Farm Bill Primer: MAL and LDP Farm Support Programs

Farm Bill Primer: MAL and LDP Farm Support Programs

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June 22, 2022
Farm Bill Primer: MAL and LDP Farm Support Programs
The Agriculture Improvement Act of 2018 (2018 farm bill;
P.L. 115-334) reauthorized the Marketing Assistance Loan
Table 1. Marketing Assistance Loan (MAL) Rates and
(MAL) and Loan Deficiency Payment (LDP) programs for
2020-2021 Marketing Year Average Prices (MYAP)
crop years 2019-2023. The MAL program has been a
2020-2021
significant feature of U.S. farm policy since the 1930s.
Commodity
Unit
MAL Rate
MYAP
Congress has authorized the LDP program since the 1980s.
The MAL program provides loans to farmers collateralized
Wheat
$/bu.
$3.38
$5.05
by eligible stored commodities. The MAL program also
provides price support to borrowers when market prices
Corn
$/bu.
$2.20
$4.53
drop below levels specified in statute. The LDP program
Sorghum, grain
$/bu.
$2.20
$5.04
provides payments to farmers eligible to receive price
support under the MAL program. Farmers cannot receive
Barley
$/bu.
$2.50
$4.75
MAL and LDP program benefits for the same commodity
Oats
$/bu.
$2.00
$2.77
and must meet eligibility requirements.
Upland Cottona
$45.00-
Marketing Assistance Loan Program
$/cwt.
$66.30
$52.00
The MAL program helps farmers meet cash flow needs by
ELS cotton
$/cwt.
$95.00
$119.00
providing financing for commodities pledged as collateral,
allowing farmers to delay sales until later in the marketing
Rice, long-grain
$/cwt.
$7.00
$12.60
year when market conditions may improve. The MAL
Rice, medium-grain
$/cwt.
$7.00
$20.10
program offers producers or processors—depending on the
commodity—nine-month-term, nonrecourse and recourse
Soybeans
$/bu.
$6.20
$10.80
loans for qualifying stored commodities. Under
nonrecourse loans, the U.S. Department of Agriculture
Other oilseedsb
$/cwt.
$10.09
Various
(USDA) must accept the forfeited crop pledged as collateral
Peanuts
$/cwt
$17.75
$21.00
as full payment of an outstanding loan. Under recourse
loans, the borrower is liable for repaying the loan in full.
Peas, dry
$/cwt.
$6.15
$9.84
Lentils
$/cwt.
$13.00
$18.20
The loans are valued at commodity-specific loan rates
established in the 2018 farm bill (Table 1). If local market
Chickpeas, large
$/cwt.
$14.00
$23.30
prices increase above the loan rate, a farmer may repay the
Chickpeas, small
$/cwt.
$10.00
$20.20
MAL plus interest and reclaim the crop. If market prices
fall below the MAL rates, farmers can repay nonrecourse
Wool, graded
$/cwt.
$115.00
$166.00
loans at the market price or surrender the commodity used
Wool, ungraded
$/cwt.
$40.00
NA
as collateral in lieu of repayment. Farmers receive the
difference between the lower market price and the higher
Mohair
$/cwt.
$420.00
$517.00
MAL rate as a marketing loan gain (Figure 1).
Honey
$/cwt.
$69.00
$210.00
Figure 1. MAL Nonrecourse Loan Stylized Example
Sugar, raw cane
$/cwt.
$19.75
$42.13
Sugar, refined beet
$/cwt.
$25.38
$63.36
Sources: CRS calculations using 2018 farm bil (P.L. 115-334, §1202
and §1301); USDA National Agricultural Statistics Service Quickstats
database; and various USDA Economic Research Service commodity
outlook reports.
Notes: bu. = bushel, cwt. = 100 pounds, ELS = extra-long staple, NA
= not available.
a. The MAL rate for upland cotton is the average MYAP for the
preceding two years, limited to a range of $45/cwt. and
$52/cwt.

b. Other oilseeds include canola, crambe, flaxseed, mustard seed,
Source: Congressional Research Service (CRS).
rapeseed, safflower, sesame seed, and sunflower seed.
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link to page 2 Farm Bill Primer: MAL and LDP Farm Support Programs
USDA announces daily posted county prices for most MAL
risk management varies across commodities depending on
commodities. For cotton and rice, USDA announces weekly
the relationship between farm prices and the statutory loan
prices based on international reference prices. Farmers may
rates. Under the 2018 farm bill, taxpayer costs for the
compare the posted prices announced by USDA with the
programs have been low in comparison with other farm
statutory MAL loan rates for each eligible commodity when
support programs, as market prices have tended to exceed
selecting from among the potential MAL program benefits.
MAL loan rates for most eligible commodities. MAL and
LDP program outlays are coupled (i.e., tied) to annual
Farmers may repay loans at any time before maturity
production, a consideration for U.S. commitments to limit
without penalty. Interest rates are fixed at 1% above the
trade-distorting support under the World Trade
cost of borrowing from the U.S. Treasury. Commodities
Organization’s Agreement on Agriculture.
may be stored in an approved warehouse or on the farm.
During the 1950s, 1960s, and 1980s, market prices
Loan Deficiency Payment Program
remained below loan rates for extended periods. This led to
When market prices fall below the MAL rates, the LDP
frequent loan forfeitures and large government stock
program may provide direct payments to producers equal to
holdings at relatively high costs to taxpayers. It also led
the amount of MAL marketing loan gains, in lieu of
farmers to grow crops based on loan rates rather than
executing a MAL loan. The farmer may then market the
market prices. To lower costs and reduce government
crop or store it for future sale. LDPs are available for the
ownership of grains and oilseeds, Congress created the LDP
same commodities eligible for MALs, excluding ELS
program and additional MAL program features in the 1980s
cotton and including unshorn pelts.
to avoid forfeitures of crops under loan. The list of eligible
loan crops has expanded over the decades. The most recent
Appropriations and Program Outlays
additions were dry peas, lentils, and small and large
The MAL and LDP programs receive mandatory
chickpeas in 2002.
appropriations of “such sums as necessary” through the
Commodity Credit Corporation (CCC). Program outlays
The 2018 farm bill removed limitations on the maximum
vary from year to year based on program enrollments and
benefits that an individual or legal entity can receive per
market conditions (Table 2).
year from the MAL and LDP programs. Some
policymakers advocated for tighter limits to lower program
Table 2. MAL and LDP Program Outlays
costs, respond to concerns about payments to large farms,
FY2019-FY2022
and reduce potential incentives to expand large farms at the
$ mil ions, not adjusted for inflation
expense of small farms. Others contend that larger farms
should not be penalized for the economies of size and

FY2019 FY2020 FY2021 FY2022
efficiencies they have achieved.
MAL recourse
43
63
17
16
In 2020, USDA created additional farm support programs
loans
using funds appropriated by Congress and funded through
MAL
the CCC to respond to the COVID-19 pandemic. These
nonrecourse
7,616
8,394
6,446
6,283
programs provided higher levels of price support for
loans
commodities eligible for MALs and LDPs and price support
for commodities ineligible for MALs and LDPs. Congress
Loans repaid
-7,239
-6,502
-7,161
-6,236
could consider whether to modify the MAL and LDP
LDPs
1
24
10
2
programs to reduce the need for future supplemental
commodity support, taking into account that any expansion
Total
421
1,979
-688
65
in these programs under the existing farm bill baseline may
Source: CRS using the Budget of the U.S. Government, Appendix,
require funding reductions for other farm bill priorities.
for FY2021, FY2022, and FY2023.
For additional background, see the following CRS reports:
Notes: Values for FY2022 are executive branch estimates. Values for
other years are actuals.
 CRS Report R45730, Farm Commodity Provisions in
2018 Farm Bill Changes
the 2018 Farm Bill (P.L. 115-334)
The 2018 farm bill increased the statutory loan rate for
 CRS Report R46248, U.S. Farm Programs: Eligibility
certain commodities, authorized recourse loans for certain
and Payment Limits
lower-quality commodities, and changed how market prices
are calculated for cotton, among other changes. The 2018
 CRS Report R46577, U.S. Farm Support: Outlook for
farm bill also excluded MAL and LDP benefits from
Compliance with WTO Commitments, 2018 to 2020
payment limits.

Issues for Congress
CRS In Focus IF11764, U.S. Agricultural Aid in
Response to COVID-19
MAL loans incentivize farmers to store more of their
production after harvest, potentially allowing for more
Stephanie Rosch, Analyst in Agricultural Policy
consistent supplies and market prices throughout the year.
MALs and LDPs also augment farm incomes during
IF12140
periods of low prices. The programs’ usefulness for farm
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Farm Bill Primer: MAL and LDP Farm Support Programs

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