[Federal Register Volume 71, Number 127 (Monday, July 3, 2006)]
[Proposed Rules]
[Pages 37857-37862]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-10368]


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DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1421

RIN 0560-AH52


Storage Requirements for Grain Security for Marketing Assistance 
Loans

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Proposed rule.

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SUMMARY: This rule proposes changes to the regulations governing the 
Marketing Assistance Loan Programs of the Commodity Credit Corporation 
(CCC) that are authorized by the Farm Security and Rural Investment Act 
of 2002 (2002 Act). CCC is proposing to no longer require a Federally-
licensed warehouse operator, or in a State with a warehouse licensing 
programs, a State-licensed warehouse operator to execute a CCC storage 
agreement. Nothing in this proposed rule will affect the administration 
of the United States Warehouse Act by USDA.

DATES: Comments should be received on or before August 2, 2006.

ADDRESSES: CCC invites interested persons to submit comments on this 
proposed rule and on the collection of information required to 
administer the affected regulations. Comments may be submitted by any 
of the following methods:
     E-Mail: Send comments to: [email protected].
     Fax: Submit comments by facsimile transmission to: (202) 
690-1536.
     Mail: Send comments to: Director, Price Support Division, 
Farm Service Agency, United States Department of Agriculture (USDA), 
Room 4095-S, 1400 Independence Avenue, SW., Washington, DC 20250-0512.
     Hand Delivery or Courier: Deliver comments to the above 
address.
     Federal Rulemaking Portal: Go to http://www.regulations.gov. Follow the online instructions for submitting 
comments.
    All written comments will be available for public inspection at the 
above address during business hours from 8 a.m. to 5 p.m., Monday 
through Friday.

[[Page 37858]]


FOR FURTHER INFORMATION CONTACT: Kimberly Graham; phone: (202) 720-
9154; e-mail: [email protected], or fax: (202) 690-1536.

SUPPLEMENTARY INFORMATION:

Background

    Since the enactment of the Agricultural Act of 1949, the major 
activity of CCC has been the administration and implementation of 
nonrecourse marketing assistance loans to producers of major 
agricultural commodities. Generally, Congress established loan rates 
for certain commodities, e.g. $1.95 per bushel for corn, for the 2004 
through 2007 crop years. Under nonrecourse loan provisions, the 
producer may satisfy the loan obligation through forfeiture to CCC of 
the commodity pledged as collateral for the loan.
    Since 1949, the commodities pledged as collateral for these loans 
could be stored on the producer's farm or in approved warehouses. 
Historically, approved warehouses have been warehouse operators who 
entered into storage agreements with CCC that set forth terms and 
conditions regarding: (1) Financial aspects of the warehouse; (2) rates 
that are applicable to the storage of CCC owned inventory and CCC loan 
collateral; (3) handling and delivery charges with respect to these 
commodities; and (4) related storage issues.
    Most States, as well as the Department of Agriculture (USDA), have 
a warehouse licensing regime for the storage of agricultural 
commodities. In these States, generally, an entity must have a State or 
Federal license to engage in storing these commodities. These licensed 
entities issue warehouse receipts that evidence ownership of commingled 
commodities. In general, those non-licensed entities in States with 
licensing programs may not store agricultural commodities on behalf of 
producers but are free to purchase commodities from producers. 
Accordingly, in such States, commercial feed lots, ethanol plants, wool 
pools, and other entities that are the ``end users'' of the commodity 
are not licensed warehouses and, therefore, may not store commodities 
on behalf of producers. In those States that do not have such a 
licensing regime, warehouses must still follow State laws relating to 
bailment and storage. The State laws relating to bailment and storage 
may vary from State to State.
    As a result of the accumulation of large quantities of commodities 
forfeited under nonrecourse loans, in the mid-1980's Congress 
instituted a fundamental change to CCC loan programs when market prices 
are below the CCC loan rate. The change allows producers the 
opportunity to repay the nonrecourse loan at a price determined by CCC 
and to retain any difference between the amount of the loan value and 
the repayment value. Under these ``marketing assistance loans (MAL),'' 
the producer still has the option of forfeiting the loan collateral to 
CCC. MAL's accomplish two objectives. First, they provide producers 
with interim financing to continue farming operations without having to 
market their crop during a period of low market prices. Second, these 
loans facilitate the orderly marketing and distribution of commodities 
throughout the year.
    The three largest amounts of acreage planted to agricultural 
commodities for which marketing assistance loans are available are 
devoted to corn, soybeans and wheat. The following chart shows the 
estimated production of these commodities, as determined by the 
National Agricultural Statistics Service of USDA, and the quantity of 
such crops forfeited to CCC in the 2000 through 2004 crop years. With 
respect to the 2004 crop, the increase in forfeitures was attributable 
to the disruption in marketing channels caused by Hurricane Katrina. 
This hurricane occurred when a significant number of corn and soybean 
marketing assistance loans matured in the upper Midwest. The closing of 
the Mississippi River in the New Orleans area and damage to grain 
handling facilities in that area caused significant reductions in 
commodity prices. As a result, there was an abnormal increase in 
forfeitures to CCC; however, to mitigate this impact, CCC provided 
producers with farm-stored loans the opportunity to store these CCC-
owned stocks on their farm for up to 60 days with the option of 
purchasing the commodity at a price CCC would use in completing a 
marketing loan transaction. Accordingly, while CCC took title to a 
larger quantity of 2004 crops compared to the previous two years, such 
stocks moved into commercial distribution as soon as was practicable in 
as normal a way as possible.

----------------------------------------------------------------------------------------------------------------
                                                                                                    Percent of
                         Commodity year                             Production      Forfeitures     production
                                                                   bil. bushels    mil. bushels      forfeited
----------------------------------------------------------------------------------------------------------------
Corn:
    2000........................................................           9.915          26.596          0.2682
    2001........................................................           9.502           0.017          0.0002
    2002........................................................           8.966           1.892          0.0211
    2003........................................................          10.089           1.037          0.0103
    2004........................................................          11.807          24.382          0.2065
Soybeans:
    2000........................................................           2.757           5.704          0.2069
    2001........................................................           2.890           0.054          0.0019
    2002........................................................           2.756           0.205          0.0074
    2003........................................................           2.453           0.122          0.0050
    2004........................................................           3.123           0.483          0.0154
Wheat:
    2000........................................................           2.228          12.749          0.5722
    2001........................................................           1.947           0.442          0.0227
    2002........................................................           1.605           1.507          0.0939
    2003........................................................           2.344           2.480          0.1058
    2004........................................................           2.158           9.401          0.3247
----------------------------------------------------------------------------------------------------------------

    CCC's ownership interest in these major commodities is 
insignificant. The percentage of other marketing loan commodities owned 
by CCC as a percentage of total production is similar to these 
commodities. When a comparison is made with the quantities of 
commodities forfeited to CCC as a percentage of the quantities pledged 
as

[[Page 37859]]

collateral for such loans, CCC takes possession of less than 0.4 
percent of the commodities pledged as collateral for marketing 
assistance loans.
    The amount of the monetary gain producers may obtain by repaying 
CCC marketing assistance loans at repayment rates below their loan rate 
can be substantial. Therefore, there is a significant incentive for a 
producer to obtain these loans solely for this benefit. However, both 
the producer and CCC incur costs in completion of the loan transaction 
due to costs associated with lien searches and lien filing fees as well 
as USDA personnel costs incurred in processing these loans. To reduce 
the costs associated with the delivery of this benefit, producers may 
simply request that a payment be made to them in an amount equal to 
what would be realized if the loan had been made and immediately repaid 
at the lower repayment rate. In return for the payment, referred to as 
a ``loan deficiency payment (LDP)'', the producer agrees that the 
commodity for which the LDP was provided will not be pledged as 
collateral for a CCC marketing assistance loan. The LDP amount is equal 
to the established loan rate for the applicable loan commodity less the 
repayment rate multiplied by the eligible quantity of the commodity. 
With respect to commodities such as wheat, rice, feed grains, minor 
oilseeds, wool, mohair and pulse crops, section 1205 of the 2002 Act 
provides that these payments are made with respect to ``producers on a 
farm that, although eligible to obtain a marketing assistance loan 
under section 1201 with respect to a loan commodity, agree to forgo 
obtaining the loan for the commodity in return for loan deficiency 
payments. * * *'' A similar provision is set forth in section 1307 of 
the 2002 Act for producers of peanuts.
    With the advent of marketing assistance loans and LDP's in the mid-
1980's, producers' use of these benefits has shifted substantially from 
the marketing loan option to the LDP option. The following chart sets 
forth the number of marketing assistance loans and LDP's approved by 
CCC as of March 31, 2006, for the 2003, 2004, and 2005 crops.

----------------------------------------------------------------------------------------------------------------
                                                                                                       Loan
                         Commodity year                              Warehouse       Farm loan      deficiency
                                                                       loans                         payments
----------------------------------------------------------------------------------------------------------------
Corn:
    2003........................................................           3,465          47,933          99,617
    2004........................................................           6,952          50,684       1,079,690
    2005........................................................           4,594          34,031       1,155,137
Soybeans:
    2003........................................................           3,256          18,538               7
    2004........................................................          15,258          40,318         463,338
    2005........................................................          14,239          39,587          86,170
Wheat:
    2003........................................................           5,749           8,295         103,418
    2004........................................................           5,440           9,569          55,725
    2005........................................................           3,596           8,464          17,571
----------------------------------------------------------------------------------------------------------------

    Generally, in those years in which market prices remain below the 
CCC loan rate, there is a significantly greater use made of LDP's than 
marketing assistance loans. However, as demonstrated by the issuance of 
only 7 loan deficiency payments with respect to the 2003 crop of 
soybeans, and the issuance of approximately 22,000 marketing assistance 
loans, producers still avail themselves of the loan program for 
financing purposes.
    The CCC storage payment with respect to peanuts and upland cotton 
pledged as collateral for marketing assistance loan programs encourages 
the use of such loans instead of loan deficiency payments; thus, the 
percentages of loan placements for these commodities are statistically 
larger than for other commodities. Similarly, the use of commodity 
certificates under section 166 of the Federal Agriculture Improvement 
and Reform Act of 1996, as amended, (the 1996 Act) also encourages the 
use of these loans in lieu of loan deficiency payments for several 
reasons, further skewing the distribution of these benefits. The use of 
these certificates by large marketing cooperatives facilitates the 
repayment of marketing assistance loans because the benefits 
attributable to the use of these certificates do not count against the 
statutory payment limitation provisions of the Food Security Act of 
1985, as amended, which would otherwise limit: (1) The amount of a gain 
that a producer would be able to receive through a marketing assistance 
loan; and (2) the amount of loan deficiency payments that would be made 
to the producer. Thus, the number of warehouse-stored loans made with 
respect to upland cotton and rice is greater, and the use of loan 
deficiency payments less, than would otherwise be anticipated in the 
absence of section 166 of the 1996 Act.
    The manner in which agricultural commodities are marketed and used 
has changed substantially since the enactment of the Agricultural Act 
of 1949. Changes in commodity marketing and use have been driven in 
part by the dramatic consolidation in farm operations since the middle 
1900's. Advances in agronomics and technology, including biotechnology, 
have allowed producers to significantly expand the sizes of their 
operations and benefit from crop specialization and economies of scale. 
Coincident to this have been structural changes in the livestock and 
poultry feeding sectors and the remarkable growth in ethanol 
production. These changes have pushed larger and larger quantities of 
agricultural commodities into commercial marketing channels and away 
from the primary on-farm uses of the early 1900's.
    Based on the U.S. Census of Agriculture, the number of U.S. farms 
dropped from 5.4 million in 1950 to 2.1 million in 2002. Much of the 
loss in farm numbers, however, occurred by the mid-1970's. The 1974 
Census of Agriculture reported 2.3 million farms. Despite the slowing 
decline in farm numbers, the size of farm operations continues to grow. 
In 1974, there were 32,752 farms with 1,000 acres or more land. In 
2002, there were 176,990 farms with 1,000 acres of more land. The 
number of farms with 2,000 acres or more increased more than 13 fold 
during this time, going from only 5,862 farms in 1974 to 77,970 farms 
in 2002.
    Accompanying this consolidation in farm numbers and growth in farm 
size has been a similarly dramatic consolidation in the livestock and 
poultry feeding sectors. Based on the

[[Page 37860]]

U.S. Census of Agriculture, 3 out of every 4 farms had cattle and 1 out 
of every 2 farms had hogs in 1950. In 2002, only 1 in every 2 farms had 
cattle, and only 1 in every 25 had hogs. Numbers are just as dramatic 
for poultry. In 1950, 4 of every 5 farms had chickens or turkeys. In 
2002, only 1 out of every 14 farms had chickens or turkeys. The 
consolidation of cattle, hog, and poultry feeding into fewer and larger 
capital intensive operations has shifted feed use away from the farms 
where grains and oilseeds are produced. This has left grain and oilseed 
producers increasingly reliant on commercial grain marketing channels 
as outlets for their production and sources of their revenue. These 
structural changes have had a significant impact on the amount of grain 
used on the farms where it is produced. During the 1949/50 marketing 
year just more than half of all grain and oilseed (wheat, corn, barley, 
oats, rye, sorghum, rice, and soybeans) production was consumed on the 
same farms where it was produced. Since then, while production of these 
commodities has increased more than three-fold, the amount used on the 
same farm where it was produced has dropped by more than one-third. The 
bulk of this decline in on-farm use reflects consolidation in livestock 
and poultry feeding and specialization in grain and oilseed farming. It 
also reflects the phenomenal expansion in fuel ethanol production which 
has grown from a negligible share of domestic corn use in the 1970's to 
more than 12 percent of domestic use during the 2004/05 marketing year. 
Less significant, but also affecting this decline in on-farm use has 
been the shift away from bin-run seed in the small grains and soybean 
sectors as commercial seed varieties have become ever more dominant.
    The decline in on-farm use has substantially increased the volume 
of grain moving through commercial marketing channels. In the early 
1950's, 50 percent of all grain and oilseed production was sold 
commercially. In recent years, 90 percent of all grain and oilseed 
production has been sold commercially. As on-farm use has fallen since 
1949/50, the volume that is marketed commercially has increased six-
fold, twice the rate of increase in production.
    CCC nonrecourse loan provisions have been modified over the years 
to better reflect the needs of producers who must respond to these 
changes in commodity marketing and use. Particularly important in this 
regard has been the marketing assistance loan provisions that have 
given CCC tools like alternative marketing loan repayment rates and the 
LDP which have significantly reduced the quantity of loan collateral 
forfeited to CCC. With greater ability to minimize forfeitures, CCC 
inventories and quantities of grains and oilseeds otherwise controlled 
by CCC have dramatically declined since the 1980's.
    Producers who do not have storage facilities on their farms, and 
who desire to obtain a marketing assistance loan, may deliver the 
commodity to a CCC-approved warehouse and tender to CCC as collateral 
for a loan a warehouse receipt that reflects the quantity and quality 
of the commodity produced and delivered to such facility. Commodities 
delivered to other non-CCC-approved warehouses and to facilities that 
commingle the commodity with the commodities of other persons may not 
be tendered to CCC as loan collateral, except as provided in section 
1201(c) of the 2002 Act.
    To be a CCC-approved warehouse the warehouse must enter into a CCC 
storage agreement and meet certain financial requirements. This 
agreement was required because, prior to authorization and use of 
marketing assistance loans, in some years, producers tendered to CCC 
over 75 percent of the annual production of some crops. If market 
prices remained below the CCC loan rate, the producers would forfeit 
the commodity to CCC. CCC required producers with warehouse-stored 
loans to store the loan collateral in CCC-approved warehouses to 
protect CCC's interest in the commodity by storing the commodity where 
CCC could readily assume ownership. CCC takes title from a warehouse 
according to its agreement upon maturity of the loan with no action 
needed on the part of the producer. The warehouse receipt is simply 
endorsed in blank to vest title in the holder, which is CCC. If a farm-
stored loan was involved, CCC would direct the producer to deliver the 
commodity to a CCC-approved warehouse. Other statutes precluded the 
sale of CCC-owned commodities unless market prices reached certain 
levels, thus requiring CCC to own commodities for prolonged periods of 
time. Thus, CCC was dependent upon commercial warehouses for the 
storage of large quantities of grain, and, in the event of collateral 
forfeiture, the approved warehouse could continue to store the 
commodity for extended periods. CCC still requires the storage of its 
loan collateral only in CCC-approved warehouses regardless of its 
license status.

Proposed Changes

    The first change proposed by this rule is that CCC will no longer 
require a Federally-licensed warehouse operator also to maintain a CCC 
storage agreement. With respect to warehouses licensed by USDA under 
the United States Warehouse Act, the conditions that a warehouse 
operator must meet for obtaining a Federal license exceed those that 
must be met for obtaining a CCC storage agreement. While the CCC 
storage agreement, unlike a Federal warehouse license, specifies 
storage rates that CCC will pay in the unlikely event the commodity is 
forfeited to CCC, CCC has maintained a policy since the late 1980's to 
move commodities it obtains as forfeitures into the market place as 
quickly as possible. Thus, minimal storage costs are incurred by CCC. 
Accordingly, CCC has determined that requiring a Federally-licensed 
warehouse operator to also maintain a CCC storage agreement provides no 
additional protection to CCC's interests as a lender in the 
administration of the marketing assistance loan programs and CCC will 
no longer require such warehouse operators to also maintain a storage 
agreement. CCC may, however, continue to utilize storage agreements in 
those instances where it is engaged in the long-term storage of 
commodities for use in CCC domestic and international feeding programs, 
i.e. wheat stored under the Bill Emerson Humanitarian Trust.
    Second, in a State with a warehouse licensing program, CCC will no 
longer require the use of a CCC storage agreement for a State-licensed 
warehouse. In such States, especially those with grain indemnity funds 
that provide cash payments to depositors in the event of the insolvency 
of the warehouse operator, CCC has adequate protection as a secured 
lender. There are redundant costs to the warehouse operator in meeting, 
and maintaining, compliance with both the State license and the CCC 
storage agreement. Even without the storage agreement CCC will still 
have clear title to the commodity in the event of the insolvency of the 
warehouse operator. If the loan is repaid, CCC has no interest at 
stake. Thus, for State-licensed warehouses, a CCC storage agreement 
will not be required, except possibly in the case of the long term 
storage of CCC-owned grain.
    A small number of States do not have warehouse licensing programs. 
In these States, warehouse operators must still comply with State laws 
pertaining to storage and bailment. CCC will not require these entities 
to execute a CCC

[[Page 37861]]

storage agreement before a producer may obtain a marketing assistance 
loan with respect to commodities stored in such warehouse, but may 
require that the warehouse be approved in advance by CCC as a location 
where CCC loan collateral may be stored using the same general criteria 
currently used in the administration of CCC storage agreements. In 
making these determinations, CCC may require that the storing warehouse 
meet certain financial requirements and that the structure in which the 
commodity is stored meets conditions needed to protect CCC's interest 
in these States. A list of approved warehouses may be obtained from FSA 
State and county offices.
    These changes will allow producers to obtain warehouse-stored loans 
at all warehouses, both State and Federally-licensed, thus expanding 
the amount of storage available for use by producers who wish to obtain 
such loans. This is particularly beneficial since commercial warehouse 
capacity has declined over the past 15 years while the amount of 
commodities produced in that time has increased--9.4 billion bushels of 
commercial storage available in the United States in 1990, compared to 
8.5 billion in 2005. Production of wheat, corn, soybeans, rice, grain 
sorghum, and barley during that same time increased from 13.9 billion 
bushels to 17.3 billion bushels. Marketing patterns have changed during 
this time, for example, many buyers have turned to a ``timed-to-
arrive'' basis and do not maintain large stocks of commodities at their 
facilities. The proposed regulatory changes are intended to compliment 
these changing patterns.
    This proposed rule will have no impact on the administration of the 
U.S. Warehouse Act.

Notice and Comment

    Section 1601(c) of the 2002 Act provides that the regulations 
needed to implement Title I of the 2002 Act, which include those 
involved here, may 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 relating to notices of 
proposed rulemaking and public participation in rulemaking.

Executive Order 12866

    This rule is issued in conformance with Executive Order 12866, was 
determined to be not significant and has not been reviewed by the 
Office of Management Budget.

Regulatory Flexibility Act

    It has been determined that the Regulatory Flexibility Act is not 
applicable to this rule because CCC is not required by 5 U.S.C. 533 or 
any other law to publish a notice of proposed rulemaking for the 
subject matter of this rule.

Environmental Assessment

    The environmental impacts of this rule have been considered 
consistent 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 the FSA 
regulations for compliance with NEPA, 7 CFR part 799. FSA concluded 
that the rule requires no further environmental review because it is 
categorically excluded. No extraordinary circumstances or other 
unforeseeable factors exist which would require preparation of an 
environmental assessment or environmental impact statement.

Executive Order 12988

    This rule has been reviewed in accordance with Executive Order 
12988. This rule will preempt State laws that are inconsistent with it. 
Before any legal action may be brought regarding a determination under 
this rule, the administrative appeal provisions set forth at 7 CFR 
parts 11 and 780 must be exhausted.

Executive Order 12372

    This program is not subject to the provisions of Executive Order 
12372, which require intergovernmental consultation with State and 
local officials. See the notice related to 7 CFR part 3014, subpart V, 
published at 48 FR 29115 (June 24, 1983).

Unfunded Mandates Reform Act of 1995

    The rule contains no Federal mandates under the regulatory 
provisions of Title II of the Unfunded Mandates Reform Act of 1995 
(UMRA) for State, local, and tribal governments or the private sector. 
Thus, this rule is not subject to the requirements of sections 202 and 
205 of the UMRA.

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 OMB under the Paperwork Reduction Act.

Executive Order 12612

    This rule does not have sufficient Federalism implications to 
warrant the preparation of a Federalism Assessment. The provisions 
contained in this rule will not have substantial direct effect on 
States or their political subdivisions or on the distribution of power 
and responsibilities among the various levels of government.

Government Paperwork Elimination Act

    CCC 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 available electronically through the USDA eForms Web site 
at http://www.sc.egov.usda.gov for downloading. The regulation is 
available at FSA's Price Support Division Internet site at http://www.fsa.usda.gov/dafp/psd. 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.

Federal Assistance Programs

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

List of Subjects in 7 CFR Part 1421

    Agricultural commodities, Feed grains, Grains, Loan programs-
agriculture, Oilseeds, Price support programs, Reporting and 
recordkeeping requirements.

    For the reasons set out in the preamble, 7 CFR part 1421 is amended 
as follows:

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 part 1421 continues to read as 
follows:


[[Page 37862]]


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

Subpart A--General

    2. Revise Sec.  1421.13 to read as follows:


Sec.  1421.13  Special marketing assistance loans and loan deficiency 
payments.

    (a) Commodities stored in an unapproved storage facility may be 
pledged as collateral for a marketing assistance loan if the producer:
    (1) Makes request of the marketing assistance loan and obtains the 
commodity certificate to immediately exchange for the requested loan 
collateral at the same time at the county office that, under part 718 
of this title, is responsible for administering the programs for the 
farm on which the commodity was produced.
    (2) Submits the marketing assistance loan request and the commodity 
certificate exchange before or on the date of delivery to the 
unapproved facility.
    (b) Eligible producers of hay and silage derived from an eligible 
loan commodity as provided in Sec.  1421.5 are eligible to request hay 
and silage quantities for a loan deficiency payment in accordance with 
Sec.  1421.200.

Subpart B--Marketing Assistance Loans

    3. Revise Sec.  1421.103(c) to read as follows:


Sec.  1421.103  Approved storage.

* * * * *
    (c)(1) Approved warehouse storage consists of warehouses that are:
    (i) If Federally-licensed, in compliance with 7 CFR part 735; or
    (ii) If not Federally-licensed, in compliance with State laws and 
is a warehouse that issues a warehouse receipt that meets the criteria 
set forth in Sec.  1421.107.
    (2) CCC may, on a case-by-case basis, require a warehouse operator 
that is not Federally-or State-licensed to enter into an agreement with 
CCC that sets forth requirements to adequately protect CCC's security 
interest in commodities pledged as collateral for a loan in accordance 
with this part.
    4. Remove Sec. Sec.  1421.5551 through 1421.5559.

    Signed in Washington, DC, on June 16, 2006.
Thomas B. Hofeller,
Acting Executive Vice President, Commodity Credit Corporation.
 [FR Doc. E6-10368 Filed 6-30-06; 8:45 am]
BILLING CODE 3410-05-P