Farm Programs: Changes to the Marketing Assistance Loan Program  
Have Had Little Impact on Payments (28-SEP-01, GAO-01-964).	 
								 
Under the Department of Agriculture's (USDA) Marketing Assistance
Loan Program, the federal government accepts harvested crops as  
collateral for interest-bearing loans (marketing assistance	 
loans) that are typically due in nine months. When market prices 
drop below the loan rate (the loan price per pound or bushel),	 
the government allows farmers to repay the loan at a lower rate  
and retain ownership of their commodity for eventual sale. The	 
difference between the loan rate and the lower repayment rate is 
called the "marketing loan gain." Conversely, farmers who do not 
have marketing assistance loans can also receive a benefit when  
prices are low called a "loan deficiency payment." The loan	 
deficiency payment is equal to the marketing loan gain that the  
farmer would have received if he had a loan. Farmers may choose  
to obtain either a marketing loan gain or a loan deficiency	 
payment--both of which are known as the marketing loan benefit.  
The increase in the payment limit and the availability of	 
commodity certificates had only modest effects on the total $15  
billion in marketing assistance loan payments provided for crop  
year 1999 and for crop year 2000 through May 2001. Because of the
increase in the payment limit, total payments over the 2-year	 
period were 1.9 percent more than they would have been under the 
previous limit, or an additional $261.1 million. Most farmers did
not use commodity certificates to receive gains over the payment 
limit, but a small number of farmers did benefit from the	 
program. According to the best available data from USDA's county 
offices, 47 farmers used certificates to receive more than	 
$150,000 in 1999 and 100 farmers did so in 2000.		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-01-964 					        
    ACCNO:   A01671						        
  TITLE:     Farm Programs: Changes to the Marketing Assistance Loan  
Program Have Had Little Impact on Payments			 
     DATE:   09/28/2001 
  SUBJECT:   Agricultural programs				 
	     Farm credit					 
	     Farm income stabilization programs 		 
	     Farm subsidies					 
	     Program management 				 
	     USDA Marketing Assistance Loan Program		 

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GAO-01-964
     
Report to Congressional Requesters

United States General Accounting Office

GAO

September 2001 FARM PROGRAMS Changes to the Marketing Assistance Loan
Program Have Had Little Impact on Payments

GAO- 01- 964

Page i GAO- 01- 964 Farm Programs Letter 1

Results in Brief 3 Background 4 Changes to the Marketing Assistance Loan
Program Had Only a

Modest Impact on Total Payments 7 Certificate Gains Were Generally Used to
Reduce the

Administrative Burden for Cooperatives Rather Than to Avoid Payment Limits
15 USDA?s Oversight of Payments to Cooperatives Is Inadequate 18 Conclusions
20 Recommendation 20 Agency Comments 20

Appendix I Scope and Methodology 22

Appendix II Crops and Loan Quantities Redeemed With Certificates, Crop Years
1999 and 2000 25

Appendix III Farmers, by State, Receiving More than $75,000 Due to Increase
in the Payment Limit, Crop Years 1999 and 2000 26

Appendix IV State- by State Analysis of Certificate Gains, Crop Years 1999
and 2000 28

Appendix V State- by State Analysis of Total Marketing Loan Program Benefits
in Excess of $75,000, Crop Years 1999 and 2000 31

Appendix VI GAO Contacts and Staff Acknowledgments 33 Contents

Page ii GAO- 01- 964 Farm Programs Tables

Table 1: Amount of Crops Placed in the Marketing Loan Program, Crop Year
2000, and Percent Eligible for Marketing Loan Gains, as of June 13, 2001 22
Table 2: Amount of Crop Under Loan Redeemed With Certificates,

Crop Years 1999 and 2000 25 Table 3: Farmers Receiving More Than $75,000 in
Total Loan

Deficiency Payments and Marketing Loan Gains by State, Crop Years 1999 and
2000 26 Table 4: Total Certificate Gains by State, Including Number of

Users, Percent of Total Certificate Gains Received, and Percent of Gains
Obtained by Cooperatives and Individual Farmers, Crop Year 1999 28 Table 5:
Total Certificate Gains by State, Including Number of

Users, Percent of Gains Each State Received and Percent of Gains Obtained by
Cooperatives and Individual Farmers, Crop Year 2000 29 Table 6: Number of
Farmers Who Received Total Marketing Loan

Program Benefits (Market Loan Gains, Loan Deficiency Payments and
Certificate Gains Combined) Between $75,000 and $150,000 and in Excess of
$150,000, Crop Years 1999 and 2000 31

Figures

Figure 1: Distribution of Marketing Loan Benefits, by Crop, for Crop Years
1999 and 2000 7 Figure 2: Percentage of Farmers Within Various Payment

Categories, Crop Year 2000 9 Figure 3: Distribution of Market Loan Benefits,
Crop Year 2000 10 Figure 4: Percentage Distribution of Total Certificate
Gain

Payments, by Crop, for Crop Years 1999 and 2000 11 Figure 5: Distribution of
Certificate Gains by State Percentages,

Crop Years 1999 and 2000 12 Figure 6: Distribution of Certificate Gains by
Percent of Farmers

and by Percent of Dollars, Crop Year 2000 14 Figure 7: Distribution of Total
Marketing Assistance Loan Program

Payments for Farmers Who Used Certificates, Crop Years 1999 and 2000 17

Page 1 GAO- 01- 964 Farm Programs

September 28, 2001 The Honorable Tom Harkin Chairman, Committee on
Agriculture,

Nutrition, and Forestry United States Senate

The Honorable Thad Cochran Ranking Minority Member Subcommittee on
Agriculture, Rural Development,

and Related Agencies Committee on Appropriations United States Senate

Federal payments to farmers have reached an historic high- over $26 billion
in fiscal year 2000. Much of this assistance was targeted to help farmers
cope with persistently low commodity prices and was provided principally
through the Marketing Assistance Loan Program, which is administered by the
U. S. Department of Agriculture (USDA). This program was designed originally
to provide short- term financing so that farmers could pay their bills right
after harvest and spread their sales over the entire marketing year.
However, at times of low commodity prices- as in 1999 and 2000- the
Marketing Assistance Loan Program has become a major source of income for
farmers growing wheat, rice, feed grains, oilseeds (primarily soybeans), and
upland cotton.

Under the Marketing Assistance Loan Program, the federal government accepts
harvested crops as collateral for interest- bearing loans (marketing
assistance loans) that are typically due in 9 months. When market prices
drop below the loan rate (the loan price per pound or bushel), the
government allows farmers to repay the loans at a lower rate and retain
ownership of their commodities for eventual sale. The difference between the
loan rate and the lower repayment rate is called the ?marketing loan gain.?
Conversely, farmers who do not have marketing assistance loans can also
receive a benefit when prices are low called a ?loan deficiency payment.?
The loan deficiency payment is equal to the marketing loan gain that the
farmer would have received if he had a loan. Farmers may choose to obtain
either a marketing loan gain or a loan deficiency payment- both of which are
known as the marketing loan benefit. Prior to the 1999 crop

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 01- 964 Farm Programs

year, farmers were limited annually to a total of $75,000 in marketing loan
benefits. 1

Farmers who have reached their payment limit can still get some help from
the government if crop prices are below the loan rate. They can always
obtain a marketing loan and collect the loan payment, then, after 9 months,
forfeit the crop to the government. In this way, farmers keep the loan
amounts and the government owns their crops, incurring storage costs and,
most likely, losses when it sells the crops. To discourage forfeitures, the
Congress raised the payment limit for marketing loan benefits to $150, 000
per farmer in crop year 1999 and again for crop year 2000. In addition to
this increase, the Congress authorized the use of a new commodity
certificate program, which USDA implemented in February 2000. Commodity
certificates also discourage forfeitures because they, in effect, eliminate
the payment limit and allow farmers to continue collecting benefits if
market prices are below the loan rate. Under this program, farmers who took
out loans may purchase certificates for their crops at the alternative
repayment rate and use them to repay their loan. In this way, farmers
benefit from a ?certificate gain?- the difference between the loan rate and
the lower alternative repayment rate. Unlike market loan gains and loan
deficiency payments, ?certificate gains? do not count against a farmer?s
payment limit. Farmers may use certificates at any time, even if they are
not near the payment limit.

You asked us to provide information on how the Marketing Assistance Loan
Program worked for crop years 1999 and 2000. This report discusses the
extent to which (1) the increased payment limit and the availability of
commodity certificates increased payments through the Marketing Assistance
Loan Program and (2) farmers used commodity certificates to receive gains
that would have otherwise have been denied by the payment limit.

In conducting our work, we used USDA?s payment data for crop years 1999 and
2000. The data for crop year 1999 are complete, but data on crop year 2000
do not reflect the total payments that will eventually be made for this crop
year. To examine the extent of payments over the payment limit of $75,000,
we focused only on payments made to farmers through USDA?s county offices.
Approved cooperative marketing associations and loan

1 A crop year is the year in which a crop is produced. The final date on
which farmers who produced a crop in 2000 can receive marketing loan
benefits is February 28, 2002.

Page 3 GAO- 01- 964 Farm Programs

servicing agents (we refer to both of these as cooperatives in our report)
also obtain market loan benefits from USDA for their members? crops and
distribute the benefits according to cooperative rules. There were 30
cooperatives that received market loan program payments in crop years 1999
and 2000. USDA does not have information on how these funds were distributed
to cooperative members. Therefore, our analysis does not include payments
made by cooperatives. Marketing loan payments to cooperatives represented 14
percent of payments in crop year 1999 and 5 percent in crop year 2000. In
assessing the extent to which commodity certificates were used to receive
gains over $75,000, we obtained the total amount of certificate gains per
farmer and cooperative marketing association. Again, we do not have detailed
information on how the cooperatives distributed the certificate gains to
their members. Accordingly, we were unable to determine precisely the extent
to which cooperative members obtained certificates to receive gains over the
payment limit. To address this data limitation, we obtained information from
two rice and four cotton cooperatives that together made up 98 percent of
certificate gains obtained by cooperatives in 1999 and 92 percent in 2000.
See appendix I for a more detailed discussion of our data analysis.

The increase in the payment limit and the availability of commodity
certificates had only modest effects on the total $15 billion in marketing
assistance loan payments provided for crop year 1999 and for crop year 2000
through May 2001. Because of the increase in the payment limit, total
payments over the 2- year period were 1.9 percent more than they would have
been under the previous limit, or an additional $261.1 million. In each
year, less than 1 percent of farmers benefited from the increase in the
payment limit. In 1999, the states with the most farmers exceeding the
previous $75,000 limit were Arkansas, South Dakota, and Texas; in 2000, the
states were Illinois, North Dakota, and South Dakota. Similarly, commodity
certificates represented a small proportion of all marketing assistance loan
payments-$ 380 million of the more than $15 billion in total payments made
over the period. Cooperatives collected about 70 percent of these commodity
certificate benefits for distribution to their members. In terms of crops,
almost all certificate gains were for rice and cotton in 1999; in 2000, most
gains were for rice and cotton, followed by corn and soybeans. Arkansas
leads the states in certificate gains in both years because Arkansas rice
cooperatives collected a significant portion of certificate gains for their
members. Results in Brief

Page 4 GAO- 01- 964 Farm Programs

Although certificates were put in place, in part, to allow farmers to
receive payments once they reached the payment limit, most certificates were
not used for this purpose. For cooperatives, certificates were primarily
used to reduce the administrative burden of tracking individual members?
payment limits and to provide more flexibility in making marketing
decisions. However, a few cooperatives did use certificates to obtain gains
for an estimated 340 farmers who would have reached the payment limit in
crop year 1999. With respect to farmers who received payments through USDA
county offices, the vast majority received less than $75,000 in combined
market benefits and certificate gains and hence did not reach the original
payment limit. While most farmers did not use certificates to receive gains
over the payment limit, a small number of farmers did benefit from the
program. According to the best available data from USDA county offices, 47
farmers used certificates to receive more than $150,000 in 1999 and 100
farmers did so in 2000. While certificates were intended to save the
government money by discouraging forfeitures and eliminating the costs
associated with storing and disposing of forfeited crops, they may lead to
higher expenditures if they are used to collect payments in excess of
payment limits. The Congressional Budget Office estimates that these
government savings and costs roughly offset each other.

During our review, we found that USDA was not adequately monitoring
cooperatives? internal controls for distributing billions of dollars of
marketing loan benefits to their members. Accordingly, we are recommending
steps USDA can take to correct this problem.

We provided USDA with a draft of this report for review and comment. USDA
concurred with our findings and recommendation.

The Federal Agriculture Improvement and Reform Act of 1996, referred to as
the 1996 Farm Bill, continued a commodity loan program that has existed in
various forms since the 1930s. The Marketing Assistance Loan Program is
aimed at helping farmers with the orderly marketing of their crops through
short- term financing. Farmers secure these loans after harvest, when prices
frequently are the lowest. The loans give farmers upfront capital to use
until they market their crops. However, at times of low prices, the program
becomes part of the federal safety net for farmers by providing income
support. In essence, the program provides a minimum guaranteed price that
farmers will receive for certain commodities and Background

Page 5 GAO- 01- 964 Farm Programs

provides them with income support payments. Marketing assistance loans are
available to the farmers of various crops, including wheat, rice, feed
grains, oilseeds, and upland cotton. 2

Farmers obtain marketing loans by using their crops as collateral. The loan
amount is based on a statutory national loan rate (a per unit price for each
crop). To determine the loan amount, USDA multiplies the loan rate by the
amount of crop offered as collateral. Farmers may repay the loan?s principal
and interest at any time within the loan period (usually 9 months). In lieu
of repaying their loans, farmers may forfeit their crops to the government
when the loans mature and keep the loan principal. Forfeitures typically
occur when the price farmers can receive for their crops falls below the
loan rate. In such cases, farmers receive greater revenue by forfeiting the
crops than by marketing them.

Because the government incurs costs in obtaining and selling forfeited
crops, the commodity loan program has provisions that allow farmers to repay
their commodity loans at prevailing market prices. Basically, when the price
farmers will receive for their crops falls below the loan rate, they can
repay their loans at a lower alternative repayment rate, also known as the
posted county price. USDA calculates the repayment rate on the basis of
local market prices (for cotton and rice, USDA uses an adjusted world price
that it calculates weekly).

Farmers keep the difference between the loan rate and the lower alternative
repayment rate. This difference is known as a ?marketing loan gain? and is
considered a cash payment to farmers. Farmers retain their crops and have
the opportunity to later sell them at prices higher than their loan
repayment rate.

Farmers who do not choose to obtain marketing loans may still receive
similar help from USDA when prices are low. In lieu of securing loans,
eligible farmers may choose to receive payments for the difference between
the alternative repayment rate and the loan rate. These direct payments are
called ?loan deficiency payments.?

The sum of the marketing loan gains and loan deficiency payments for all
crops during the crop year is normally limited by law to $75,000 per person.
For payment limitations, persons can be individuals as well as

2 Honey was added to the program for crop year 2000.

Page 6 GAO- 01- 964 Farm Programs

entities such as limited partnerships, corporations, and trusts, which all
may only receive up to $75,000. However, a partnership or a joint operation
may have several members, each of whom can receive up to $75,000. To monitor
limitations, USDA tracks payments to the individuals who are members of
partnerships and joint operations. Farmers can receive payments for more
than one farming operation. However, no individual may receive payments for
more than three entities (i. e., partnerships, corporations) in which that
individual holds a substantial beneficial interest. 3

Owing to concerns that low prices were causing numerous farmers to reach the
payment limit, for crop years 1999 and 2000, the Congress lifted the cap on
the loan subsidy payments that farmers could receive. It doubled this
payment limit, so that each person was eligible to receive $150,000.

In October 1999, the Congress amended the 1996 Farm Bill to provide for the
issuance of commodity certificates. USDA implemented the commodity
certificate program in February 2000. Certificates are available for crop
years 1998 through 2002. The commodity certificate program is intended to
discourage marketing loan forfeitures. Commodity certificates are
essentially another option for providing a government payment to farmers if
market prices are below the loan rate. Unlike marketing loan gains or loan
deficiency payments, however, certificate gains do not count against a
farmer?s payment limit. In effect, certificates do away with the payment
limit.

Farmers use commodity certificates to redeem their marketing assistance
loans at a lower repayment rate. By purchasing these certificates, farmers
can immediately reclaim their commodities under loan. The purchase price for
their commodity is the posted county price multiplied by the quantity of
crop to be redeemed from the loan. No paper certificates are actually
issued. The commodity certificate is only valid for immediate use and
expires immediately upon repayment of the loan and exchange of the
certificate for the commodity under loan.

Because of low commodity prices, payments through marketing assistance loan
program have been significant. In crop year 1999, the combination of

3 A person who owns 10 percent or more of a corporation or other entity
receiving payments is considered to have a substantial beneficial interest.

Page 7 GAO- 01- 964 Farm Programs

marketing loan gains, loan deficiency payments, and certificate gains
totaled more than $8 billion, and crop year 2000 payments were more than $7
billion. Figure 1 shows the distribution of these benefits, by crop, for
crop years 1999 and 2000.

Figure 1: Distribution of Marketing Loan Benefits, by Crop, for Crop Years
1999 and 2000

Note: Other crops include barley, crambe, canola, flaxseed, mustard seed,
oats, rapeseed, safflower, sorghum, sunflower seed, and sunflower oil in
crop year 1999 and barley, canola, crambe, flaxseed, honey, oats, rapeseed,
sorghum, sunflower seed, and sunflower oil in crop year 2000.

Source: GAO?s analysis of Farm Service Agency report PSL- 82R, ?Price
Support Division Loan Deficiency Payment and Price Support Cumulative
Activity as of June 13, 2001?, and certificate payment files as of April
2001.

The increase in the payment limit and the introduction of commodity
certificates had a limited impact on total payments made through the
Marketing Assistance Loan Program in crop years 1999 and 2000. Because of
the increase in the payment limit, 1999 payments for loan deficiency
payments and marketing loan gains were 2.5 percent, or $170.7 million, more
than they would have been otherwise. In 2000, these payments were 1.4
percent, or $90.4 million more than they would have been otherwise. Total
payments over $75,000 were less in 2000 than 1999 because cotton payments
decreased. In both years, the farmers who collected payments of more than
$75,000 represented less than 1 percent of all farmers receiving Changes to
the

Marketing Assistance Loan Program Had Only a Modest Impact on Total Payments

Page 8 GAO- 01- 964 Farm Programs

benefits, and most of these farmers did not reach the increased limit of
$150,000. Commodity certificates also composed a small proportion of all
program payments-$ 380 million of the $15 billion in marketing loan
assistance payments made over the 2- year period. Members of cooperatives
collected most of these certificate gains. In terms of crops,

-94 percent of certificate gains went to rice and cotton farmers (both
cooperative members and individual farmers) in 1999; in 2000, 70 percent of
the gains went to rice and cotton farmers and 22 percent to corn and soybean
farmers. Arkansas was the leading state in certificate gains in both years
because its rice cooperatives collected a significant amount of certificate
gains on behalf of their members.

In both crop years 1999 and 2000, over 925,000 farmers received marketing
loan benefits from USDA?s county offices. 4 Most farmers collected less than
$15,000- 85 percent in 1999 and 86 percent in 2000. In both years, less than
1 percent of farmers obtained more than $75,000 in combined market loan
gains and loan deficiency payments. Figure 2 shows the percentage of farmers
in various payment categories for total marketing loan gains and loan
deficiency payments for crop year 2000. The percentages were roughly the
same for crop year 1999.

4 Our analysis is based on payment limits for individuals, whether they are
acting alone or as members of a partnership or other entity. For example,
each member of a partnership is listed as a farmer. The Increase in Payment

Limits Benefited Only a Small Percentage of Farmers

Page 9 GAO- 01- 964 Farm Programs

Figure 2: Percentage of Farmers Within Various Payment Categories, Crop Year
2000

Note: This figure does not include payments made by cooperatives, which
represented 5 percent of total marketing loan gains and loan deficiency
payments in crop year 2000.

Source: GAO?s analysis of USDA?s payment data.

Of the 1 percent of farmers who collected more than $75,000 each year, the
majority did not reach the increased payment limit of $150,000. Most farmers
collected less than $20, 000 over the original payment limit of $75,000, or
less than $95,000 in total benefits. Farmers who obtained more than $75,000
in benefits came from about 40 states in each year. The leading states in
1999 were Arkansas and Texas, which together accounted for 19 percent of the
farmers who received more than $75,000 in payments; in 2000, the leading
states were North Dakota, Illinois, and South Dakota, which together
accounted for 32 percent of the farmers who received more than $75,000 in
payments. (App. III provides the number of farmers by state who received
more than $75,000 due to the increased payment limit.)

Commodity certificate gains totaled over $98 million in crop year 1999 and
increased to over $282 million in crop year 2000. These certificate payments
represented 1. 2 percent of total marketing assistance loan program payments
in crop year 1999 and 3.9 percent in crop year 2000. In both years, the
majority of certificate gains were distributed by Commodity Certificates

Did Not Substantially Add to Program Payments

Page 10 GAO- 01- 964 Farm Programs

cooperatives to their members. Seventy- eight percent of certificate gains
went to 12 cooperatives in 1999 and 67 percent to 17 cooperatives in 2000.
The remaining certificate gains were issued to 671 farmers in 1999 and 2,713
farmers in 2000 by USDA county offices. 5 Figure 3 shows the distribution of
marketing assistance loan benefits by payment type in relation to the
distribution of certificate payments by farmers and cooperatives for crop
year 2000.

Figure 3: Distribution of Market Loan Benefits, Crop Year 2000

Source: GAO?s analysis of USDA?s payment data.

The majority of certificate gains in both years were for cotton and rice. In
crop year 1999, over 90 percent of certificate gains were for these two
crops- 58 percent for rice and 36 percent for cotton. In crop year 2000,
while rice and cotton farmers were still receiving the bulk of the payments

5 The number of farmers is not based on the members in partnerships or joint
ventures for this analysis because USDA maintains this information at the
entity level.

Page 11 GAO- 01- 964 Farm Programs

(33 percent for rice and 37 percent for cotton), farmers of other crops,
such as corn and soybeans, used the certificate program more in 2000 than
they had in 1999. While the percentage of total certificate payments for
cotton stayed about the same and rice decreased, total certificate payments
for each of these crops increased from 1999 to 2000- from $57 million to $94
million for rice, and from $36 million to $104 million for cotton. Figure 4
shows the percentage distribution of certificate gain payments by crop for
crop years 1999 and 2000. (App. II provides the total quantity of each crop
that was redeemed from a marketing loan with a certificate.)

Figure 4: Percentage Distribution of Total Certificate Gain Payments, by
Crop, for Crop Years 1999 and 2000

Note: Other crops include barley, oats, sorghum, and sunflower oil in crop
year 1999 and barley, canola, crambe, flaxseed, oats, sorghum, sunflower
seed, and sunflower oil in crop year 2000.

Source: GAO?s analysis of USDA?s certificate data.

Farmers and cooperatives in 35 states in 1999 and 34 states in 2000 used
certificates. In 1999, the leading states in terms of total certificate
gains were Arkansas, 59 percent; California, 20 percent; and Texas, 9
percent. In 2000, Arkansas was still the leader with 33 percent of
certificate gains, followed by Mississippi, 20 percent; Texas, 12 percent;
and California, 7 percent. The leading states were the homes of the
cooperatives that

Page 12 GAO- 01- 964 Farm Programs

obtained the majority of certificate gains. In both years, most of the
remaining states received 1 percent or less of the certificate gains for
their members. However, these other states obtained a larger share of the
total certificate gains in 2000 than they did in the previous year. If only
the payments made by USDA county offices to farmers are considered, the
results differ. In 2000, the states that collected the most gains were North
Dakota, South Dakota, and Illinois; farmers in these states used
certificates to collect gains for corn, soybeans, rice, and wheat. Figure 5
shows the certificate gains by the leading states for crop years 1999 and
2000. Appendix III provides a complete list of certificate gains by state.

Figure 5: Distribution of Certificate Gains by State Percentages, Crop Years
1999 and 2000

Source: GAO?s analysis of USDA?s certificate data.

Payments to cooperatives varied considerably. The cooperatives obtained
total certificate gains that ranged from $55,000 to $35 million in 1999 and
from $7,000 to $57 million in 2000 to distribute to their members. The
cooperative that received the largest certificate funds in both crop years
1999 and 2000 distributed these funds to about 6, 000 members.

Page 13 GAO- 01- 964 Farm Programs

Farmers who received certificate gains from USDA county offices realized
gains that were typically less than $25,000. However, several farmers
obtained larger certificate gains. 6 In crop year 1999, 42 farmers received
over $100, 000 in certificate gains. Nine of these received more than
$250,000 and two received more than $1 million. The farmer realizing the
most in payments received a total of $2.7 million in certificate gains for
cotton. In crop year 2000, no farmers received gains in excess of $1
million, but 24 farmers received gains of between $250,000 and $750,000. In
both years, at the lower total range of certificate gains, a high percentage
of farmers received a low percentage of gains. Conversely, at the higher
range of certificate gains, a low percentage of farmers received a high
percentage of gains. For example, in crop year 2000, the 57 percent of
farmers who received $25,000 or less in certificate gains received 17
percent of the dollars, while the 6 percent of farmers who received more
than $100,000 received 31 percent of the total dollars. Figure 6 shows the
relationship between the percentage of farmers for different payment
categories and the total percentage of payments these farmers received in
crop year 2000.

6 The number of farmers is not based on the members in partnerships or joint
ventures for this analysis because USDA maintains this information at the
entity level.

Page 14 GAO- 01- 964 Farm Programs

Figure 6: Distribution of Certificate Gains by Percent of Farmers and by
Percent of Dollars, Crop Year 2000

Note: This analysis does not include payments made by cooperatives. Some
farmers may have received payments from both the county office and the
cooperatives. In addition, the number of farmers is not based on the members
in partnerships or joint ventures for this analysis because USDA maintains
this information at the entity level.

Source: GAO?s analysis of USDA?s certificate data.

Page 15 GAO- 01- 964 Farm Programs

Although commodity certificates allow users to receive payments in excess of
the amount they could receive otherwise, cooperative officials told us that
they primarily used commodity certificates to reduce administrative burdens.
According to these officials, certificates eliminate the time- consuming and
costly need to track when their members reach their payment limits.
Moreover, according to the rice and cotton cooperative officials we spoke
to, certificates provide more flexibility in marketing crops. Similarly, the
majority of farmers who obtained certificate gains from USDA county offices
did not exceed the $75,000 payment limit. According to USDA officials, most
farmers used certificates early in the year to avoid the possibility of
reaching the payment limit later in the year. While most certificates were
not used by farmers to exceed the payment limit, certificates did
potentially reduce forfeitures for the small number of farmers who were at
the payment limit and used certificates. Although certificates can benefit
the government by avoiding the associated costs of storing and selling crops
that would otherwise be forfeited, they also lead to more marketing
assistance loan payments. The net effect of this trade- off is difficult to
determine precisely, but the Congressional Budget Office has estimated that
it is, for all practical purposes, ?a wash.?

The two rice cooperatives we met with obtained 70 percent of certificate
gains distributed by all cooperatives in 1999 and 43 percent in 2000. These
cooperatives used certificates in both years, rather than obtaining
marketing loan gains or loan deficiency payments, because the certificates
eliminated the need to monitor compliance with the payment limit for each of
their members. These cooperatives were not using certificates because their
members were reaching the payment limit. They reported that they had few
members affected by the increased $150,000 payment limitation. The
cooperatives? certificate gains were about the same as they would have been
if they had chosen to obtain market gains or loan deficiency payments.
Combined, the two rice cooperatives distributed the certificate gains to
over 8,000 members in 1999 and 2000.

We discussed the use of certificates with four cotton cooperatives that
represented 28 percent of certificate gains obtained by all cooperatives in
1999 and 49 percent in 2000. In crop year 1999, cotton prices were much
lower than the loan rate, and these four cotton cooperatives had members who
reached the payment limit. Nevertheless, the cooperatives made limited use
of certificates because certificates were not available until late in the
crop year. By the time certificates became available, two of the
cooperatives had already obtained marketing loan benefits for most of their
crops so their use of certificates was limited. If the cooperatives had
Certificate Gains

Were Generally Used to Reduce the Administrative Burden for Cooperatives
Rather Than to Avoid Payment Limits

Page 16 GAO- 01- 964 Farm Programs

been able to use certificates for their members who reached the payment
limit for the entire crop year, they could have gained more in benefits.
According to its calculations, one of the cooperatives told us it could have
gained about $5 million in benefits for 150 members who had reached the
payment limit. The other two cotton cooperatives were able to use
certificates. Officials at these two cooperatives estimate that they were
able to help about 340 of their large farmers who would have reached their
limit if they used marketing loan gains and loan deficiency payments and not
been able to receive any additional payments for their crops. These two
cooperatives received over $17 million in certificate gains to distribute to
their members. They would not have been able to receive all of these funds
without the availability of certificates.

In crop year 2000, however, these cooperatives shifted from obtaining loan
deficiency payments and marketing loan gains to receiving the majority of
their members? loan program benefits through certificates. However, this
decision was not primarily to receive benefits over the payment limit
because the cooperatives did not have many farmers who would reach the limit
in that year. According to the cooperative officials, most members were
unlikely to reach the payment limit because cotton prices were not that
different from the loan rate- therefore, marketing loan gains per pound were
small. Like the rice cooperatives, the cotton cooperatives said they used
certificates primarily because the certificates eliminated the
administrative burden of monitoring payment limits. Cooperative officials
told us this is a laborious, inexact, and time- consuming process. More
importantly, certificates assist cooperatives with the orderly marketing of
their crops. Certificates provide cooperatives with flexibility in their
marketing decisions because the cooperatives do not have to make marketing
decisions according to when, or if, members reach the payment limit.

Most of the farmers who purchased certificates through county offices did
not use them to receive benefits above the payment limit. For each farmer
who received certificate gains, we determined total certificate gains, loan
deficiency payments, and marketing loan gains by payment limit individuals,
whether they were acting alone or as members of a partnership or other
entity. The available data show that the majority of farmers who used
certificates did not receive more than $75, 000 in total benefits. In crop
years 1999 and 2000, 86 and 84 percent, respectively, received less than
$75,000. In crop years 1999 and 2000, only 5 percent and 3 percent,
respectively, of farmers who used certificates obtained more than $150, 000
in total benefits. That is, 47 farmers in 1999 and 100 farmers in 2000
received more than $150,000. In 1999, 2 of the 47 farmers received

Page 17 GAO- 01- 964 Farm Programs

more than $1 million in payments; in 2000, 8 of the 100 farmers received
over $350, 000. Figure 7 shows the percent distribution of total payments at
the payment limit level for farmers who used certificates in crop years 1999
and 2000.

Figure 7: Distribution of Total Marketing Assistance Loan Program Payments
for Farmers Who Used Certificates, Crop Years 1999 and 2000

Note: This analysis is based on payment limit persons (i. e., payments to
partnerships and joint operations are divided among their members). These
data do not include payments made by cooperatives to these farmers. Some
farmers may have received payments from both USDA county offices and
cooperatives.

Source: GAO?s analysis of USDA?s payment data.

We spoke with several county office officials about the reasons farmers in
their county used certificates. The county officials said that some farmers
chose to use certificates instead of marketing loan gains or loan deficiency
payments at the beginning of the harvest because they were concerned they
might eventually reach the $75, 000 payment limit. However, the Congress
subsequently raised the payment limit to $150,000. If the limit

Page 18 GAO- 01- 964 Farm Programs

had been raised earlier, these farmers might not have used certificates,
according to these officials.

While most farmers did not use the majority of the certificates to receive
benefits in excess of the payment limit, a handful of farmers did so.
Furthermore, in 2000, the number of farmers who needed certificates would
have been slightly higher if the Congress had not increased the payment
limit to $150,000. With certificates, farmers reaching the payment limit can
continue to obtain payments when posted county prices are lower than loan
rates, retain their crops, and sell them later when market prices are higher
than the loan rate. With program payments, and possibly higher prices,
farmers might receive a total return higher than the loan rate. Without
certificates, the farmers at the payment limit might forfeit their crops.
When farmers forfeit their crops, they receive the loan rate for their
crops, but they lose the crops and the potential for greater revenue. Also,
except for cotton, farmers are responsible for the costs of storing the
crops during the 9- month loan period before they can forfeit it.

Because certificates reduce the potential for forfeitures, they save the
government the costs associated with storing and disposing of forfeited
crops. However, certificates also lead to higher expenditures if farmers use
them to collect payments in excess of the payment limit. The Congressional
Budget Office estimates that these government savings and costs roughly
offset each other. However, according to USDA officials at the Economic
Research Service, farmers could respond to increased loan program benefits
by increasing their production of eligible crops. Because certificates could
increase overall loan program benefits, they might result in increased
federal spending for commodity loan programs.

During the course of our work, we found that, until recently, USDA had not
been reviewing cooperatives? internal controls to ensure that the market
loan benefits they distributed to their members were valid and accurate. In
crop years 1999 and 2000, the 30 cooperatives obtained over $1.8 billion in
marketing loan program benefits to distribute to their members. USDA is
responsible for monitoring whether the controls in place ensure that (1)
cooperative members are eligible for payments, (2) members do not exceed
their payment limit, and (3) duplicate benefits are not provided for the
same crop. We have issued standards for internal control in government that
provide the overall framework for establishing USDA?s Oversight of

Payments to Cooperatives Is Inadequate

Page 19 GAO- 01- 964 Farm Programs

and maintaining internal control. 7 These standards define the minimum level
of quality acceptable for internal control in government and provide the
basis against which internal control is to be evaluated. One standard
provides that agencies should monitor the effectiveness of internal control
to assess the quality of performance over time. In considering the extent to
which the continued effectiveness of internal control is monitored, both
ongoing monitoring activities and separate evaluations of the internal
control system, or portions thereof, should be considered.

In addition, USDA guidance has a provision to review cooperative operations.
Agency officials stated that although they have not been reviewing the
cooperatives, other controls provide some assurance of compliance with farm
eligibility and payment limitation provisions. One control procedure is
USDA?s automated weekly update process, which provides the cooperatives with
information on eligible farms and payment limits for individual persons.
However, cooperative officials said that the automated update process does
not work very well at times. For example, one cooperative official told us
that erroneous USDA computer data had contributed to the cooperative?s
internal compliance report showing that the cooperative collected over $60
million in excess of the payment limit or for ineligible production. The
data discrepancy was later resolved after cooperative officials contacted
USDA. Another control is an end- of- year process when cooperatives report
the volume in bushels, or other units of measure, of crop placed under loan
or on which they received benefits. While USDA has these processes in place,
it has yet to develop reasonableness tests on the total payments the
cooperatives received. Without effective monitoring, USDA cannot determine
how well its internal controls are functioning or determine what, where, and
how improvements, when needed, should be implemented. Specifically, without
periodically reviewing cooperative operations, USDA cannot be assured that
only eligible farmers and eligible crops are receiving payments or that the
amount of payments is valid.

USDA has recently taken some steps to ensure that cooperatives are operating
properly. In 2001, the agency held a training session for cooperative
officials on determining their members? payment eligibility. They have also
completed work on an audit program and recently conducted reviews at two
cooperatives. USDA officials acknowledged that

7 Standards for Internal Control in the Federal Government (GAO/ AIMD- 00-
21, Nov. 1999).

Page 20 GAO- 01- 964 Farm Programs

these reviews are important and that they should conduct more of them.
However, they told us that they did not have the resources necessary because
high turnover had resulted in a shortage of staff with the necessary
expertise to conduct the reviews. Currently, USDA has two staff working
part- time to conduct these reviews. The officials said that with current
resources, they could continue to review two cooperatives a year. At this
rate, it would take USDA about 15 years to complete the reviews.

With over $1.8 billion in payments made to cooperatives during a 2- year
period, it is important for USDA to have controls in place to ensure the
validity and accuracy of these payments. Without timely reviews of these
payments, the stewardship of public resources is at risk.

To ensure that marketing loan benefit payments made to cooperatives are
appropriate, we recommend that the Secretary of Agriculture ensure that a
sufficient number of staff with requisite skills are available to conduct
timely reviews of such payments. Specifically, the reviews should ensure
that payments are made only for eligible producers and that the payments are
valid.

We provided USDA with a draft of this report for review and comment. The
Acting Deputy Administrator for Farm Programs concurred with our finding
that oversight of payments to cooperatives is inadequate and with our
recommendation to address this problem.

We performed our work from December 2000 through August 2001 in accordance
with generally accepted government auditing standards. We did not
independently assess the accuracy and reliability of the USDA payment files
we used.

As we agreed with your offices, unless you publicly announce the contents of
this report earlier, we plan no further distribution of it until 30 days
from the date of this letter. We will then send copies of this report to the
congressional committees with jurisdiction over farm programs, the Secretary
of Agriculture, the Director of the Office of Management and Budget, and
other interested parties. We will also make copies available upon request.
Conclusions

Recommendation Agency Comments

Page 21 GAO- 01- 964 Farm Programs

If you have any questions about this report, please contact me at (202) 512-
3841. Major contributors to this report are listed in appendix IV.

Lawrence J. Dyckman Director, Natural Resources and Environment

Appendix I: Scope and Methodology Page 22 GAO- 01- 964 Farm Programs

To determine the extent to which the increased payment limit of $150,000
raised payments under the marketing assistance loan program, we used U. S.
Department of Agriculture?s (USDA) payment data (? payment file?) from the
Price Support Loans System for crop years 1999 and 2000. While the data for
crop year 1999 are complete, the analysis for crop year 2000 is as of May
2001. Farmers will continue to receive payments for crop year 2000 until
February 2002 and, consequently, the crop year 2000 data do not fully
reflect total payments that will eventually be made for this crop year (see
table 1 for amount of crops still eligible to receive marketing loan gains
as of June 13, 2001). We used the payment file to identify the marketing
loan gains and loan deficiency payments USDA made to farmers. This file
provided by USDA has these payments allocated to persons by identification
number. We did not independently assess the accuracy and reliability of the
Price Support Loans System?s database.

Table 1: Amount of Crops Placed in the Marketing Loan Program, Crop Year
2000, and Percent Eligible for Marketing Loan Gains, as of June 13, 2001

Crop Unit of measure Total quantity under loan

or applied to loan deficiency payment Outstanding loan

quantity Percent eligible for

marketing loan gains as of June 13, 2001

Rapeseed Hundredweight 47,980 0 0 Canola Hundredweight 19,350,750 30,390 0.
2 Oats Bushels 152,433,290 323,960 0. 2 Crambe Hundredweight 344,960 1, 240
0.4 Flaxseed Hundredweight 5, 350,590 31,780 0. 6 Sunflower seeds
Hundredweight 5, 591,140 84,130 1. 5 Sunflower oil Hundredweight 26,644,680
405,030 1. 5 Barley Bushels 260,612,470 3, 976,110 1.5 Sorghum Hundredweight
169,228,600 3, 036,710 1.8 Wheat Bushels 1, 961,035, 460 39,419,830 2. 0
Soybeans Bushels 2, 724,837, 500 119,993,680 4. 4 Rice Hundredweight
186,859,830 12,152,460 6. 5 Corn Bushels 9, 624,814, 010 795,556,040 8. 3
Cotton Pounds 7, 815,693, 620 1,015,011, 920 13.0 Honey Hundredweight
212,864,390 30,011,150 14.1 Mustardseed Hundredweight 22,730 4, 300 18.9
Safflower Hundredweight 36,080 15,900 44.1

Source: GAO?s analysis of Farm Service Agency report PSL- 82R, Price Support
Division Loan Deficiency Payment and Price Support Cumulative Activity as of
June 13, 2001.

To examine the extent to which payments rose above the prior payment limit
of $75,000, we totaled the payments for each identification number. We
identified 951,948 persons who received marketing loan gains and loan
Appendix I: Scope and Methodology

Appendix I: Scope and Methodology Page 23 GAO- 01- 964 Farm Programs

deficiency payments for crop year 1999 and 925,482 for crop year 2000. We
focused on USDA payments made directly to these farmers and excluded
payments made through cooperative marketing associations and loan servicing
agents (referred to as cooperatives). These cooperatives, which market the
members? crops, obtain the benefits for their members from USDA and
distribute them according to cooperative rules. Accordingly, we were not
able to identify payments received by individual farmers and to determine if
these payments exceeded payment limits. USDA provided separate files with
the total marketing loan gains and loan deficiency payments made to each
cooperative in crop years 1999 and 2000. Cooperatives received about 14
percent of the total payments in 1999 and about 5 percent in 2000.

To determine the extent to which the availability of commodity certificates
increased payments under the marketing assistance loan program, we used
USDA?s commodity certificate data from the Price Support Loans System (?
certificate file?) for crop years 1999 and 2000 for farmers and cooperatives
that received benefits through USDA county offices. These data are as of
April 2001. To determine the reliability of the certificate data, we
validated the data for a random sample of 50 certificates, 25 for each crop
year. We contacted 43 county offices that processed the sample certificates
to determine the accuracy of selected data fields. The data fields we
validated include producer, loan number, transaction date, crop, certificate
value, certificate gain, and the outstanding amount. We found the error rate
contained in the sample was less than 1 percent in 1999 and zero in 2000.

Cotton cooperatives apply for marketing benefits, including certificate
gains, using an automated process managed by the Kansas City Management
Office (KCMO) in Kansas City, Kansas, instead of the USDA county offices.
For each cotton cooperative, we obtained total marketing loan benefits and
the total certificate gains from the Automated Cotton Reporting System in
KCMO. These data are as of March 2001.

To determine the extent to which farmers used commodity certificates to
receive gains that would otherwise exceed the payment limits, we performed a
computerized match to compare farmer identification numbers from the
certificate file to the payment file. For each matching identification
number, we totaled the certificate gains and marketing loan benefits. We
compared these payments to the original dollar limit- $75,000- and to the
new dollar limit of $150,000. We identified 526 of 671 identification
numbers in the certificate file that matched the payment file for crop year
1999 and 2,291 of 2,713 that matched in crop year 2000.

Appendix I: Scope and Methodology Page 24 GAO- 01- 964 Farm Programs

For the identification numbers that did not match, we conducted further
analysis to determine the total certificate gains and marketing loan
benefits. The certificate file does not have farm entities that are
partnerships or joint operations broken down by the number of persons
receiving the payment, but the payment file does. We provided KCMO a list
for each year of the identification numbers in the certificate file that did
not have a match in the payment file. KCMO used the Permitted Entity file
for crop years 1999 and 2000 to provide us a list of the members of each
partnership and joint operation as well as their individual identification
number and share of payments. Using this information, we determined the
certificate gains for each individual member. This information was matched
with the payment file to obtain each member?s total certificate gains and
marketing loan benefits.

While we have the total certificate gains for each cooperative, we do not
have data on how the cooperatives distributed these funds to their members.
Without these data, we cannot determine the number of cooperative members
who obtained certificate gains over the payment limit. To address this data
limitation, we interviewed officials from two rice and four cotton
cooperatives to discuss their reasons for using certificates. These
cooperatives accounted for 98 percent of the certificate gains obtained by
cooperatives in 1999 and 92 percent in 2000.

Finally, to obtain information on how the marketing loan assistance program
operates, we reviewed relevant laws, regulations, and notices and handbooks
from USDA?s Farm Service Agency. We also interviewed officials from USDA?s
Farm Service Agency and Economic Research Service officials in Washington,
D. C. In addition, we visited four USDA county offices in Arkansas and Texas
and discussed certificates via telephone with 43 county offices. Finally, we
met with academia and representatives from the National Cotton Council in
Memphis, Tennessee, and Plains Cotton Growers, Inc., in Lubbock, Texas.

We performed our work from December 2000 through August 2001 in accordance
with generally accepted government auditing standards.

Appendix II: Crops and Loan Quantities Redeemed With Certificates, Crop
Years 1999 and 2000

Page 25 GAO- 01- 964 Farm Programs

Table 2: Amount of Crop Under Loan Redeemed With Certificates, Crop Years
1999 and 2000

Loan quantities redeemed with certificates Crop Crop year 1999 Crop year
2000

Barley 119,455 2, 077,697 Canola 0 588,091 Corn 9,146,862 88,561,202 Cotton
604,028 5, 517,117 Crambe 0 231,924 Flaxseed 0 109,603 Oats 1,306 89,260
Rice 23,883,058 31,174,330 Sorghum 99,112 1, 645,365 Soybeans 3,538,048
32,775,955 Sunflower seed 0 61,617 Sunflower oil 183,108 932,033 Wheat
984,207 22,944,892

Notes: Crop year 2000 data are as of April 2001. Quantities are in bushels
for barley, corn, oats, soybeans and wheat; hundredweight for canola,
crambe, flaxseed, rice, sorghum, sunflower seed, and sunflower oil; and
pounds for cotton.

Source: GAO?s analysis of USDA?s Price Support Loans System payment files
and Automated Cotton Reporting System payments to cotton cooperatives
marketing associations and loan servicing agents.

Appendix II: Crops and Loan Quantities Redeemed With Certificates, Crop
Years 1999 and 2000

Appendix III: Farmers, by State, Receiving More than $75,000 Due to Increase
in the Payment Limit, Crop Years 1999 and 2000

Page 26 GAO- 01- 964 Farm Programs

In both crop years 1999 and 2000, less than 1 percent of farmers who
received marketing loan benefits from USDA?s county offices received over
$75,000 in market loan gains and loan deficiency payments combined. Table 3
provides the number of payment limit individuals in each state who received
more than $75,000.

Table 3: Farmers Receiving More Than $75,000 in Total Loan Deficiency
Payments and Marketing Loan Gains by State, Crop Years 1999 and 2000

Total number of farmers receiving benefits over $75,000 State Crop Year 1999
Crop Year 2000

Alabama 92 5 Alaska 0 0 Arizona 98 10 Arkansas 520 344 California 269 126
Colorado 126 44 Connecticut 1 0 Delaware 15 30 Florida 30 5 Georgia 384 10
Hawaii 0 0 Idaho 6 36 Illinois 335 491 Indiana 203 254 Iowa 321 296 Kansas
384 140 Kentucky 36 151 Louisiana 176 85 Maine 0 0 Massachusetts 0 0
Maryland 53 88 Michigan 79 51 Minnesota 376 323 Mississippi 376 110 Missouri
264 324 Montana 22 19 Nebraska 228 212 Nevada 0 1 New Hampshire 0 0 New
Jersey 1 3 New Mexico 33 9 New York 5 0 North Carolina 246 95

Appendix III: Farmers, by State, Receiving More than $75,000 Due to Increase
in the Payment Limit, Crop Years 1999 and 2000

Appendix III: Farmers, by State, Receiving More than $75,000 Due to Increase
in the Payment Limit, Crop Years 1999 and 2000

Page 27 GAO- 01- 964 Farm Programs

Total number of farmers receiving benefits over $75,000 State Crop Year 1999
Crop Year 2000

North Dakota 174 621 Ohio 98 169 Oklahoma 32 18 Oregon 1 10 Pennsylvania 3
11 Rhode Island 0 0 South Carolina 75 3 South Dakota 413 434 Tennessee 194
49 Texas 683 138 Utah 0 0 Vermont 0 0 Virginia 71 48 Washington 2 21 West
Virginia 0 0 Wisconsin 75 32 Wyoming 0 2

Total 6,500 4,818

Note: These data does not include payments made by cooperatives. Cooperative
payments represented 14 percent of total marketing loan gains and loan
deficiency payments in crop year 1999 and 5 percent in crop year 2000.

Note: Although the payment limit for total marketing loan gains and loan
deficiency payments is $150,000 for crop years 1999 and 2000, in a few cases
the data provided by USDA has individuals that received more than $150,000.

Source: GAO?s analysis of USDA?s payment data.

Appendix IV: State- by State Analysis of Certificate Gains, Crop Years 1999
and 2000

Page 28 GAO- 01- 964 Farm Programs

Table 4: Total Certificate Gains by State, Including Number of Users,
Percent of Total Certificate Gains Received, and Percent of Gains Obtained
by Cooperatives and Individual Farmers, Crop Year 1999

State Total number of

individuals and cooperatives using certificates Total certificate

gains Percent of total certificate gains

Percent of gains received by cooperatives

Percent of gains received by individual farmers

Alabama 3 $87,474 a 100 Arizona 7 136,685 a 100 Arkansas 68 58,160,351 59.1
94 6 California 30 19,611,423 19.9 89 11 Colorado 11 200,171 a 100 Florida 1
24,202 a 100 Georgia 25 811,863 a 100 Idaho 1 6, 975 a 100 Illinois 39
391,037 a 100 Indiana 23 198,911 a 100 Iowa 55 600,125 a 100 Kansas 17
111,280 a 100 Kentucky 1 1, 360 a 100 Louisiana 59 2, 903,295 3.0 100
Maryland 2 2, 817 a 100 Michigan 10 149,509 a 100 Minnesota 34 318,953 a 100
Mississippi 25 954,676 a 6 94 Missouri 31 636,820 a 100 Montana 4 22,471 a
100 Nebraska 21 515,684 a 100 New Mexico 3 113,293 a 100 New York 1 315 a
100 North Carolina 13 185,219 a 59 41 North Dakota 10 134,224 a 100 Ohio 9
24,919 a 100 South Carolina 5 105,827 a 100 South Dakota 59 1,565,011 1.6
100 Tennessee 19 459,133 a 42 58 Texas 76 9, 261,526 9.4 47 53 Utah 1 426 a
100 Virginia 16 228,410 a 100 Washington 1 3, 708 a 100 West Virginia 1 770
a 100 Wisconsin 8 459,033 a 100

Total 689 $98,387,896

a Less than 1 percent.

Appendix IV: State- by State Analysis of Certificate Gains, Crop Years 1999
and 2000

Appendix IV: State- by State Analysis of Certificate Gains, Crop Years 1999
and 2000

Page 29 GAO- 01- 964 Farm Programs

Note: The following states did not receive certificate gains for crop year
1999: Alaska, Connecticut, Delaware, Hawaii, Maine, Massachusetts, Nevada,
New Hampshire, New Jersey, Oklahoma, Oregon, Pennsylvania, Rhode Island,
Vermont, and Wyoming.

Source: GAO?s analysis of USDA?s Price Support Loans System payment files
and Automated Cotton Reporting System payments to cotton cooperative
marketing associations and loan servicing agents.

Table 5: Total Certificate Gains by State, Including Number of Users,
Percent of Gains Each State Received and Percent of Gains Obtained by
Cooperatives and Individual Farmers, Crop Year 2000

State Total number of

individuals and cooperatives using

certificates Total certificate gains Percent of total

certificate gains Percent of state

gains received by cooperatives

Percent of state gains received by individual farmers

Alabama 2 $70,553 a 100 Arkansas 159 91,975,265 32.6 91 9 California 19
18,565,241 6. 6 93 7 Colorado 8 731,096 a 100 Delaware 16 423,387 a 100
Georgia 5 158,143 a 100 Idaho 10 339,898 a 100 Illinois 342 9,730,436 3.5
100 Indiana 249 7,458,596 2.6 100 Iowa 107 2,754,687 a 100 Kansas 92
2,129,147 a a 100 Kentucky 84 3,281,929 1.2 100 Louisiana 161 4,459,712 1.6
100 Maryland 25 1,016,002 a 100 Michigan 12 319,375 a 100 Minnesota 124
4,214,530 1.5 21 79 Mississippi 26 56,477,316 20 98 2 Missouri 202 6,942,070
2.5 100 Montana 12 321,899 a 100 Nebraska 79 2,376,856 a 100 New Mexico 1
92,765 a 100 North Carolina 67 4, 630,648 1.6 59 41 North Dakota 342
11,716,235 4. 2 100 Ohio 54 1,644,086 a 100 Oklahoma 13 409,408 a 100 Oregon
6 245,953 a 100 Pennsylvania 2 50,142 a 100 South Carolina 5 488,609 a 100
South Dakota 255 11,017,550 3. 9 100 Tennessee 86 3,563,470 1.3 68 32 Texas
134 32,901,833 11.7 81 19 Virginia 38 1,203,428 a 100 Washington 10 510,724
a 100

Appendix IV: State- by State Analysis of Certificate Gains, Crop Years 1999
and 2000

Page 30 GAO- 01- 964 Farm Programs

State Total number of

individuals and cooperatives using

certificates Total certificate gains Percent of total

certificate gains Percent of state

gains received by cooperatives

Percent of state gains received by individual farmers

Wisconsin 3 17,840 a 100

Totals 2750 282,238,829

a Less than 1 percent. Notes: Data for crop year 2000 are as of April 2001.
The following states did not receive certificate gains for crop year 2000:
Alaska, Arizona, Connecticut, Florida, Hawaii, Maine, Massachusetts, Nevada,
New Hampshire, New Jersey, New York, Rhode Island, Utah, Vermont, West
Virginia, and Wyoming.

Source: GAO?s analysis of USDA?s Price Support Loans System payment files
and Automated Cotton Reporting System payments to cotton cooperative
marketing associations and loan servicing agents.

Appendix V: State- by State Analysis of Total Marketing Loan Program
Benefits in Excess of $75,000, Crop Years 1999 and 2000

Page 31 GAO- 01- 964 Farm Programs

Table 6: Number of Farmers Who Received Total Marketing Loan Program
Benefits (Market Loan Gains, Loan Deficiency Payments and Certificate Gains
Combined) Between $75,000 and $150,000 and in Excess of $150,000, Crop Years
1999 and 2000

State Total number of farmers

receiving benefits between $75,000 and $150,000

in crop year 1999 Total number of farmers

receiving benefits over $150,000 in crop

year 1999 Total number of farmers

receiving benefits between $75,000 and

$150,000 in crop year 2000

Total number of farmers receiving

benefits over $150,000 in crop

year 2000

Alabama 90 2 5 1 Alaska 0 0 0 0 Arizona 86 15 8 1 Arkansas 495 47 357 47
California 227 49 125 6 Colorado 111 16 41 6 Connecticut 1 0 0 0 Delaware 15
0 22 14 Florida 30 1 5 0 Georgia 341 44 9 4 Hawaii 0 0 0 0 Idaho 7 0 32 8
Illinois 324 17 493 163 Indiana 195 8 290 102 Iowa 319 11 272 60 Kansas 372
11 133 52 Kentucky 35 1 146 35 Louisiana 173 14 87 14 Maine 0 0 0 0
Massachusetts 0 0 0 0 Maryland 53 1 74 18 Michigan 77 4 54 4 Minnesota 369
11 307 72 Mississippi 367 18 109 5 Missouri 252 17 300 87 Montana 21 3 15 11
Nebraska 221 12 205 42 Nevada 0 0 1 0 New Hampshire 0 0 0 0 New Jersey 1 0 3
0 New Mexico 27 7 6 1 New York 5 0 0 0 North Carolina 238 8 92 23 North
Dakota 172 4 567 228 Ohio 96 2 174 14 Oklahoma 31 1 11 10 Oregon 1 0 10 3

Appendix V: State- by State Analysis of Total Marketing Loan Program
Benefits in Excess of $75,000, Crop Years 1999 and 2000

Appendix V: State- by State Analysis of Total Marketing Loan Program
Benefits in Excess of $75,000, Crop Years 1999 and 2000

Page 32 GAO- 01- 964 Farm Programs

State Total number of farmers

receiving benefits between $75,000 and $150,000

in crop year 1999 Total number of farmers

receiving benefits over $150,000 in crop

year 1999 Total number of farmers

receiving benefits between $75,000 and

$150,000 in crop year 2000

Total number of farmers receiving

benefits over $150,000 in crop

year 2000

Pennsylvania 3 0 10 1 Rhode Island 0 0 0 0 South Carolina 72 3 3 2 South
Dakota 388 39 382 140 Tennessee 187 7 46 15 Texas 623 70 135 45 Utah 0 0 0 0
Vermont 0 0 0 0 Virginia 67 8 36 21 Washington 2 0 15 8 West Virginia 0 0 0
0 Wisconsin 71 4 32 1 Wyoming 0 0 2 0

Total 6,165 455 4,614 1,264

Note: These data represent payments made by USDA county offices. These data
do not include payments made by cooperatives to their members. Cooperative
payments represented 14 percent of total marketing loan gains and loan
deficiency payments in crop year 1999 and 5 percent in crop year 2000.
Cooperative payments to members represented 78 percent of total certificate
gains in crop year 1999 and 67 percent in crop year 2000.

Note: The number of farmers is based on payment limits for individuals,
whether they are acting alone or as members of a partnership or other
entity. For example, each member of a partnership is listed as a farmer.

Note: Certificate gains are not typically allocated to payment limits for
individuals because the payment limit does not apply to certificate gains.
We obtained information from USDA to allocate certificate gains to payment
limit individuals for this analysis.

Source: GAO?s analysis of USDA?s payment data.

Appendix VI: GAO Contacts and Staff Acknowledgments

Page 33 GAO- 01- 964 Farm Programs

Lawrence Dyckman (202) 512- 3841 Gregory Kosarin (202) 512- 6526

In addition to those named above, Leigh White; Cleofas Zapata, Jr.; Charles
W. Bausell, Jr.; James W. Turkett; and Carol Herrnstadt Shulman made key
contributions to this report. Appendix VI: GAO Contacts and Staff

Acknowledgments GAO Contacts Staff Acknowledgments

(360031)

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