Commodity Loan Rates

In the United States there is a commodity loan program that allows producers of specific crops to obtain a loan from the federal government that is based on a commodity specific rate per production unit. In turn, the producer must pledge that commodity as collateral for the loan. The purpose is to allow a farmer to obtain the loan for all or a portion of that commodity that can be held to be sold at a later date. Commodity loan rates are fixed through legislation.

Purpose of Commodity Loans
In the past the program was primarily focused on increased productivity and on the quality of life for farmers in the United States. By setting up this program, the government focused on management of supplies by limiting acreage and through storage programs. Beginning in 1985 the focus began to shift a bit to become more market oriented with reduced government involvement. Since then the focus has widened to include such things as food safety, agricultural trade issues, food assistance and even conservation or environmental concerns. Even though the focus has changed, the program remains intact and rates are still set by the feds.

Current Commodity Loan Rates
Current rates have been established to run from 2009 through 2012 and are still in force unless, of course, Congress legislates changes as they are wont to do. As commodity loan rates are specific to the particular commodity and each commodity unit is measured differently, no two commodities will carry the same rates. Following is a chart of the commodity loan rates for the crop years 2010 through 2012:

  • Wheat – Measured in Bushels – $2.94
  • Corn – Measured in Bushels – $1.95
  • Grain Sorghum – Measured in Bushels – $1.95
  • Barley – Measured in Bushels – $1.95
  • Oats – Measured in Bushels – $1.39
  • Upland Cotton – Measured in Pounds – $0.052
  • Extra-long Staple Cotton – Measured in Pounds – $0.7977
  • Long-grain Rice – Measured in Hundredweights – $6.50
  • Medium-grain Rice – Measured in Hundredweights – $6.50
  • Soybeans – Measured in Bushels – $5.00
  • Other Oilseeds – Measured in Hundredweights – $10.09
  • Peanuts – Measured in Tons – $355.00
  • Graded Wool – Measured in Pounds – $1.15
  • Nongraded Wool – Measured in Pounds – $0.40
  • Mohair – Measured in Pounds – $4.20
  • Honey – Measured in Pounds – $0.69
  • Dry Peas – Measured in Hundredweights – $5.40
  • Lentils – Measured in Hundredweights – $11.28
  • Small Chickpeas – Measured in Hundredweights – $7.43
  • Large Chickpeas – Measured in Hundredweights – $11.28

In other words, these are the commodity loan rates at which the farmers ‘pay back’ the loans. There is, however, special stipulations in place whereby farmers can repay commodity loans at lower rates if market prices fall below commodity loan rates. Interest rates are also tacked on by the Commodity Credit Corporation through which farmers receive the loan.

Understanding Commodity Loan Rates and Collateral
The above figures can be better understood as collateral rates that commodity loans are based on. To simplify this, let’s look at 100 bushels of wheat. The collateral that farmer would have would be $294.00. Of course that is not a realistic figure but used for the sole intent of understanding how commodity market rates and collateral work together. Keep in mind that in the end these rates are subject to change somewhat based on current commodity market values. Some rates are established on a county or regional level and would take precedence over the national rates while others are strictly established on a national level.

Comments are closed.