Farmers that find themselves harvesting crops at a time when market prices are at an all-time low may worry about their future. Rather than forcing you to sell your commodities at harvest-time lows, you can opt for a USDA marketing assistance loan. This loan helps give you cash flow without forcing you to sell your commodities at a loss.
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Non-Recourse USDA Marketing Assistance Loans
A non-recourse USDA Marketing Assistance Loan is for covered commodities that the USDA will take as collateral. This gives you two options:
Whether turning over the commodities satisfies the full amount of the loan depends on the settlement value at the time that you turn the commodities over to the CCC.
Recourse Marketing Assistance Loan
The USDA also offers a Recourse Marketing Assistance Loan. This program is the opposite of the Non-Recourse loan because the USDA won’t accept a commodity in place of the payment. In other words, you must pay back the full amount of principal and interest in order to satisfy the loan.
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Eligibility for an MAL
In order to be eligible for a Marketing Assistance Loan, you must meet the following requirements:
- Meet the USDA income requirements
- Have proof that you follow all conservation and wetland requirements
- Show that you have an interest in the commodity moving forward
- Prove that you are an eligible producer with an interest in the commodity
- The commodity must meet all USDA requirements
In short, the Marketing Assistance Loan helps producers get the cash flow they need without taking a loss on their sales. This gives producers the ability to delay selling their commodities until market prices improve. This gives producers the ability to store production and to increase their profits moving forward.
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