CCC PROPOSES DROPPING STORAGE AGREEMENT

Comments due by October 10

The Commodity Credit Corporation has proposed dropping Uniform Grain and Rice Storage Agreements as a requirement for handling government grain.  

PROPOSED CHANGES from the July 3 Federal Register 

The first change proposed by this rule is that CCC will no longer require a Federally-licensed warehouse operator also to maintain a CCC storage agreement.   

CCC said the conditions that a warehouse operator must meet for obtaining a Federal license under the United States Warehouse Act exceed those that must be met for obtaining a CCC storage agreement.  The CCC storage agreement specifies storage rates, a Federal license does not.  However, CCC has maintained a policy since the late 1980's to move commodities it obtains as forfeitures into the market place as quickly as possible. Thus, minimal storage costs are incurred by CCC. Accordingly, CCC has determined that requiring a Federally-licensed warehouse operator to also maintain a CCC storage agreement provides no additional protection to CCC's interests as a lender in the administration of the marketing assistance loan programs. CCC may, however, continue to utilize storage agreements in those instances where it is engaged in the long-term storage of commodities for use in CCC domestic and international feeding programs, i.e. wheat stored under the Bill Emerson Humanitarian Trust. 

Second, in a State with a warehouse licensing program, CCC will no longer require the use of a CCC storage agreement for a State-licensed warehouse.  

CCC says that in such States, especially those with grain indemnity funds that provide cash payments to depositors in the event of the insolvency of the warehouse operator, CCC has adequate protection as a secured lender. There are redundant costs to the warehouse operator in meeting, and maintaining, compliance with both the State license and the CCC storage agreement. Even without the storage agreement CCC will still have clear title to the commodity in the event of the insolvency of the warehouse operator. If the loan is repaid, CCC has no interest at stake. Thus, for State-licensed warehouses, a CCC storage agreement will not be required, except possibly in the case of the long-term storage of CCC-owned grain. 

CCC says, “These changes will allow producers to obtain warehouse-stored loans at all warehouses, both State and Federally-licensed, thus expanding the amount of storage available for use by producers who wish to obtain such loans. This is particularly beneficial since commercial warehouse capacity has declined over the past 15 years while the amount of commodities produced in that time has increased.  CCC says marketing patterns have changed during this time, for example, many buyers have turned to a ``timed-to-arrive'' basis and do not maintain large stocks of commodities at their facilities. The proposed regulatory changes are intended to compliment these changing patterns.”

This proposed rule will have no impact on the administration of the U.S. Warehouse Act.

BACKGROUND:

Since 1949, the commodities pledged as collateral for nonrecourse marketing assistance loans could be stored on the producer's farm or in approved warehouses.   Approved warehouses were those who entered into storage agreements with CCC that set forth terms and conditions regarding: (1) Financial aspects of the warehouse; (2) rates that are applicable to the storage of CCC owned inventory and CCC loan collateral; (3) handling and delivery charges with respect to these commodities; and (4) related storage issues.

With the advent of marketing assistance loans and LDP's in the mid-1980's, producers' use of these benefits has shifted substantially from the marketing loan option to the LDP option.  When a comparison is made with the quantities of commodities forfeited to CCC as a percentage of the quantities pledged as collateral for such loans, CCC takes possession of less than 0.4 percent of the three major crops of corn, soybeans and wheat pledged as collateral for marketing assistance loans.

HOW TO MAKE COMMENTS:

Comments may be submitted by any of the following methods:

     E-Mail: Send comments to: kimberly.graham@wdc.usda.gov.

     Fax: Submit comments by facsimile transmission to: (202) 690-1536.

     Mail: Send comments to: Director, Price Support Division, Farm Service Agency, United States Department of Agriculture (USDA), Room 4095-S, 1400 Independence Avenue, SW., Washington, DC 20250-0512.

All written comments will be available for public inspection at the above address during business hours from 8 a.m. to 5 p.m., Monday through Friday.

FOR FURTHER INFORMATION CONTACT: Kimberly Graham; phone: (202) 720-9154; email kimberly.graham@wdc.usda.gov, or fax (202) 690-1536