1% interest rate benefits farmers

Now that fall harvest is near completion, producers are reminded that commodity loans are available for harvested production of corn and soybeans.

Commodity loans are not as popular as in previous years due to high commodity prices for grain. Although at a 1 percent interest rate, they do provide operating capital and provide marketing flexibility for some producers.

For other producers who take advantage of the commodity loan program, it is used as a tax planning tool to either increase revenue or increase expenses.

Producers who feed their grain also are eligible for commodity loans. When the commodity is being fed, a repayment schedule is prepared according to the amount of grain being fed monthly.

Commodity loans are processed usually within three business days of the date of request. This is probably the simplest loan program administered by USDA.

Some of the requirements include.

• Eligibility — Reported crop production on any farm. Conservation compliance rules do apply.

• Terms — Matures in nine-months and proceeds are deposited directly into your account.

• Repayment — Payments can be made at any time during the loan period before selling or feeding.

• Collateral — The grain pledged for loan is the collateral, it may not be fed or sold without first repaying a specific quantity or obtaining a marketing authorization.

• Storage — Grain must be stored in an approved structure for on-farm storage. Warehouse stored grains also are eligible if stored at an approved government warehouse.

To summarize, for those producers who are storing grain for sale later in the year or for feeding purposes, commodity loans provide one option to consider when obtaining operating capital for crop inputs.

Commodity loans are popular for a variety of reasons: to provide capital, provide better opportunity for timely grain marketing, capitalize on discounts for inputs offered in the winter, each farm has their own use.

Because the interest rate is low, producers could maximize early order discounts by paying for seed, fertilizer and crop protection products now. Interested producers should contact the FSA office for more information.

Luke Fritz is executive director of the Butler County Farm Service Agency.