below loan rates, thus limiting 
confection LDP'S to $3.00 per cwt.). This change was necessary to 
maintain confection sunseed acreage as oil-type sunseed LDP'S raised 
relative per-acre returns to levels that discouraged confection 
planting.
    The announced 2002 loan rates for oil-type and confection sunseed 
reflect a $2.95-per-cwt. spread at the national level. This spread is 
consistent with the spread that existed during the early 1990's before 
the loan program began to distort sunseed plantings and prices. It also 
establishes a guaranteed price spread that the sunseed industry 
indicates is critical to maintaining a balance of production between 
the sunseed types.
    Differentiating other oilseed loan rates based on market price 
relationships is projected to cost less than setting all other oilseed 
loan rates at the same level over the 7-year life of the 2002 Act. 
Other oilseed loan program outlays are projected to average $24 million 
per year for crop years 2002-2007. Loan program outlays under the 
alternative of setting loan rates at the same level are projected to 
average $48 million per year.
    The use of market-based loan rates is expected to reduce canola, 
flaxseed, and oil-type sunseed acreage and increase confection sunseed, 
mustardseed, and safflower acreage. This will bring acreage, 
production, and prices among the other oilseeds more in line with 
market demand. Planted acreage is expected to average about 250,000 
acres lower for crop years 2003-2007 than it would be under a single 
loan rate. This represents a relatively small 5-percent annual 
reduction in total other oilseed acreage. Historically, other oilseed 
acreage has varied widely. Since 1995, plantings have ranged from 3.2 
million acres in 1996 to 5.4 million acres in 1999
Designating Other Oilseeds Eligible for Loans and LDP
    Crambe is not designated as an ``other oilseed'' under the 2002 
Act, although it was loan-eligible under the 1996 Act for crop years 
1999, 2000 and 2001. This change is expected to eliminate $367,000 in 
loan program outlays during the 2002-2007 crop years. Some of these 
savings will be offset as producers shift production into other covered 
commodities. Without the substantial level of price support provided to 
crambe during recent years, acreage is expected to continue to decline. 
Crambe plantings have declined from 42,000 acres in 1998 to an 
estimated 14,000 acres for 2002. Lack of designation as an other 
oilseed will eliminate the potential of an additional $1.3 million in 
projected direct payments to crambe producers during the life of the 
2002 Act.
    Sesame also is not designated as an other oilseed under the 2002 
Act. It was designated as loan-eligible under the 1996 Act for crop 
years 2000 and 2001. Because of its relatively high price, sesame has 
not generated any loan program benefits and was not expected to under 
the 2002 Act, even if it were designated as loan-eligible. Lack of 
designation as an ``other oilseed,'' will eliminate the potential for a 
projected $210,000 in direct payments to sesame producers.
Wool and Mohair
    USDA does not publish official wool or mohair supply-use-price 
projections. Private analysts and university researchers expect that 
sheep and lamb numbers in the United States will continue on a long-
term downward trend. Falling domestic demand for

[[Page 63510]]

lamb meat and strong competition from imports of foreign lamb will 
weigh on domestic production. Falling numbers of sheep and a focus on 
selection of sheep based on meat attributes are expected to result in 
falling wool production for the foreseeable future. However, tightening 
supplies of wool, both domestically and abroad, are expected to result 
in a slow rebound in wool prices from their current depressed levels. 
Consequently, wool program outlays are expected to decrease in 
subsequent years. Mohair production, prices and program outlays are 
expected to follow a similar path.
    Wool program costs are expected to range from about $25 million in 
2002 to $6.4 million in 2007. Mohair program costs are expected to 
range from about $3.6 million in 2002, to $2.0 million in 2007. 
Government outlays are expected to increase producer income about $28 
million in the initial program year, declining steadily to about $8.4 
million in 2007. Neither domestic use nor exports of wool and mohair 
are expected to be significantly impacted by the program.
Pulses (Dry Peas, Lentils, and Small Chickpeas)
    The 2002 Act provides nonrecourse marketing assistance loans and 
loan deficiency payments to dry peas, lentils and small chickpeas for 
the first time. It is likely that the availability of these provisions 
will increase the supply for the 2002-2007 crops of dry peas and 
lentils resulting in a minor decrease in wheat production. Small 
chickpea production is expected to be unchanged due to planting 
flexibility provisions with no change in expected returns including 
program benefits. Producers of dry peas and lentils are expected to 
receive additional marketing loan/loan deficiency benefits of $156 
million over the 2002-2007 period. Wheat producers will receive $374 
million less in benefits (loan outlays--$15 million lower and counter-
cyclical payments--$359 million lower) as the decline in acreage 
increases the market price of wheat which lowers its LDP and counter-
cyclical payment rates. Hence, a net decrease of $218 million in 
program outlays is expected. Likewise, taxpayer burden will decrease by 
$218 million over the same period. Even though food use demand for dry 
peas and lentils is believed to be relatively price-inelastic, 
consumers are expected to gain $12 million in additional income over 
the program period due to lower expected prices. The cost savings for 
feed purchases to livestock producers is expected to total $13 million 
over the program period as increases in feed pea production reduce 
prices.
Loan Deficiency-like Payments for Grazed Acreage of Wheat, Barley, 
Oats, and Triticale
    The 2002 Act makes wheat, barley, oats and triticale available for 
grazing LDP's if the commodity is grazed. It is assumed that the 
availability of grazing LDP's will not affect the supply, demand, and 
price of these commodities for the 2002-2007 crops. Thus, these 
commodities LDP rates will not be impacted. Producers are expected to 
receive grazing LDP's of $71 million over the 2002-2007 period, 
increasing projected total revenues the same amount. The additional 
grazing LDP's also increase program outlays and, therefore, taxpayer 
burden by $71 million over the same period. The consumer impact will be 
negligible because crop and livestock prices are expected to be 
unchanged. Thus, food prices will not change.
Peanuts
    Under the previously existing USDA peanut program producers 
delivered the peanuts to a buying point where the peanuts were graded 
and a check was written based on the weight of the peanuts adjusted for 
grade and minus fees. Quota peanuts received $610 per ton and 
additional peanuts received a lower support rate ($132 in 2001). 
Contract additional peanuts for export received a price less than $610 
but generally above the additional support price. The storage of loan 
collateral was paid by one of three Marketing Associations 
(Associations) authorized under the previous statute. The Associations 
managed the peanuts and any profits or loss were passed on to the 
producers of quota peanuts. Any losses incurred under the program were 
paid the following year by an assessment on producers.
    The new 2002 Act peanut program requires producers to be more 
involved in the marketing process. They can apply for a market 
assistance loan and place the peanuts in storage, request a loan 
deficiency payment or sell the peanuts commercially. Peanuts placed 
under loan can be redeemed by the producer prior to loan maturity, and 
sold to commercial handlers. The loan will be repaid at a rate 
determined by the Secretary of Agriculture. If the peanuts are not 
redeemed they will be forfeited and become the property of CCC.
    Producer income is not expected to decline significantly under the 
new program despite the gap between the $355 loan rate and the old $610 
support price. Under the 2002 Act producers may receive funds from 
three sources other than the marketing loan or the loan deficiency 
payment. These include a direct payment of $36 per ton, compensation 
for lost quota at a rate of 11 cents per pound per year for 5 years, 
and a counter-cyclical payment equal to the difference between the 
market price (or market loan rate if it is higher) plus the direct 
payment of $36 per ton and the $495 target price. DCP is being 
promulgated under a rule to follow this one. Furthermore, all of the 
peanuts produced are eligible for the $355 per ton marketing assistance 
loan or an LDP. Under the old program the average price received by the 
producer was a blend of the $610 quota support for quota peanuts, the 
contract additional price and the support price for additional peanuts.
    Total peanut production is expected to increase slightly under the 
new program. Consumers may pay slightly less for peanut products 
because of the projected lower peanut prices paid by manufacturers. 
However, because of the very inelastic price elasticity of demand for 
peanuts, this is expected to be insignificant.
    Shellers and manufacturers will be paying significantly less for 
peanuts under the 2002 program. The actual price they pay will be 
determined by the market price of peanuts, which is expected to be 
significantly below the $610 support price under the old program.
    The loan repayment rate established by the Secretary will to some 
degree influence the market price for peanuts. This price will be 
determined on a weekly basis after several factors are evaluated. These 
factors may include, but not be limited to, marketing loan activity, 
domestic commercial prices and price and sales activity in the Western 
Europe and other international peanut markets. The process will be 
evaluated on a continuous basis and refined, as better information 
becomes available.
    It is likely that the supply of peanuts will meet the demand for 
domestic edible peanuts in the U.S. This market is relatively stable 
and grows at about the same rate as the general population. Any 
significant growth in the production of U.S. peanuts will be in the 
export sector. This market will depend on the world equilibrium market 
price of peanuts.
    The cost of marketing loans will be the cost of handling and 
storing the peanuts during the 9-month loan period plus any loses 
incurred disposing of forfeited peanuts. The storage and handling costs 
have been estimated by

[[Page 63511]]

the Congressional Budget Office at $74 million during the 2002-2007 
period. The cost of the loan deficiency portion of the program has been 
estimated at $406 million over the 2002-2007 period. Because food use 
demand for peanuts is extremely price inelastic, consumers are expected 
to gain little in additional income over the program period, but peanut 
prices are not expected to drop.
    There are many aspects of the 2002 Act that make the cost of the 
program open-ended. There is no limit on the amount of peanuts that can 
be produced. The price of peanuts will be determined in the market 
place and the cost of the LDP and the counter-cyclical payments could 
be significantly above the $406 million if production increases and 
prices drop. U.S. peanuts are currently moving into international trade 
at about $200 per farmer stock short ton, well below the average loan 
rate of $355. Thus, while these estimates are valid based on what the 
Agency knows, the real economic effects of the new peanut program are 
very likely to vary.
    For specific details or further information regarding the cost/
benefit assessment contact Mr. Phil Sronce at 202-720-2711.

List of Subjects in 7 CFR Part 1421

    Grains, Loan programs/agriculture, Price support programs, 
Reporting and record keeping requirements.

    For the reasons set out in the preamble, 7 CFR part 1421 is amended 
as set forth below.

PART 1421--GRAINS AND SIMILARLY HANDLED COMMODITIES--MARKETING 
ASSISTANCE LOANS AND LOAN DEFICIENCY PAYMENTS FOR THE 2002 THROUGH 
2007 CROP YEARS

    1. The authority citation for 7 CFR part 1421 is revised to read as 
follows:

    Authority: 7 U.S.C. 7231-7237 and 7931 et seq.; 15 U.S.C. 714b, 
714c.


    2. The title of part 1421 is revised as set forth above.

    3. Subpart--Loan and Loan Deficiency Payment Regulations for the 
1996 Through 2002 Crops of Wheat, Feed Grains, Rice, Oilseeds, (Canola, 
Crambe, Flaxseed, Mustard Seed, Rapeseed, Safflower, Soybeans, and 
Sunflower Seed) and Farm-Stored Peanuts (Sec. Sec.  1421.1-1421.32) is 
removed and Subparts A, B and C are added in its place as set forth 
below.

    4. Subpart--Grazing Payments for 2001 Crop of Wheat, Barley, or 
Oats (Sec. Sec.  1421.300-1421.307) is designated as Subpart D.

    5. The subpart entitled Subpart--Regulations Governing the Wheat 
and Feed Grain Farmer-Owned Reserve Program for 1990 Through 1995 Crops 
(Sec.  1421.200) is removed.

Subpart E--Standards for Approval of Warehouses for Grain, and 
Similarly Handled Commodities

    6. Subpart--Standards for Approval of Warehouses for Grain, Rice, 
Dry Edible Beans and Seed (Sec. Sec.  1421.5551-1421.5559) is 
designated as Subpart E and the heading is revised to read as set forth 
above.

    7. For the convenience of the user, the table of contents for 
subparts A through E follows:

Subpart A--General
Sec.
1421.1 Applicability.
1421.2 Administration.
1421.3 Definitions.
1421.4 Eligible producers.
1421.5 Eligible commodities.
1421.6 Beneficial interest.
1421.7 Requesting marketing assistance loans and loan deficiency 
payments.
1421.8 Eligible quantity.
1421.9 Basic loan rates.
1421.10 Market rates.
1421.11 Spot checks.
1421.12 Production evidence.
1421.13 Handling payments and collections.
1421.14 Obtaining peanut loans.
Subpart B--Marketing Assistance Loans
1421.100 Applicability.
1421.101 Maturity dates.
1421.102 Adjustment of basic loan rates.
1421.103 Approved storage.
1421.104 Marketing assistance loan making.
1421.105 Farm-stored marketing assistance loans.
1421.106 Warehouse-stored marketing assistance loan collateral.
1421.107 Warehouse receipts.
1421.108 Transfers and reconcentrations.
1421.109 Personal liability of the producer.
1421.110 Repayments.
1421.111 Commodity certificate exchanges.
1421.112 Loan settlement.
1421.113 Foreclosure.
1421.114 Recourse loans.
Subpart C--Loan Deficiency Payments
1421.200 Applicability.
1421.201 Loan deficiency payment rate.
1421.202 Loan deficiency payment quantity.
1421.203 Personal liability of the producer.
Subpart D--Grazing Payments for 2002-2007 Crop Years of Wheat, Barley, 
Oats and Triticale
1421.300 Applicability.
1421.301 Administration.
1421.302 Definitions.
1421.303 Eligible producer and eligible land.
1421.304 Time and method for application.
1421.305 Payment amount.
1421.306 Misrepresentation and scheme or device.
1421.307 Refunds; joint and several liability.
Subpart E--Standards for Approval of Warehouses for Grain, and 
Similarly Handled Commodities
1421.5551 General statement and administration.
1421.5552 Basic standards.
1421.5553 Bonding requirements for net worth.
1421.5554 Examination of warehouses.
1421.5555 Exceptions.
1421.5556 Approval of warehouses, requests for reconsideration.
1421.5557 Exemption from requirements.
1421.5558 Contract and application and inspection fees.
1421.5559 OMB control numbers assigned pursuant to Paperwork 
Reduction Act.


    Authority: 7 U.S.C. 7231-7237 and 7931 et seq.; 15 U.S.C. 714b, 
714c.

    8. The text of the new subparts A, B and C reads as follows:

Subpart A--General


Sec.  1421.1  Applicability.

    (a) The regulations of this subpart are applicable to the 2002 
through 2007 crops of barley, small chickpeas, corn, grain sorghum, 
lentils, oats, dry peas, peanuts, rice, wheat, wool, mohair, oilseeds 
and other crops designated by Commodity Credit Corporation (CCC). These 
regulations set forth the general provisions under which marketing 
assistance loans and loan deficiency payments (LDP) will be 
administered by the CCC. Additional terms and conditions are in the 
note and security agreement and the loan deficiency payment application 
that must be executed by a producer to receive marketing assistance 
loans and LDP's.
    (b)(1) The basic loan rates, the schedule of premiums and 
discounts, and forms applicable to the marketing assistance and loan 
deficiency payment programs for the commodities specified in paragraph 
(a) of this section are available in Farm Service Agency (FSA) State 
and county offices. The forms for use in these programs will be 
prescribed by CCC.
    (2) Loan deficiency payments shall be available for unshorn pelts, 
hay and silage.
    (c) Marketing assistance loans and loan deficiency payments will 
not be available for any commodity produced on land owned or otherwise 
in the possession of the United States if such land is occupied without 
the consent of the United States.
    (d) Producers who produced eligible loan commodities are eligible 
for

[[Page 63512]]

marketing assistance loans or loan deficiency payments.


Sec.  1421.2  Administration.

    (a) The marketing assistance loan and loan deficiency payment 
program shall be administered under the general supervision of the 
Executive Vice President, CCC and shall be carried out in the field by 
FSA State and county committees, respectively.
    (b) State and county committees, and representatives and employees 
thereof, cannot modify or waive any requirement of this part, except as 
provided in paragraph (e) of this section.
    (c) The State committee shall take any required action not taken by 
the county committee. The State committee shall also:
    (1) For the 2001 crop year only, allow producers who violated the 
terms and conditions of the note and security agreement which resulted 
in the producer losing beneficial interest in the commodity before 
repaying the loan and the county committee determined the producer 
acted in good faith, to repay the loan at a rate that is the lesser of 
the loan plus interest; or the alternative repayment rate, as 
determined under Sec.  1421.10, in effect on the date the beneficial 
interest was lost. In cases, where a locked-in repayment rate under 
Sec.  1421.110 was applicable, the prescribed form is considered null 
and void.
    (2) Correct or require correction of an action taken by a county 
committee that is not in compliance with this part; or
    (3) Require a county committee to not take an action or implement a 
decision that is not under the regulations of this part.
    (d) The Executive Vice President, CCC, or a designee, may determine 
any question arising under these programs, or reverse or modify a 
determination made by a State or county committee.
    (e) The Deputy Administrator for Farm Programs, FSA, may authorize 
State and county committees to waive or modify deadlines and other 
program requirements in cases where lateness or failure to meet such 
other requirements does not adversely affect the operation of the 
marketing assistance loan and loan deficiency payment program.
    (f) A representative of CCC may execute marketing assistance loan 
and loan deficiency payment applications and related documents only 
under the terms and conditions determined and announced by CCC. Any 
document not executed under such terms and conditions, including any 
purported execution before the date authorized by CCC, shall be null 
and void.


Sec.  1421.3  Definitions.

    The definitions in this section apply for all purposes of program 
administration. Terms defined in part 718 of this title and parts 1412 
and 1425 of this chapter also apply, except where they conflict with 
the definitions in this section.
    Basic loan rate means the loan rate established by CCC for a 
commodity before any adjustment for premiums and discounts.
    Charges means all fees, costs, and expenses incurred in insuring, 
carrying, handling, storing, conditioning, and marketing the commodity 
tendered to CCC for loan. Charges also include any other expenses 
incurred by CCC in protecting CCC's or the producer's interest in such 
commodity.
    Commodity certificate exchange means the exchange, as provided for 
in part 1401 of this chapter, of commodities pledged as collateral for 
a marketing assistance loan at a rate determined by CCC in the form of 
a commodity certificate bearing a dollar denomination. Such certificate 
may not be transferred or exchanged for the inventory of CCC.
    Designated marketing association means a marketing association or 
cooperative, approved by the Secretary, to issue marketing loan 
benefits on behalf of CCC for peanuts.
    Field direct loan deficiency payment means a loan deficiency 
payment issued to producers who:
    (1) Will lose beneficial interest immediately at harvest or;
    (2) Immediately feed the commodity during harvest.
    High moisture commodities means corn and grain sorghum normally 
harvested and intended to be stored or marketed in a high moisture 
condition.
    Incorrect certification means the certifying of a quantity of a 
commodity for the purpose of obtaining a marketing assistance loan or a 
loan deficiency payment in excess of the quantity eligible for such 
marketing assistance loan or loan deficiency payment or the making of 
any fraudulent representation with respect to obtaining loans or loan 
deficiency payments.
    Loan commodities means wheat, corn, grain sorghum, barely, oats, 
rice, soybeans, other oilseeds, peanuts, wool, mohair, dry peas, 
lentils, and small chickpeas and other crops designated by CCC.
    Loan deficiency payment means a payment received in lieu of a loan 
when the CCC-determined value is below the applicable county loan rate.
    Mohair means the hair sheared from a live Angora goat. Mohair does 
not include pelts, or hides or mohair shorn from pelts or hides.
    Oilseeds means any crop of sunflower seed, canola, rapeseed, 
safflower, flaxseed, mustard seed, and other oilseeds as determined and 
announced by CCC.
    Other crops designated by CCC means with respect to eligibilities 
for benefits under this part:
    (1) Those crops harvested as other than grain, such as silage, 
haulage, earlage;
    (2) Specific crops designated for grazing; or
    (3) As otherwise designated by CCC.
    Pulse crops means any crop of dry peas, lentils, and small 
chickpeas as defined by CCC.
    Servicing agent bank means the bank designated as the financial 
institution for a CMA or a designated marketing association.
    Small chickpea means any chickpea that meets the definition of a 
chickpea according to the Grain Inspection, Packers and Stockyards 
Administration (GIPSA), Federal Grain Inspection Service (FGIS) and 
falls below a 20/64th sieve.
    Unauthorized disposition means the conversion of any loan quantity 
pledged as collateral for a farm-stored loan without prior written 
authorization from the county committee.
    Unauthorized removal means the movement of any farm-stored loan 
quantity from the storage structure in which the commodity was stored 
or structures that were designated when the loan was approved to any 
other storage structure, whether or not such structure is located on 
the producer's farm, without prior written authorization from the 
county committee.
    Unshorn pelt means the removed skin and attached wool from a 
slaughtered lamb that has never been shorn.
    Warehouse receipt means a receipt containing the required 
information prescribed in this part and is:
    (1) A pre-numbered, negotiable warehouse receipt issued under the 
authority of the U.S. Warehouse Act, a state licensing authority, or by 
an approved CCC warehouse in such format authorized and approved, in 
advance, by CCC;
    (2) An electronic warehouse receipt issued by such warehouse 
recorded in a central filing system or system maintained in one or more 
locations which are approved by FSA to operate such system; or
    (3) Other such acceptable evidence of title, as determined by CCC.
    Wool means the fiber sheared from a live sheep.

[[Page 63513]]

Sec.  1421.4  Eligible producers.

    (a) To be an eligible producer, the producer must:
    (1) Be an individual, partnership, association, corporation, 
estate, trust, State or political subdivision or agency thereof, or 
other legal entity that produces an eligible commodity as a landowner, 
landlord, tenant, or sharecropper, or in the case of rice, furnishes 
land, labor, water, or equipment for a share of the rice crop. With 
respect to wool and mohair, the producer must own, other than through a 
security interest mortgage, or lien, the sheep and goats that produced 
the wool and mohair respectively for a period of not less than 30 days.
    (2) Comply with all provision of this part and:
    (i) 7 CFR part 12--Highly Erodible Land and Wetland Conservation;
    (ii) 7 CFR part 718--Provisions Applicable to Multiple Programs;
    (iii) 7 CFR part 1400--Payment Limitation & Payment Eligibility;
    (iv) 7 CFR part 1403--Debt Settlement Policies and Procedures;
    (v) 7 CFR part 1405--Loans, Purchases and Other Operations.
    (3) Have made a acreage certification with respect to all the 
cropland on the farm.
    (b) A receiver or trustee of an insolvent or bankrupt debtor's 
estate, an executor or an administrator of a deceased person's estate, 
a guardian of an estate of a ward or an incompetent person, and 
trustees of a trust shall be considered to represent the insolvent or 
bankrupt debtor, the deceased person, the ward or incompetent, and the 
beneficiaries of a trust, respectively. The production of the receiver, 
executor, administrator, guardian, or trustee shall be considered to be 
the production of the person or estate represented by the receiver, 
executor, administrator, guardian, or trustee. Marketing assistance 
loans and loan deficiency payment documents executed by any such person 
will be accepted by CCC only if they are legally valid and such person 
has the authority to sign the applicable documents.
    (c) A minor who is otherwise an eligible producer is eligible to 
receive marketing assistance loans or loan deficiency payments only if 
the minor meets one of the following requirements:
    (1) The right of majority has been conferred on the minor by court 
proceedings or by statute;
    (2) A guardian has been appointed to manage the minor's property 
and the applicable marketing assistance loan or loan deficiency payment 
documents are signed by the guardian;
    (3) Any note or loan deficiency payment program application signed 
by the minor is cosigned by a person determined by the county committee 
to be financially responsible; or
    (4) A bond is furnished under which a surety guarantees to protect 
CCC from any loss incurred for which the minor would be liable had the 
minor been an adult.
    (d) If more than one producer executes a note and security 
agreement with CCC, each such producer shall be jointly and severally 
liable for the violation of the terms and conditions of the note and 
the regulations in this part. Each such producer shall also remain 
liable for repayment of the entire marketing assistance loan amount 
until the loan is fully repaid without regard to such producer's 
claimed share in the commodity pledged as collateral for the loan. In 
addition, such producer may not amend the note and security agreement 
with respect to the producer's claimed share in such commodities, or 
loan proceeds, after execution of the note and security agreement by 
CCC.
    (e)(1) The county committee may deny a producer a marketing 
assistance loan on farm-stored commodities if the producer has:
    (i) Made a misrepresentation in connection with the marketing 
assistance loan or LDP program;
    (ii) Previously not allowed a representative access to the site 
where commodities pledged as collateral for CCC loans were stored or 
otherwise failed to corporate in the settlement of a marketing 
assistance loan; or
    (iii) Failed to adequately protect the interests of CCC in the 
commodity pledged as collateral for a farm-stored loan.
    (2) A producer who is denied a farm-stored loan will be eligible to 
pledge a commodity as collateral for a warehouse-stored loan or provide 
some other form of financial assurance to obtain a farm-stored loan.
    (f) A CMA may obtain a marketing assistance loan and loan 
deficiency payment on eligible production of a loan commodity on behalf 
of its members who are eligible to receive marketing assistance loans 
or loan deficiency payments with respect to a crop of a commodity. For 
purposes of this subpart, the term ``producer'' includes a CMA.
    (g) In case of the death, incompetency, or disappearance of any 
producer who is entitled to the payment of any sum in settlement of a 
marketing assistance loan or loan deficiency payment, payment shall, 
upon proper application to the FSA county service center that disbursed 
the marketing assistance loan or loan deficiency payment, be made to 
the persons who would be entitled to such producer's payment under the 
regulations contained in part 707 of this title.


Sec.  1421.5  Eligible commodities.

    (a) Commodities eligible to be pledged as collateral for a loan 
made under this part are:
    (1) Barley, corn, grain sorghum, oats, canola, peanuts, soybeans, 
oilseeds, wheat, dry peas, lentils, small chickpeas, rice and other 
crops designated by CCC produced and mechanically harvested in the 
United States;
    (2) Dual purpose sorghum varieties as determined by CCC; and
    (3) Wool and mohair produced and shorn from live animals in the 
United States.
    (b) A commodity produced on land owned or otherwise in the 
possession of the United States that is occupied without the consent of 
the United States is not an eligible commodity.
    (c)(1) To be an eligible commodity, the commodity must be 
merchantable for food, feed, or other uses determined by CCC and must 
not contain mercurial compounds, toxin producing molds, or other 
substances poisonous to humans or animals. A commodity containing 
vomitoxin, aflatoxin or Aspergillus mold may not be pledged for a loan 
made under this part, except as provided by CCC in the marketing 
assistance loan note and security agreement.
    (2) The determination of class, grade, grading factor, milling 
yields, and other quality factors, including the determination of type, 
quality, and quantity for peanuts:
    (i) With respect to barley, canola, corn, flaxseed, grain sorghum, 
oats, rice, soybeans, sunflower seed for extraction of oil, wheat and 
other commodities designated by CCC, shall be based upon the Official 
United States Standards for Grain, United States Standards for Whole 
Dry Peas, Split Peas, and Lentils for dry peas and lentils, United 
States Standards for Beans for small chickpeas and the United States 
Standards for Rice as applied to rough rice whether or not such 
determinations are made on the basis of an official inspection.
    (ii) With regard to mustard seed, rapeseed, safflower seed, 
flaxseed and sunflower seed used for a purpose other than to extract 
oil, shall be based on quality requirements established and announced 
by CCC, whether or not such determinations are made on the basis of an 
official inspection. The costs of an official quality determination may 
be

[[Page 63514]]

paid by CCC. The quality requirements that are used in administering 
marketing assistance loans and loan deficiency payments for the 
oilseeds in this paragraph are available in USDA State and county FSA 
service centers.
    (iii) With regard to farm-stored peanuts, shall be determined at 
the time of delivery to CCC by a Federal or State Inspector authorized 
or licensed by the Secretary.
    (d) Eligible wool and mohair must:
    (1) Have been produced and sheared from live sheep and goats, of 
domestic origin and located in the U.S. for a period of not less than 
30 calendar days prior to shearing.
    (2) Be of merchantable quality deemed by CCC to be suitable for 
loan and must have been shorn in the United States.
    (e) When certifying acreage on farms in which an interest is held, 
the producer must provide acceptable evidence of the commodity from 
which the county committee may determine whether the eligible 
production claimed by the producer is reasonable for the production 
practices on such farm or similar farms in the same county; or have 
either the eligible or ineligible commodity measured by a 
representative of the county FSA service center at the producer's 
expense, before commingling.


Sec.  1421.6  Beneficial interest.

    (a)(1) To be eligible to receive marketing assistance loans or loan 
deficiency payments, a producer must have the beneficial interest in 
the commodity that is tendered to CCC for a marketing assistance loan 
or loan deficiency payment. The producer must always have had the 
beneficial interest in the commodity unless, before the commodity was 
harvested, sheared or slaughtered in the case of unshorn pelts, the 
producer, and a former producer whom the producer tendering the 
commodity to CCC has succeeded, had such an interest in the commodity. 
Commodities obtained by gift, barter or purchase shall not be eligible 
to be tendered to CCC for marketing assistance loans or loan deficiency 
payments. Heirs who succeed to the beneficial interest of a deceased 
producer or who assume the decedent's obligations under an existing 
marketing assistance loan or loan deficiency payment shall be eligible 
to receive marketing assistance loans and loan deficiency payments 
whether succession to the commodity occurs before or after harvest, 
shearing or slaughter so long as the heir otherwise complies with this 
part.
    (2) A producer shall not be considered to have divested the 
beneficial interest in the commodity if the producer retains control, 
title, and risk of loss in the commodity, including the right to make 
all decisions regarding the tender of such commodity to CCC for 
marketing assistance loans or loan deficiency payments, including those 
cases where the producer takes either of the actions in paragraph 
(a)(2)(i) or (a)(2)(ii) of this section as follows:
    (i) Executes an option to purchase, whether or not a payment is 
made by the potential buyer for such option to purchase, for such 
commodity if all other eligibility requirements are met and the option 
to purchase contains the following:

    Notwithstanding any other provision of this option to purchase, 
title; risk of loss; and beneficial interest in the commodity, as 
specified in 7 CFR 1421.6, shall remain with the producer until the 
buyer exercises this option to purchase the commodity. This option 
to purchase shall expire, notwithstanding any action or inaction by 
either the producer or the buyer, at the earlier of:
    (1) The maturity of any Commodity Credit Corporation (CCC) loan 
that is secured by such commodity;
    (2) The date CCC claims title to such commodity; or
    (3) Such other date as provided in this option;

    (ii) Enters into a contract to sell the commodity if the producer 
retains title, risk of loss, and beneficial interest in the commodity 
and the purchaser pays no advance payment amount or any incentive 
payment amount to enter into such contract to the producer, except as 
provided in part 1425 of this chapter.
    (3) If marketing assistance loans and loan deficiency payments are 
made available to producers through an approved CMA under part 1425 of 
this chapter, the beneficial interest in the commodity must always have 
been in the producer-member who delivered the commodity to the CMA or 
its member CMA's, except as otherwise provided in this section. 
Commodities delivered to such a CMA shall not be eligible to receive 
marketing assistance loans or loan deficiency payments if the producer-
member who delivered the commodity does not retain the right to share 
in the proceeds from the marketing of the commodity as provided in part 
1425 of this chapter.
    (b) With respect to wool, mohair, dry peas, lentils and small 
chickpeas produced in the 2002 crop year, producers who lost beneficial 
interest before October 11, 2002 are eligible for a loan deficiency 
payment based on the date the producer lost beneficial interest in the 
applicable commodity.
    (c) For peanuts produced in the 2002 crop year, producers who lost 
beneficial interest in the 2002 crop of peanuts are eligible for a loan 
deficiency payment based on the date the producer lost beneficial 
interest in the applicable commodity.


Sec.  1421.7  Requesting marketing assistance loans and loan deficiency 
payments.

    (a) A producer must, unless authorized by CCC, request marketing 
assistance loans and loan deficiency payments at the county office 
that, under part 718 of this title, is responsible for administering 
programs for the farm on which the commodity was produced.
    (b) A marketing assistance loan or loan deficiency payment may be 
requested in person, by mail or electronic format designated by CCC. 
Forms prescribed by CCC may be obtained from the USDA, Farm Service 
Agency Web site.
    (c) To receive marketing assistance loans or loan deficiency 
payments for a crop of a commodity, a producer must execute a note and 
security agreement or loan deficiency payment application on or before 
the applicable final loan availability date, as follows:
    (1) March 31 of the year following the year in which the following 
crops are normally harvested: barley, canola, flaxseed, oats, rapeseed, 
and wheat.
    (2) May 31 of the year following the year in which the following 
crops are normally harvested: corn, grain sorghum, mustard seed, rice, 
safflower, soybeans, sunflower seed, dry peas, lentils, and small 
chickpeas.
    (3) January 31 of the year following the year in which peanuts are 
normally harvested or wool and mohair are normally sheared.
    (d) With respect only to loan deficiency payments for eligible loan 
commodities produced in the 2001 crop year, whether or not produced on 
a farm covered by a production flexibility contract, the applicable 
final loan availability for such payment is November 12, 2002.


Sec.  1421.8  Eligible quantity.

    (a) With respect to marketing assistance loans and loan deficiency 
payments for:
    (1) Farm-stored commodities, all determinations of weight, and 
quality, except as otherwise agreed to or required by CCC, shall be 
determined at the time of delivery of the commodity to CCC or at the 
time the loan deficiency payment application is filed for measured 
requests, if applicable or selected for spot-check for certified 
requests.

[[Page 63515]]

    (2) Warehouse-stored commodities, all determinations of grade, 
weight and quality, except as otherwise agreed to or required by CCC, 
shall be determined at the time the loan or LDP is requested when 
acceptable documentation, under Sec.  1421.106, accompanies the loan or 
LDP request.
    (b)(1) A producer may, before the final date for obtaining a 
marketing assistance loan for a commodity, repledge as collateral for 
securing a marketing assistance loan any commodity that had been 
previously pledged as collateral for a marketing assistance loan, 
except with respect to:
    (i) Commodities that have been acquired with commodity certificate 
exchanges under part 1401 of this chapter;
    (ii) Commodities that have been redeemed at the prevailing world 
market price for rice, or the alternative repayment rate for all other 
commodities, as determined by CCC.
    (iii) Commodities on which a loan deficiency payment has been 
received.
    (2) The commodity repledged as security for the subsequent loan 
shall have the same maturity date, under Sec.  1421.101 as the original 
loan.
    (c)(1) The marketing assistance loan documents shall not be 
presented for disbursement unless the commodity subject to the note and 
security agreement is an eligible harvested commodity, is in existence, 
and is in approved farm or warehouse storage, as determined by CCC. If 
the commodity was not either an eligible commodity, in existence, or in 
approved storage at the time of disbursement, the total amount 
disbursed under the marketing assistance loan and charges plus interest 
shall be refunded promptly by the producer.
    (2) Marketing assistance loans may be disbursed to eligible 
producers who store eligible commodities in unlicensed storage 
facilities only if the producer agrees to redeem the marketing 
assistance loan on the date in which the loan is disbursed with a 
commodity certificate exchange.
    (3) CCC shall limit the total marketing assistance loan quantity 
for a loan disbursement, or loan deficiency payment quantity for a loan 
deficiency payment, based on a subsequent increase in the quantity of 
an eligible commodity by the final loan availability date to 100 
percent of the outstanding quantity of such marketing assistance loan 
or loan deficiency payment application. A producer may obtain a 
separate marketing assistance loan or loan deficiency payment before 
the final loan availability date for the commodity for quantities in 
excess of 100 percent of such quantity if such quantities are an 
otherwise eligible commodity.


Sec.  1421.9  Basic loan rates.

    (a) Basic marketing assistance loan rates for a commodity may be 
established on a State, regional, county basis or other basis and may 
be adjusted by CCC to reflect quality and location and other factors 
applicable to the commodity and as otherwise provided in this section.
    (b) The basic marketing assistance loan rates for wheat, corn, 
barley, oats, grain sorghum, rice, peanuts, soybean, canola, flaxseed, 
mustard seed, rapeseed, safflower, sunflower seed, dry peas, lentils, 
small chickpeas, wool, mohair and other crops designated by CCC will be 
determined by CCC and made available at State and county offices.
    (c)(1) For all commodities except rice, warehouse-stored loans 
shall be disbursed at levels based on the basic county marketing 
assistance loan rate for the county where the commodity is stored, 
adjusted for the schedule of premiums and discounts established for the 
commodity on the basis of quality factors set forth on warehouse 
receipts or supplemental certificates and for other quality factors, as 
determined and announced by CCC.
    (2) For rice, warehouse-stored loans shall be disbursed at levels 
based on the milling yields times the whole and broken kernel marketing 
assistance loan rates, adjusted for the schedule of discounts on the 
basis of quality factors set forth on warehouse receipts or 
supplemental certificates and for other quality factors, as determined 
and announced by CCC.


Sec.  1421.10  Market rates.

    (a)(1) For the 2002 through 2007 crops of barley, corn, grain 
sorghum, oats, wheat, dry peas, lentils, small chickpeas, oilseeds, and 
other crops as designated by CCC, a producer may repay a nonrecourse 
marketing assistance loan at a rate that is the lesser of:
    (i) The marketing assistance loan rate and charges, plus interest 
determined for such crop; or
    (ii) The alternative repayment rate for such crop.
    (2) To the extent practicable, CCC shall determine and announce the 
alternative repayment rate, based upon the market prices at appropriate 
U.S. markets as determined by CCC, to minimize loan forfeitures, 
minimize the Federal Government-owned inventory of the commodities, 
minimize the storage costs incurred by the Federal Government 
domestically and internationally, and minimize discrepancies in 
marketing loan benefits across State boundaries and across county 
boundaries. The alternative repayment rate may be adjusted to reflect 
quality and location for each crop of a commodity as follows:
    (i) On a weekly basis in each county for oilseeds, except soybeans;
    (ii) On a daily basis in each county for barley, corn, grain 
sorghum, oats, soybeans, and wheat; and
    (iii) On a weekly basis nationally for dry peas, lentils and small 
chickpeas.
    (b)(1) For the 2002 through 2007 crops of peanuts, wool and mohair, 
a producer may repay a nonrecourse loan at a rate that is the lesser 
of:
    (i) The loan rate and charges interest, plus interest determined 
for such crop; or
    (ii) The alternative repayment rate for such crop.
    (2) To the extent practicable, CCC shall determine and announce 
periodically an alternative repayment rate for peanuts, wool, and 
mohair to minimize loan forfeitures, minimize the Federal Government-
owned inventory of the commodities, minimize the storage costs incurred 
by the Federal Government domestically and internationally, and 
minimize discrepancies in marketing loan benefits across State 
boundaries and across county boundaries.
    (c)(1) The prevailing world market price for a class of rice shall 
be determined by CCC based upon a review of prices at which rice is 
being sold in world markets and a weighting of such prices through the 
use of information such as changes in supply and demand of rice, tender 
offers, credit concessions, barter sales, government-to-government 
sales, special processing costs for coatings or premixes, and other 
relevant price indicators, and shall be expressed in U.S. equivalent 
values F.O.B. vessel, U.S. port of export, per hundredweight as 
follows:
    (i) U.S. grade No. 2, 4 percent broken kernels, long grain milled 
rice;
    (ii) U.S. grade No. 2, 4 percent broken kernels, medium grain 
milled rice; and
    (iii) U.S. grade No. 2, 4 percent broken kernels, short grain 
milled rice.
    (2) Export transactions involving rice and all other related market 
information will be monitored on a continuous basis. Relevant 
information may be obtained for this purpose from USDA field reports, 
international organizations, public or private research entities, 
international rice brokers, and other sources of reliable information.
    (3) The prevailing world market price for a class of rice adjusted 
to U.S. quality and location the adjusted world

[[Page 63516]]

price (AWP), as determined under paragraph (c)(5) of this section, 
shall apply to this section.
    (4) The adjusted world price for each class of rice shall equal the 
prevailing world market price for a class of rice (U.S. equivalent 
value) as determined under paragraphs (a)(2) and (3) of this section 
and adjusted to U.S. quality and location as follows:
    (i) The prevailing world market price for a class of rice shall be 
adjusted to reflect an F.O.B. mill position by deducting from such 
calculated price an amount that is equal to the estimated national 
average costs associated with:
    (A) The use of bags for the export of U.S. rice, and
    (B) The transfer of such rice from a mill location to F.O.B. vessel 
at the U.S. port of export with such costs including, but not limited 
to, freight, unloading, wharfage, insurance, inspection, fumigation, 
stevedoring, interest, banking charges, storage, and administrative 
costs.
    (ii) The price determined under paragraph (c)(4)(i) of this section 
shall be adjusted to reflect the market value of the total quantity of 
whole kernels contained in milled rice by deducting the world value of 
broken kernels it contains, with the value of the broken kernels 
determined by multiplying the quantity of broken kernels (4 percent per 
hundredweight) by the world market value of broken kernels. The world 
market value of broken kernels shall be based upon the relationship of 
whole and broken kernel world prices as estimated from observations of 
prices at which rice is being sold in world markets.
    (iii) The price determined under paragraph (c)(4)(ii) of this 
section shall be adjusted to reflect the per-pound market value of 
whole kernels by dividing the price by the quantity of whole milled 
kernels contained in the milled rice (96 percent per hundredweight).
    (iv) The price determined under paragraph (c)(4)(iii) of this 
section shall be adjusted to reflect the market value of whole kernels 
contained in 100 pounds of rough rice by multiplying such price by the 
estimated national average quantity of whole kernel rice by class 
obtained from milling 100 pounds of rough rice.
    (v) The price determined under paragraph (c)(4)(iv) of this section 
shall be adjusted to reflect the total market value of rough rice by:
    (A) Adding to such price:
    (1) The market value of bran contained in the rough rice, computed 
by multiplying the domestic unit market value of bran by the estimated 
national average quantity of bran produced in milling 100 pounds of 
rice; and
    (2) The market value of broken kernels contained in the rough rice, 
computed by multiplying the estimated world market value of broken 
kernels by the estimated national average quantity of broken kernels 
produced in milling 100 pounds of rice;
    (B) Deducting from such price:
    (1) An estimated cost of milling rough rice; and
    (2) An estimated cost of transporting rough rice from farm to mill 
locations.
    (vi) The price determined under paragraph (c)(4)(v) of this section 
may be adjusted to a whole kernel loan rate basis by deducting the 
estimated world market value of the total quantity of broken kernels 
contained in such rice and dividing the resulting value by the 
estimated national average quantity of milled whole kernels produced in 
milling 100 pounds of rice.
    (5)(i) The adjusted world price for each class for rice, loan rate 
basis, shall be determined by CCC and announced, to the extent 
practicable, on or after 3:00 p.m. Eastern Standard time each Tuesday, 
or more frequently, as determined necessary by CCC, continuing through 
the later of:
    (A) The last Tuesday of July 2007; or
    (B) The last Tuesday of the latest month the 2007-crop rice loans 
mature.
    (ii) In the event that Tuesday is a non-workday, the determination 
will be made on the next workday, on or after 3:00 p.m. Eastern 
Standard time.
    (iii) The announced prices will be effective upon announcement and 
will remain in effect for a period as announced by the CCC.
    (6) On the day of the announcement of the adjusted world price, 
applications for loan deficiency payments for rice that specify the 
payment rate will not be accepted between 2:00 p.m. Eastern Standard 
time and the time of the world price announcement.


Sec.  1421.11  Spot checks.

    (a) CCC may inspect the collateral for marketing assistance loans, 
and producers with such loans shall allow CCC access to the farm and 
storage facility as necessary to conduct collateral inspections, or 
``spot checks'' as they are called. Spot checks will verify that the 
quality and quantity of farm-stored commodities pledged as collateral 
for marketing assistance loans are maintained by the producer.
    (b) Loan deficiency payments are selected for spot check to ensure 
that all eligibility requirements, as required by CCC, are met in order 
to receive such loan deficiency payment.
    (c) Producers must present production evidence for commodities 
acceptable to CCC when a spot check is conducted.


Sec.  1421.12  Production evidence.

    (a) Producers who redeem marketing assistance loan collateral at 
the prevailing world market price for rice, or the alternative 
repayment rate for all other commodities, as CCC determines or receives 
a loan deficiency payment may be required to provide CCC with:
    (1) Evidence of production of the collateral such as:
    (i) Evidence of sales,
    (ii) Delivery evidence,
    (iii) Load summaries from warehouse, processor, or buyer,
    (iv) Warehouse receipts
    (v) Paid measurement service
    (vi) Spot check measurements with paid measurement service
    (vii) Cleaning tickets for seed (viii) Scale tickets, if not issued 
by the producer for the producer's own production
    (ix) Core tests for wool and mohair
    (x) Maximum eligible quantity as determined by CCC
    (2) The storage location of the collateral that has not been 
otherwise disposed of and access to such collateral;
    (3) Permission to inspect, examine, and make copies of the records 
and other written data as deemed necessary to verify the eligibility of 
the producer and commodity;
    (4) In the case of wool and mohair, permission to examine and 
inspect the sheep herd; and
    (5) Any other evidence requested by the county FSA service center 
or the Deputy Administrator, FSA.
    (b) A producer who fails to provide acceptable evidence of 
production shall be required to repay the market gain or loan 
deficiency payment and charges, plus interest, as determined by CCC.


Sec.  1421.13  Handling payments and collections.

    (a) Amounts of $9.99 or less due a producer will be paid only upon 
the producer's request.
    (b) Deficiencies of $9.99 or less, including interest, may be 
disregarded unless demand for payment is made by CCC.


Sec.  1421.14  Obtaining peanut loans.

    (a) Peanuts loans to individual producers may be obtained through:
    (1) County offices; or
    (2) A designated Marketing Association or a CMA approved by CCC.
    (b) The loan documents shall not be presented for disbursement 
unless the peanuts pledged as collateral for the

[[Page 63517]]

marketing assistance loan is eligible in accordance with Sec.  1421.8. 
If the peanuts were ineligible at the time of the disbursement, the 
total amount disbursed under loan, or as an LDP, plus charges and 
interest shall be refunded promptly.

Subpart B--Marketing Assistance Loans


Sec.  1421.100  Applicability.

    This subpart provides the terms and conditions for marketing 
assistance loans offered by CCC. Additional terms and conditions are 
also in the note and security agreement which the producer must sign to 
receive such marketing assistance loans.


Sec.  1421.101  Maturity dates.

    (a)(1) All marketing assistance loans shall mature on demand by CCC 
and no later than the last day of the 9th calendar month following the 
month in which the note and security agreement is filed and approved 
except, for transferred marketing assistance loan collateral. The 
maturity date for transferred marketing assistance loan collateral will 
be the maturity date applicable to the original loan that was 
transferred.
    (2) CCC may at any time call the marketing assistance loan by 
notifying the producer at least 30 days in advance of the accelerated 
maturity date.


Sec.  1421.102  Adjustment of basic loan rates.

    (a) Basic loan rates are established under Sec.  1421.9 and will be 
adjusted or not adjusted as follows:
    (1) For farm-stored commodities, except for peanuts, that exceed 
acceptable levels of contamination, the loan rate will be discounted to 
10 percent of the base county marketing assistance loan rate.
    (2) For farm-stored commodities where the test weight discounts are 
on the:
    (i) Crop year specific schedules of premiums and discounts, the 
loan rate shall be adjusted for the higher of the discount for test 
weight or grade based on test weight.
    (ii) Additional schedule of discounts, the marketing assistance 
loan rate shall be reduced to 20 percent of the county average 
marketing assistance loan rate.
    (3) With respect to commodities harvested, excluding silage or hay, 
as other than grain and pledged as collateral for a nonrecourse 
marketing assistance loan, the marketing assistance loan rate shall be 
discounted to 30 percent of the base county loan rate.
    (4) With respect to farm-stored wheat, the basic county marketing 
assistance loan rate shall not be adjusted to reflect the protein 
content.
    (5) With respect to Segregation 2 and 3 peanuts as determined by 
CCC, the marketing assistance loan rate shall be discounted to 35 
percent of the applicable loan rate.


Sec.  1421.103  Approved storage.

    (a) Approved farm storage is:
    (1) A storage structure located on or off the farm, (excluding 
public warehouses that do not enter into an agreement with CCC), that 
CCC determines to be controlled by the producer which affords safe 
storage of collateral pledged for a marketing assistance loan;
    (2) If determined and announced to be available in a State or 
county, on ground storage and other temporary storage structures 
approved by CCC.
    (3) As determined by CCC, temporary approved storage may also 
include:
    (i) On-ground storage or;
    (ii) Other storage arrangements.
    (b) CCC may reduce the quantity of a commodity pledged as 
collateral for a loan made available under paragraph (a)(2) of this 
section to not more than 75 percent of such otherwise eligible quantity 
in order to protect the interests of CCC. CCC may also limit the length 
of time the commodity may be stored on-ground or in temporary 
structures to not more than 90 days. A marketing assistance loan made 
with respect to such commodity which is not moved to a structure 
specified in (a)(2) within 90 days of the date the loan was disbursed 
may be called by CCC.
    (c) Approved warehouse storage shall consist of a public warehouse 
for which a CCC storage agreement for the commodity is in effect that 
is approved by CCC for price support purposes. Such a warehouse is 
referred to in this by part as an approved warehouse. The names of 
approved warehouses may be obtained from the FSA, Kansas City Commodity 
Office, P.O. Box 419205, Kansas City, Missouri 64141-6205, from State 
and county offices, or at the FSA web site on the Internet.


Sec.  1421.104  Marketing assistance loan making.

    (a)(1) The FSA county service center shall file or record, as 
required by State law, all security agreements that are issued with 
respect to commodities pledged as collateral for marketing assistance 
loans.
    (i) The cost of filing and recording shall be paid by CCC.
    (ii) The cost for terminating the financing statement before the 
end of the term shall be paid by the producer.
    (2) If there are any liens or encumbrances on the commodity, 
waivers that fully protect the CCC's interest must be obtained even 
though the liens or encumbrances are satisfied from the loan proceeds. 
No additional liens or encumbrances shall be placed on the commodity 
after the marketing assistance loan is approved.
    (b) Fees, charges, and interest must be paid by the producer to CCC 
at a rate CCC determines. Such fees, charges, and interest include:
    (1) A non-refundable loan service fee;
    (2) Interest that accrues on a loan under part 1405 of this 
chapter;
    (3) For each soybean crop, the producer as defined in the Soybean 
Promotion, Research and Consumer Information Act (7 U.S.C. Chapter 
6301), shall remit to CCC an assessment that CCC determines when it 
acquires the commodity and shall be equal to one-half of 1 percent of 
the amount determined under Sec.  1412.112.
    (c) For peanuts, charges associated with warehouse stored loans 
including but not limited to storage and in charges, as determined by 
CCC are paid by CCC to the producer.
    (d) The cost of terminating a financing statement shall be paid by 
the producer.


Sec.  1421.105  Farm-stored marketing assistance loans.

    (a) The producer of a commodity pledged as security for a farm-
storage loan shall:
    (1) Certify the quantity of such commodity on the loan application, 
or;
    (2) Have such quantity measured by CCC at the measurement service 
rate established by CCC.
    (b) The State committee may establish a marketing assistance loan 
percentage not to exceed a percentage CCC establishes or it may apply 
quality discounts to the loan rate in each year for each commodity on a 
Statewide basis or for specified areas within the State. Before 
approving a county committee request to establish a different loan 
percentage, or to apply quality discounts, the State committee shall 
consider conditions in the State or areas within a State to determine 
if the marketing assistance loan percentage should be reduced below the 
maximum marketing assistance loan percentage or the quality discounts 
should be applied to the basic county marketing assistance loan rate to 
provide CCC with adequate protection. Marketing assistance loans 
disbursed based upon loan percentages previously lowered and loan rates 
adjusted for quality shall not be altered if conditions within the 
State or areas within the State change to substantiate removing such 
reductions. Percentages established or loan rates adjusted for quality 
under this section shall apply

[[Page 63518]]

only to new marketing assistance loans and not to outstanding marketing 
assistance loans. In determining loan percentages or the necessity to 
apply quality discounts, the State committee shall consider any factor 
at its discretion, including the following:
    (1) General crop conditions;
    (2) Factors affecting quality peculiar to an area within the State; 
and
    (3) Climatic conditions affecting storability.
    (c) An eligible quantity of a commodity that is commingled with an 
ineligible quantity of the commodity is not eligible to be collateral 
for a marketing assistance loan unless the producer, when requesting a 
marketing assistance loan designates all structures that may be used 
for storage of the marketing assistance loan collateral.
    (1) In such cases, the producer is not required to obtain prior 
written approval from the county committee before moving marketing 
assistance loan collateral from one designated structure to another 
designated structure.
    (2) In all other instances, if the producer intends to move 
marketing assistance loan collateral from a designated structure to 
another undesignated structure, the producer must request prior 
approval from the county committee. Such approval shall be written and 
the eligible or ineligible commodity must be measured by a 
representative of the county office, at the producer's expense, before 
commingling. Prior to commingling, with respect to wool and mohair, a 
representative of the county committee may determine an average 
production of the wool and mohair in a manner approved by CCC.
    (d)(1) Two or more producers may obtain:
    (i) A single joint marketing assistance loan for commodities that 
are stored in the same farm storage facility; or
    (ii) Individual marketing assistance loans for their share of the 
commodity that is commingled in a farm storage facility with 
commodities owned by other producers if such other producers execute an 
agreement that provides that such producers shall obtain the permission 
of a representative of the county committee before removal of any 
quantity of the commodity from the storage facility. All producers who 
store a commodity in a farm storage facility in which commodities that 
have been pledged as collateral for a marketing assistance loan shall 
be liable for any damage incurred by CCC for the deterioration or 
unauthorized removal or disposition of such commodities.
    (2) In such cases, each producer must execute a note and security 
agreement with CCC, and each such producer shall be jointly and 
severally liable for the violation of the terms and conditions of the 
note and the requirements of this part. Each producer is also liable 
for repayment of the entire marketing assistance loan amount until the 
marketing assistance loan is fully repaid without regard to their share 
in the commodity pledged as collateral. In addition, such producer may 
not amend the note and security agreement for the producer's claimed 
share in such commodities, or marketing assistance loan proceeds, after 
execution of the note and security agreement by CCC.
    (e)(1) A producer, when requesting a marketing assistance loan, 
shall designate in writing specific storage structures.
    (2) The producer is not required to request prior approval before 
moving marketing assistance loan collateral between such designated 
structures.
    (3) Movement of marketing assistance loan collateral to any other 
structures not designated or the disposal of such loan collateral 
without prior written approval of the county committee, shall subject 
the producer to administrative actions.
    (4) The producer is responsible for any loss in quantity or quality 
of the farm-stored commodity pledged as collateral.
    (5) CCC shall not assume any loss in quantity or quality of the 
marketing assistance loan collateral for farm-stored loans.


Sec.  1421.106  Warehouse-stored marketing assistance loan collateral.

    (a) A commodity may be pledged as collateral for a warehouse-stored 
marketing assistance loan in the quantity delivered to CCC for storage 
at a warehouse that meets standards for approval at part 1423 of this 
chapter. Such quantity shall be the net weight specified on the 
warehouse receipt or supplemental certificate.
    (b) Two or more producers may obtain a single joint marketing 
assistance loan for commodities stored in an approved warehouse if the 
warehouse receipt pledged as collateral is issued jointly to the 
producers.
    (c) If more than one producer executes a note and security 
agreement with CCC, each such producer shall be jointly and severally 
liable for the violation of the terms and conditions of the note and 
the regulations in this part. Each such producer shall also remain 
liable for repayment of the entire marketing assistance loan amount 
until the marketing assistance loan is fully repaid without regard to 
such producer's claimed share in the commodity pledged as collateral 
for the marketing assistance loan. In addition, such producer may not 
amend the note and security agreement with respect to the producer's 
claimed share in such commodities, or marketing assistance loan 
proceeds, after execution of the note and security agreement by CCC.
    (d) Handling and storage rates that CCC has approved to be deducted 
from marketing assistance loan proceeds are available in USDA State and 
county FSA service centers. Deductions shall be based upon entries on 
the warehouse receipt or supplemental certificate, but the storage rate 
shall not exceed the storage rate CCC has approved. No storage 
deduction shall be made if written evidence acceptable to CCC is 
submitted indicating that:
    (1) Storage charges through the maturity date have been prepaid; or
    (2) The producer has arranged with the warehouse operator for the 
payment of storage charges through the maturity date and the warehouse 
operator enters an endorsement in substantially the following form on 
the warehouse receipt:

    Storage arrangements have been made by the depositor of the 
commodity covered by this receipt through (date through which 
storage has been provided). No lien will be asserted by the 
warehouse operator against CCC or any subsequent holder of the 
warehouse receipt for the storage charges that accrued before the 
specified date.

    (e) The beginning date to be used for computing storage deductions 
on the commodity stored in an approved warehouse shall be the later of 
the following:
    (1) The date the commodity was received or deposited in the 
warehouse;
    (2) The date the storage charges start; or
    (3) The day following the date through which storage charges have 
been paid.
    (f) For hard red winter and hard red spring wheat tendered to CCC 
and stored in an approved warehouse, producers must obtain official 
protein content determinations or, as CCC determines is acceptable, 
protein content may be determined by mutual agreement between the 
producer and the warehouse operator. Costs of determinations shall not 
be paid by CCC.
    (g) For warehouse-stored peanuts, CCC will pay storage charges and 
in-charges and other fees as determined by CCC, to ensure proper 
storage of CCC loan collateral. The beginning date to be used for 
computing storage deductions on the CCC peanut loan collateral stored 
in an approved warehouse shall be the later of the following:

[[Page 63519]]

    (1) The date the commodity was received or deposited in the 
warehouse;
    (2) The date the storage charges start; or
    (3) The day following the date through which storage charges have 
been paid.
    (4) The date all required marketing assistance loan documents are 
received in the county office.


Sec.  1421.107  Warehouse receipts.

    (a) Warehouse receipts tendered to CCC under Sec.  1421.3 for 
marketing assistance loans must meet the provisions of this section and 
all other provisions of this part, and CCC program documents.
    (b) Warehouse receipts must be issued in the name of the eligible 
producer or CCC. If issued in the name of the eligible producer, the 
receipt must be properly endorsed on its reverse side certifying that 
the crop is free of encumbrances in order for title to vest in the 
holder. Receipts must be issued by an approved warehouse and must 
represent a commodity that is deemed to be stored commingled. The 
receipts must be negotiable and must represent a commodity that is the 
same quantity and quality as the eligible commodity actually in storage 
in the warehouse of the original deposit.
    (c) If the receipt is issued for a commodity that is owned by the 
warehouse operator either solely, jointly, or in common with others, 
the fact of such ownership shall be stated on the receipt. In States 
where the pledge of warehouse receipts issued by a warehouse operator 
on the warehouse operator's commodity is invalid, the warehouse 
operator may offer the commodity to CCC for a marketing assistance loan 
if such warehouse is licensed under the U.S. Warehouse Act.
    (d) Each warehouse receipt or accompanying supplemental certificate 
representing a commodity stored in an approved warehouse that has a 
storage agreement with CCC shall indicate that the commodity is insured 
under such agreement. CCC shall not be responsible for the cost of such 
insurance.
    (e) A separate warehouse receipt must be submitted for each grade 
and class of any commodity tendered to CCC and, for rice, such receipt 
must also state the milling yield of the rice, and for wool, such 
receipts must also state the yield and micron of the wool.
    (f) With respect to peanuts, a warehouse receipt must be submitted 
exhibiting grade, type, and segregation for peanuts tendered to CCC.
    (g)(1) Each warehouse receipt, or a supplemental certificate (in 
duplicate) that properly identifies the warehouse receipt, must be 
issued under the applicable CCC storage agreement or the U.S. Warehouse 
Act, as applicable, and must indicate:
    (i) The name and location of the storing warehouse;
    (ii) The warehouse code assigned by CCC;
    (iii) The warehouse receipt number;
    (iv) The date the receipt was issued;
    (v) The type of commodity;
    (vi) The date the commodity was deposited or received;
    (vii) The date to which storage has been paid or the storage start 
date;
    (viii) Whether the commodity was received by rail, truck or barge;
    (ix) The amount per bushel, pound, or hundredweight of prepaid in 
or out charges;
    (x) The signature of the warehouse operator or the authorized 
agent; and
    (xi) For warehouses operating under a merged warehouse code 
agreement (KC-385), the location and county to which the producer 
delivered the commodity.
    (2) In addition to the information specified in paragraph (f)(1) of 
this section, additional commodity specific requirements shall be 
determined by CCC and be available at State and county offices and the 
Kansas City Commodity Office.
    (h) If a warehouse receipt indicates that the commodity tendered 
for loan grades ``infested'' or ``contains excess moisture'', or both, 
the receipt must be accompanied by a supplemental certificate in order 
for the commodity to be eligible for a marketing assistance loan. The 
grade, grading factors, and quantity to be delivered must be shown on 
the certificate as follows:
    (1) When the warehouse receipt shows ``infested'' and the commodity 
has been conditioned to correct the infested condition, the 
supplemental certificate must show the same grade without the 
``infested'' designation and the same grading factors and quantity as 
shown on the warehouse receipt.
    (2)(i) When the warehouse receipt shows that the commodity 
contained excess moisture and the commodity has been dried or blended, 
the supplemental certificate must show the grade, grading factors, and 
quantity after drying or blending of the commodity. Such entries shall 
reflect a drying or blending shrinkage as provided in paragraph 
(g)(2)(iv) of this section.
    (ii) When a supplemental certificate is issued under paragraphs 
(g)(1) and (g)(2)(i) of this section, the grade, grading factors and 
the quantity shown on such certificate shall supersede the entries for 
such items on the warehouse receipt.
    (iii) If the commodity has been dried or blended to reduce the 
moisture content, the quantity specified on the warehouse receipt or 
the supplemental certificate shall represent the quantity after drying 
or blending.
    (iv) For commodities dried or blended under paragraph (g)(2)(iii) 
of this section, such quantity shall reflect a minimum shrinkage in the 
receiving weight excluding dockage:
    (A) For the following commodities, 1.3 times the percentage 
difference between the moisture content of the commodity received and 
the following percentages for the specified commodity:
    (1) Barley: 14.5 percent;
    (2) Corn: 15.5 percent;
    (3) Grain sorghum: 14.0 percent;
    (4) Oats: 14.0 percent;
    (5) Rice: 14.0 percent;
    (6) Soybeans: 14.0 percent;
    (7) Wheat: 13.5 percen; and
    (8) Peanuts: 10.0 percent.
    (B) For the following commodities, 1.1 times the percentage 
difference between the moisture content of the commodity received and 
the following percentages for the specified commodity:
    (1) Canola: 10.0 percent;
    (2) Flaxseed: 9.0 percent;
    (3) Mustard Seed: 10.0 percent;
    (4) Rapeseed: 10.0 percent;
    (5) Safflower Seed: 10.0 percent;
    (6) Sunflower Seed: 10.0 percent;
    (7) Crambe: 10.0 percent; and
    (8) Sesame Seed: 10.0 percent.
    (i)(1) If, under paragraph (g) of this section, a supplemental 
certificate is issued in connection with a warehouse receipt, such 
certificate must state that no lien for processing will be asserted by 
the warehouse operator against CCC or any subsequent holder of such 
receipt.
    (2) Warehouse receipts and the commodities represented by such 
receipts that are stored in an approved warehouse that is operating 
under a CCC storage agreement may be subject to a lien for warehouse 
charges as specified in the applicable storage agreement. For all 
commodities except peanuts, the producer who pledged such a receipt as 
collateral for a loan under this part shall pay to CCC all costs 
incurred by CCC as result of the existence of the lien. In no event 
shall a warehouse operator be entitled to satisfy such a lien by sale 
of the commodities when CCC is the holder of such receipt.
    (j) Warehouse receipts representing commodities that have been 
shipped by rail or by barge, must be accompanied by supplemental 
certificates completed under paragraph (f) of this section.

[[Page 63520]]

Sec.  1421.108  Transfers and reconcentrations.

    (a) Upon request by the producer before transfer, the county 
committee may approve the transfer of a quantity of a commodity that is 
pledged as collateral for a farm-stored loan to a warehouse-stored loan 
at any time during the loan period.
    (1) Liquidation of the farm-stored loan or part thereof shall be 
made through the pledge of warehouse receipts for the commodity placed 
under warehouse-stored loan and the immediate payment by the producer 
of the amount by which the warehouse-stored loan is less than the farm-
stored loan or part thereof and charges plus interest. The loan 
quantity for the warehouse-stored loan cannot exceed 110 percent of the 
loan quantity transferred from the farm-stored loan.
    (2) Any amounts due the producer shall be disbursed by the FSA 
county service center.
    (b) Upon request by the producer before the transfer, the county 
committee may approve the transfer of a warehouse-stored loan or part 
thereof to a farm-stored loan at any time during the marketing 
assistance loan period. Quantities pledged as collateral for a farm-
stored loan shall be based on a measurement or a calculation of average 
production of wool and mohair, such measurement or calculation to be 
made by a representative of the county office before approving the 
farm-stored loan. The producer must immediately repay the amount by 
which the farm-stored loan is less than the warehouse-stored loan and 
charges plus interest on the shortage. The maturity date of the farm-
stored loan shall be the maturity date applicable to the warehouse-
stored loan that was transferred.
    (c) Upon the filing of the Reconcentration Agreement and Trust 
Receipt by the producer and warehouse operator, CCC may, during the 
marketing assistance loan period, approve the reconcentration in 
another CCC-approved warehouse for all or part of a commodity that is 
pledged as collateral for a warehouse-stored loan. Any such approval 
shall be subject to the terms and conditions in the Reconcentration 
Agreement and Trust Receipt. A producer may, before the new warehouse 
receipt is delivered to CCC, pay to CCC:
    (1) The principal amount of the marketing assistance loan and 
charges plus interest and applicable charges; or
    (2) If CCC so announces, an amount less than the principal amount 
of the marketing assistance loan and charges plus interest under the 
terms and conditions specified by CCC at the time the producer redeems 
the commodity pledged as collateral for such marketing assistance loan.


Sec.  1421.109  Personal liability of the producer.

    (a) When a producer obtains a commodity marketing assistance loan, 
the producer agrees, in writing, not to:
    (1) Provide an incorrect certification of the quantity or make any 
fraudulent or erroneous representation for the marketing assistance 
loan; or
    (2) Remove or dispose of a quantity of commodity that is collateral 
for a CCC farm-stored loan without prior written approval from CCC.
    (3) The violation of the terms and conditions of the note and 
security agreement, will cause harm or damage to CCC in that funds may 
be disbursed to the producer for a quantity of a commodity that is not 
actually in existence or for a quantity on which the producer is not 
eligible.
    (b) Such violations as are referred to in paragraph (a)(3) of this 
section may include:
    (1) Incorrect certification;
    (2) Unauthorized removal; and
    (3) Unauthorized disposition.
    (c) The producer and CCC agree that it will be difficult, if not 
impossible, to prove the amount of damages to CCC for such violations. 
Accordingly, if the county committee determines that the producer has 
committed such violations, liquidated damages shall be assessed on the 
quantity of the commodity that is involved in the violation.
    (d) In the case of violations, if CCC determines the producer:
    (1) Acted in good faith when the violation occurred, liquidated 
damages will be assessed by multiplying the quantity involved in the 
violation by:
    (i) 10 percent of the marketing assistance loan rate applicable to 
the loan note for the first offense; or
    (ii) 25 percent of the marketing assistance loan rate applicable to 
the loan note for the second offense; or
    (2) Did not act in good faith about the violation, or for cases 
other than the first or second offense, liquidated damages will be 
assessed by multiplying the quantity involved in the violation by 25 
percent of the marketing assistance loan rate applicable to the loan 
note.
    (e) For violations and the liquidated damages under paragraph 
(d)(1) of this section, the county committee shall:
    (1) Require repayment of the marketing assistance loan quantity 
incorrectly certified or the loan quantity removed or disposed at the 
lesser of:
    (i) The applicable loan principal, and charges, plus interest or;
    (ii) The announced alternative repayment rate in effect on date the 
violation occurred, plus 15 percent of the loan rate, as otherwise 
determined by the Deputy Administrator, and
    (2) If the producer fails to pay such amount within 30 days from 
the date of notification, accelerate the marketing assistance loan in 
default and require repayment of all loan principal, charges, and 
interest.
    (f) For violations committed and the liquidated damages were 
assessed under paragraph (d)(2) of this section, the county committee 
shall call the loan involved in the violation, and require repayment of 
the entire loan principal, charges and interest.
    (g) The county committee may waive the liquidated damages if it 
determines that the violation was inadvertent, accidental, and 
unintentional.
    (h) If, for any violation, the county committee determines that 
CCC's interest is not or will not be protected, the county committee 
shall call all of the producer's farm-stored loans, and deny future 
farm-stored loans and loan deficiency payments without production 
evidence for 24 months after the date the violation is discovered. 
Depending on the severity of the violation, the county committee may 
deny future farm-stored loans and loan deficiency payments without 
production evidence for an additional period CCC designates.
    (i) If the county committee determines that the producer has 
committed a violation, the county committee shall notify the producer 
in writing that:
    (1) The producer has 30 calendar days to provide evidence and 
information regarding the circumstances that caused the violation, to 
the county committee; and
    (2) Administrative actions will be taken.
    (j) If the loan is accelerated, the producer may not repay the loan 
at the lower alternative loan repayment rate and may not utilize 
commodity certificate exchanges, unless authorized by CCC.
    (k) Producers rejected for a farm-stored loan under this section 
may apply for a warehouse-stored loan.
    (l) The loan plus other charges shall be payable to CCC upon demand 
if a producer:
    (1) Makes any fraudulent representation in obtaining a marketing 
assistance loan, maintaining, or settling a loan; or
    (2) Disposes or moves the loan collateral without the approval of 
CCC.
    (m) A producer shall be personally liable for damages resulting 
from a commodity delivered to or removed by CCC containing mercurial 
compounds, toxin producing molds, or other

[[Page 63521]]

substances poisonous or harmful to humans or animals or property.
    (n) If the amount disbursed under a marketing assistance loan or in 
settlement thereof, exceeds the amount authorized by this part, the 
producer shall be liable for repayment of such excess and charges, plus 
interest.
    (o) If the amount collected from the producer in satisfaction of 
the marketing assistance loan is less than the amount required under 
this part, the producer shall be personally liable for repayment of the 
amount of such deficiency and charges, plus interest.
    (p) In the case of joint loans or loan deficiency payments, the 
personal liability for the amounts specified in this section shall be 
joint and several on the part of each producer signing the note or loan 
deficiency payment application.
    (q) Any or all of the liquidated damages assessed may be waived as 
determined by CCC.


Sec.  1421.110  Repayments.

    (a) CCC may allow a producer to repay a nonrecourse marketing 
assistance loan at a rate that is the lesser of:
    (1) The loan rate and charges, plus interest determined for a crop; 
or
    (2) The prevailing world market price, as determined by CCC, for 
rice or the alternative repayment rate for all other commodities, as 
determined by CCC.
    (b)(1) On a form prescribed by CCC, a producer may request to lock 
in the applicable repayment rate for a period of:
    (i) 60 calendar days; or
    (ii) not less than 14 calendar days before the maturity date of the 
loan, but not both.
    (2) The request to lock in the applicable repayment rate must be 
received in the FSA county service center that disbursed the loan.
    (3) The repayment rate that is locked in is the rate in effect when 
the request to lock in is approved.
    (4) The repayment rate may be locked in on outstanding farm-stored 
or warehouse-stored loans.
    (5) The repayment rate that is locked in will expire the earlier 
of:
    (i) 60 calendar days from date of approval, or;
    (ii) 14 calendar days before loan maturity.
    (6) The requests can only be completed one time for a designated 
quantity.
    (7) The requests can be made in person or by facsimile.
    (8) The requests cannot be canceled, terminated, or changed after 
approval.
    (9) The locked-in applicable repayment rate will not transfer to 
any loan disbursed outside of the originating county where the 
commodity was stored.
    (10) Once a repayment rate is locked in it cannot be extended.
    (c) If a producer fails to repay a marketing assistance loan within 
the time prescribed by CCC under the terms and conditions of the 
request to lock in a market loan repayment rate, the producer may repay 
the loan:
    (1) On or before maturity, at the lesser of:
    (i) Principal plus interest as determined by CCC;
    (ii) The repayment rate in effect on the day the repayment is 
received in the FSA county service center.
    (2) After maturity at principal plus interest.
    (d) When the proceeds of the sale of the commodity are needed to 
repay all or a part of a farm-stored loan, the producer must request 
and obtain prior written approval on a CCC approved form and comply 
with the terms and conditions of such form, to remove a specified 
quantity of the commodity from storage. Approval does not constitute 
release of CCC's security interest in the commodity or release of 
producer liability for amounts due CCC for the marketing assistance 
loan indebtedness if payment in full is not received by the county 
office. Failure to repay a marketing assistance loan within the time 
period prescribed by CCC in the case of a farm-stored loan and delivery 
of the pledged collateral to a buyer, is a violation of the agreement. 
In the case of such violation, the producer must repay the loan 
principal and interest or another amount as determined by the Deputy 
Administrator, FSA, under Sec.  1421.109.
    (e) The producer may obtain county committee approval of a release 
of all or part of pledged collateral for a warehouse-stored loan at or 
before the maturity of such loan by paying to CCC:
    (1) The principal amount of the marketing assistance loan and 
charges plus interest, or
    (2) An amount less than the principal amount of the marketing 
assistance loan and charges plus interest under the terms and 
conditions specified by CCC at the time the producer redeems the 
collateral for such loan.
    (f) A partial release of marketing assistance loan collateral must 
cover all of the commodity represented by one warehouse receipt. 
Warehouse receipts redeemed by repayment of the marketing assistance 
loan shall be released only to the producer. However, such receipt may 
be released to persons designated in a written authorization that is 
filed with the county office by the producer within 15 days before the 
date of repayment.
    (g) The note and security agreement shall not be released until the 
marketing assistance loan has been satisfied in full.
    (h)(1) If the commodity is moved from storage without obtaining 
prior approval to move such commodity, such removal shall constitute 
unauthorized removal or disposition, as applicable under Sec.  
1421.109(b), unless the removal occurred on a non-workday and the 
producer notified the county office on the next workday of such 
removal.
    (2) Any loan quantities involved in a violation of Sec.  1421.109 
must be repaid under Sec.  1421.109(e).


Sec.  1421.111  Commodity certificate exchanges.

    (a) For any outstanding marketing assistance loan, a producer may 
purchase a commodity certificate and exchange that commodity 
certificate for the marketing assistance loan collateral.
    (b) The exchange rate is the lessor of:
    (1) The loan rate and charges, plus interest applicable to the 
loan;
    (2) The prevailing world market price, as determined by CCC, for 
rice or the alternative repayment rate for all other commodities, as 
determined by CCC.
    (c) Commodity certificate exchanges may not be used when locking in 
a repayment rate under Sec.  1421.110.
    (d) Producers must request a commodity certificate exchange in 
person at the FSA county service center that disbursed the marketing 
assistance loan by:
    (1) Completing a written request as CCC determines.
    (2) Purchasing a commodity certificate for the exact amount 
required to exchange the marketing assistance loan collateral.
    (3) Immediately exchanging the purchased commodity certificate for 
the outstanding loan collateral.


Sec.  1421.112  Loan settlement.

    (a) The value of the settlement of marketing assistance loan shall 
be made by CCC on the following basis:
    (1) For nonrecourse marketing assistance loans, the schedule of 
premiums and discounts for the commodity provided that:
    (i) If, the value of the collateral at settlement is less than the 
amount due, the producer shall pay to CCC the amount of such deficiency 
and charges, plus interest on such deficiency; or
    (ii) If, the value of the collateral at settlement is greater than 
the amount due, such excess shall be retained by CCC and CCC shall have 
no obligation to pay such amount to any party.

[[Page 63522]]

    (2) For recourse marketing assistance loans, the proceeds from the 
sale of the commodity provided that:
    (i) If, the value of the collateral at settlement is less than the 
amount due, the producer shall pay to CCC the amount of such deficiency 
and charges, plus interest on such deficiency; or
    (ii) If, the proceeds received from the sale of the commodity are 
greater than the sum of the amount due, plus any cost incurred by CCC 
in conducting the sale of the commodity, the amount of such excess 
shall be paid to the producer or, if applicable, to a secured creditor 
of the producer.
    (3) If CCC sells the commodity described in paragraphs (a)(1) or 
(a)(2) of this section in settlement of the marketing assistance loan, 
the sales proceeds shall be applied to the amount owed CCC by the 
producer. The producer shall be responsible for any costs incurred by 
CCC in completing the sale. CCC may deduct such amount from the sales 
proceeds.
    (b) Settlements made by CCC for eligible commodities that are 
acquired by CCC and that are stored in an approved warehouse shall be 
made on the basis of the entries in the applicable warehouse receipt, 
supplemental certificate, and accompanying documents.
    (c) Settlements made by CCC for peanuts acquired by CCC and stored 
in an approved warehouse shall be based on the settlement value at the 
time of the loan disbursement and the entries in the applicable 
warehouse receipt, supplemental certificate, and accompanying documents 
subject to adjustments for changes in quality and other factors.
    (1) All eligible commodities that are stored in other than approved 
warehouses shall be delivered to CCC as CCC instructs. Settlement shall 
be based on entries in the applicable warehouse receipt, supplemental 
certificate, and accompanying documents.
    (2) For eligible loan commodities that are delivered from other 
than an approved warehouse, settlement shall be made by CCC on the 
basis of the basic marketing assistance loan rate that is in effect for 
the commodity at the producer's customary delivery point, as determined 
by CCC.
    (d) In all cases, settlements may be adjusted for changes in 
quality and other factors affecting the value of the commodity.


Sec.  1421.113  Foreclosure.

    (a)(1) Upon maturity and nonpayment of a warehouse-stored loan, 
title to the unredeemed collateral securing the marketing assistance 
loan shall immediately vest in CCC.
    (2) Upon maturity and nonpayment of a farm-stored marketing 
assistance loan, title to the unredeemed collateral shall automatically 
transfer to CCC upon CCC demand.
    (3) When CCC acquires title to the unredeemed collateral, CCC shall 
not pay for any market value that such collateral may have in excess of 
the marketing assistance loan indebtedness, (the unpaid amount of the 
note and charges plus interest).
    (b) If the total amount due on a farm-stored loan (the unpaid 
amount of the note plus charges, and interest) is not satisfied upon 
maturity, CCC may remove the commodity from storage, and assign, 
transfer, and deliver the commodity or documents evidencing title 
thereto when, how, and upon terms as CCC determines. Disposition may 
also be effected without removing the commodity from storage. The 
commodity may be processed before sale and CCC may become the purchaser 
of the whole or any part of the commodity at either a public or private 
sale.
    (1) The value of settlement for a farm-stored commodity removed by 
CCC from storage and shall be as provided in Sec.  1421.112.
    (2) If a deficiency exists after the collateral is sold, a claim 
for such deficiency will be established in accordance with part 1403 of 
this title.


Sec.  1421.115  Recourse marketing assistance loans.

    (a) CCC shall make recourse marketing assistance loans available to 
eligible producers of high moisture corn, high moisture grain sorghum 
and other eligible loan commodities as determined by the Deputy 
Administrator, Farm Programs.
    (b) Repayment must be paid in full on or before the loan maturity 
date.
    (c) Recourse marketing assistance loan collateral may not be 
delivered or forfeited to CCC in satisfaction of the loan indebtedness.

Subpart C--Loan Deficiency Payments


Sec.  1421.200  Applicability.

    (a) During the loan availability period, loan deficiency payments 
will be made available to eligible producers when the alternative 
repayment rate is less than the applicable county loan rate.
    (b) To be eligible to receive loan deficiency payments a producer 
must:
    (1) Comply with all marketing assistance loan eligibility including 
beneficial interest requirements.
    (2) Agree to forgo obtaining such loan, if applicable; and
    (3) File in person, by mail or electronically a request for payment 
on a form prescribed by CCC; and
    (4) Otherwise comply with all program requirements.
    (c) A producer must submit a completed request for:
    (1) A field direct loan deficiency payment to CCC on or before the 
date of harvesting or shearing a quantity of an eligible commodity, 
provided further that the producer must have beneficial interest in 
such quantity on the date the commodity is harvested or sheared.
    (2) A field direct loan deficiency payment to CCC for unshorn pelts 
on or before the date of slaughter of the quantity of live lambs, 
before the loss by the producer of beneficial interest in the lamb and 
the unshorn pelt produced from such lamb.
    (3) All other types of loan deficiency payment requests after 
harvest or shearing and before beneficial interest is lost in the 
commodity, but not later than the loan availability date.
    (d) For unshorn pelts, the lamb must be owned for a period of not 
less than 30 days in advance of the application and sold for immediate 
slaughter or slaughtered for personal use. Producers must submit 
acceptable production evidence to CCC under Sec.  1421.12 at the time 
of request. Producers who do not sell lambs for immediate slaughter are 
ineligible for a loan deficiency payment.


Sec.  1421.201  Loan deficiency payment rate.

    (a) The loan deficiency payment rate for a crop shall be the amount 
by which the loan rate for the crop exceeds the rate at which CCC has 
announced that producers may repay their loans under Sec.  1421.10.
    (b) Such rate shall be the amount determined:
    (1) For loan deficiency payments other than field direct:
    (i) On the day the producer submits a completed request for a loan 
deficiency payment to the FSA county service center;
    (ii) Using the rate in effect for the FSA county service center 
where the commodity is stored.
    (2) For field direct loan deficiency payments:
    (i) On the date the commodity was delivered to the processor, 
buyer, warehouse or CMA;
    (ii) Using the rate in effect for the FSA county service center 
where the farm records are kept.
    (3) For rice loan deficiency payments, the adjusted world price 
under Sec.  1421.10(c).
    (c) The loan deficiency payment applicable to such crop shall be 
computed by multiplying the loan

[[Page 63523]]

deficiency payment rate, as determined under paragraph (b) of this 
section, by the quantity of the crop the producer is eligible to pledge 
as collateral for a nonrecourse loan for which the loan deficiency 
payment is requested.


Sec.  1421.202  Loan deficiency payment quantity.

    (a) A loan deficiency payment may be based on 100 percent of the 
net eligible quantity specified on acceptable evidence of production of 
the commodity certified as eligible for loan deficiency payment if such 
production evidence is provided for such commodity under Sec.  1421.12.
    (b) Two or more producers may obtain a single joint loan deficiency 
payment for commodities that are stored in the same storage facility. 
Two or more producers may obtain individual loan deficiency payments 
for their share of the commodity that is stored commingled in a farm 
storage facility with commodities for which a loan deficiency payment 
has been requested and shall be liable for any damage incurred by CCC 
for incorrect certification of such commodities under Sec.  1421.203.
    (c) Two or more producers may obtain a single joint loan deficiency 
payment for commodities that are stored in an approved or unapproved 
warehouse if the acceptable documentation representing an eligible 
commodity for which a loan deficiency payment is requested is completed 
jointly for such producers.


Sec.  1421.203  Personal liability of the producer.

    (a) When a producer requests a loan deficiency payment, the 
producer agrees:
    (1) When signing the Loan Deficiency Payment Application and 
Certification or the Direct Loan Deficiency Payment Agreement, as 
applicable, that the producer will not provide an incorrect 
certification of the quantity or make any fraudulent representation for 
loan deficiency payment purpose; and
    (2) That violation of the terms and conditions of the loan 
deficiency payment request, as applicable, will cause harm or damage to 
CCC in that funds may be disbursed to the producer for a quantity of a 
commodity that is not actually in existence or for a quantity on which 
the producer is not eligible, if CCC determines that the producer has 
violated the terms and conditions of the applicable forms prescribed by 
CCC, liquidated damages shall be assessed on the quantity of the 
commodity that is involved in the violation.
    (b) If CCC determines that the producer:
    (1) Acted in good faith when the violation occurred, liquidated 
damages will be assessed by multiplying the quantity involved in the 
violation by:
    (i) 10 percent of the loan deficiency payment rate for the first 
offense; or
    (ii) 25 percent of the loan deficiency payment rate for the second 
offense.
    (2) Did not act in good faith about the violation, or for cases 
other than the first or second offense, liquidated damages will be 
assessed by multiplying the quantity involved in the violation by 25 
percent of the loan deficiency payment rate.
    (c) For violations to which paragraph (b)(1) of this section 
applies, the producer must repay the loan deficiency payment applicable 
to the loan deficiency quantity incorrectly certified, and charges, 
plus interest applicable to the amount repaid. If the producer fails to 
pay such amounts within 30 days from the date of notification, the 
producer must repay the entire loan deficiency payment and charges plus 
interest.
    (d) For violations to which paragraph (b)(2) of this section 
applies, the producer shall repay of the entire loan deficiency payment 
and charges plus interest.
    (e) CCC may waive the liquidated damages taken applicable to 
paragraph (b) of this section if the CCC determines that the violation 
occurred inadvertently, accidentally, or unintentionally.
    (f) If, for any violation to which paragraph (b) of this section 
applies, the county committee determines that CCC's interest is not or 
will not be protected, the county committee shall:
    (1) Call the producer's farm-stored loans;
    (2) Deny future farm-stored loans for the current and 2 following 
crop years;
    (3) Deny loan deficiency payments for the current and 2 following 
crop years unless production evidence is presented to CCC. Depending on 
the severity of the violation, the county committee may deny future 
farm-stored loan and loan deficiency payments without production 
evidence.
    (g) If the county committee determines that the producer has 
committed a violation, the county committee shall notify the producer 
in writing that:
    (1) The producer has 30 calendar days to provide evidence and 
information regarding the circumstances that caused the violation, to 
the county committee; and
    (2) Administrative action will be taken under this section.
    (h) If the amount disbursed under loan deficiency payments exceeds 
the amount authorized by this part, the producer shall be liable for 
repayment of such excess and charges, plus interest.
    (i) In the case of joint loan deficiency payments, the personal 
liability for the amounts specified in this section shall be joint and 
several on the part of each producer signing the loan deficiency 
payment application.
    (j) Any or all of the liquidated damages assessed under the 
provisions of paragraph (b) of this section may be waived as determined 
by CCC.

    9. The heading of newly designated subpart D is revised to read as 
set forth below, and subpart D is further amended as follows:

Subpart D--Grazing Payments for 2002-2007 Crop Years of Wheat, 
Barley, Oats and Triticale

    A. In Sec.  1421.300, paragraph (a) is revised to read as follows:


Sec.  1421.300  Applicability.

    (a) The regulations in this subpart are applicable to the 2002-2007 
crops of eligible acreage planted to wheat, barley, oats or triticale 
that is grazed by livestock and not harvested in any other manner. This 
subpart sets forth the terms and conditions under which a grazing 
payment in lieu of a loan deficiency payment will be made by CCC.
* * * * *
    B. In Sec.  1401.303, paragraphs (a), (d) and (e) are revised and 
paragraph (f) is added to read as follows:


Sec.  1421.303  Eligible producer and eligible land.

    (a) To be an eligible producer for a payment under this subpart, 
the person must be a producer of wheat, barley, oats, or triticale in 
the 2002 through 2007 crop years. Also, to be an eligible producer, the 
person must meet all other qualifications for payment that are set out 
in this subpart, set out in parts 12, 718, 1400, and 1405 of this 
title. A person will not be considered the producer of the crop unless 
that person was responsible for the planting of the crop and had the 
risk of loss in the crop at all times, including, at the time of 
planting and the time of the request for a payment under, this subpart.
* * * * *
    (d)(1) A producer must, at the time of the agreement made under 
this part to obtain a payment, meet all other eligible criteria for 
obtaining loan deficiency payments.
    (2) For producers of triticale who obtain a payment under this 
subpart the

[[Page 63524]]

producer must enter into an agreement with CCC to forgo any harvesting 
of triticale on the acreage for which such a payment is made.
    (e)(1) No payment will be made if the crop could not have been 
harvested because of weather conditions or any other reason.
    (2) The producer must retain the control, title and risk of loss in 
the commodity for which the payment is sought from the date of planting 
through the date on which mechanical harvesting of the crop would 
normally occur.
    (f) Producers who elect to graze 2002-2007 crop wheat, barley, 
oats, or triticale will not be eligible for an indemnity under the 
Federal Crop Insurance Program provision of Chapter IV of this title or 
a payment under Noninsured Crop Assistance Program authorized under 
part 1437 of this chapter.
    C. In Sec.  1421.304 revise the first sentence to read as follows:


Sec.  1421.304  Time and method for application.

    Application for the program provided in this subpart must be 
received, at the county office that is responsible for administering 
programs for the farm, no earlier than the date on which eligible crops 
would normally be harvested and no later than the final loan 
availability date as determined in accordance with Sec.  1421.5. * * *
    D. In Sec.  1421.305 revise paragraphs (a), (c) and (f) to read as 
follows:


Sec.  1421.305  Payment amount.

    (a) The grazing payment rate shall be the loan deficiency payment 
in effect for the farm on the date which the producer submits a 
complete program application to CCC. For triticale, the loan deficiency 
payment rate will be equal to the rate for the predominant class of 
wheat in the county where the farm is located in effect as of the date 
of the application is filed.
* * * * *
    (c) The payment yield shall be the yield in effect for the 
calculation of direct payments under part 1412 of this chapter. In a 
case of a farm for which a farm program payment yield is unavailable 
for a covered commodity, an appropriate payment yield for the covered 
commodity on the farm will be determined by CCC taking into 
consideration the farm program payment yields applicable to the 
commodity using three (3) similar farms. For triticale, the payment 
yield shall be the yield for wheat from three (3) similar farms in that 
county.
* * * * *
    (f) To receive the payment, the eligible producer must submit a 
request for payment on an application form as prescribed by CCC or FSA. 
The application may be obtained from the county FSA office, or from the 
USDA or FSA web site in the Internet. The form must be submitted to the 
county by the close of business on or before March 31 of the applicable 
crop year.

    Signed in Washington, DC, on October 8, 2002.
James R. Little,
Executive Vice President, Commodity Credit Corporation.
[FR Doc. 02-25969 Filed 10-8-02; 10:55 am]
BILLING CODE 3410-05-P