USDA Officially Announces 'Lock-In' for Repayment Rates

October 29, 1999

USDA officially has announced changes in the procedure to lock in repayment rates for marketing assistance loans. Although one loc- in of the posted country price will be allowed during a 60-day period, a farmer can obtain multiple lock-ins on different portions of a commodity.

Marketing assistance loans are made to producers of wheat, barley, corn, rice, sorghum, oilseeds, oats and upland cotton to allow producers to withhold crops from the market when prices tend to be low.

Using a new form, producers now will be able to lock in a repayment rate at one time for a specific quantity of farm-stored loan collateral, says USDA. For warehouse-stored collateral, the quantity specified on a form CCC 697 must be the amount specified on a warehouse receipt pledged as collateral for a marketing assistance loan.

The locked-in rate will be effective for 60 calendar days, except it always will expire 14 calendar days before loan maturity.

However, USDA will allow producers to lock in a rate one time only for any specific portion of the crop. That will allow them to obtain multiple lock-ins but on different portions of a commodity and end the ability to obtain multiple locked-in rates on the entire outstanding loan quantity.

Upon expiration of the locked-in repayment rate and before the loan matures, the producer may repay the loan at the lower of principal plus interest or the effective repayment rate in effect on the date of payment. After the loan matures, the producer either may deliver the collateral to USDA to satisfy the loan obligation or repay the loan at principal plus interest.

While the locked-in rate is in effect, producers will not be able to use the current repayment rate even if it is lower than the locked-in rate, says USDA.