The Consolidated Appropriations Act of 2016 was signed into law on 18 December 2015. This Act included provisions for the issuance of commodity certificates under the same terms and conditions as were in effect for 2008 crop year loans.
Beginning with the 2015 crop Marketing Assistance Loans (MALs) the Commodity Credit Corporation (CCC) will authorize the purchase of commodity certificates for exchange of outstanding loan collateral. MALs may be redeemed with commodity certificates only if a market gain in in effect. MALs redeemed with a commodity certificate exchange will not be subject to actively engaged rules, payment limitations, or Adjusted Gross Income provisions.
The CCC-605P used for 2015 crop peanuts does not give a buyer the authority to redeem MALs with a commodity certificate exchange. Producers must complete the CCC-694 2 before a buyer can use the CCC-605P to redeem an MAL with a commodity certificate exchange.
The CCC-694-2 provides four options to producers. The options for requesting commodity certificates for exchange of loan collateral include:
- turn-around loans
- commodity certificate purchase
- redemptions by agents, buyers and alternative delivery partners
- previous redemptions with market loan gains.
Commodity loan gains from loan collateral exchanged with commodity certificates for loan collateral are not subject to:
- payment limitation
- actively engaged, member contribution, and cash rent tenant provisions
- AGI provisions.
Commodity Certificate Exchange (CCE) are applicable to Peanuts only when the loan rate for the loan exceeds the National Posted Price. The commodity certificate exchange rate is based on the date the certificate is purchased and the NPP in effect at that time. The CCC-694-2 is the producer’s acknowledgement of commodity certificate purchase and immediate exchange for loan collateral.
Producers who have pledged peanuts for a 2015 crop year MAL must complete a CCC-694-2 if they intend to have their loan collateral redemption converted to CCE.
A CCC-694-2 must be completed:
- for each loan if either of these options is selected on the CCC-694-2:
- 8A for a turn-around loan (request and repay the loan on the same day, works in lieu of an LDP to use CCE. Producers can still obtain an LDP but the LDP is subject to payment limitation, actively engaged, and AGI provisions.)
- 8B for a commodity certificate purchase. (This is for immediate exchange of all or part of the loan collateral prior to loan maturity, really just a normal repayment with a market gain using the CCE)
Note: For options 8A and 8B only one producer with a share in the crop under loan is required to sign CCC-694-2, even for joint loans. These CCC-694-2s are executed the date the loan or redemption is requested.
A CCC-694-2 must be completed for all loans and signed by all producers with a share in the crop under loan if either one or both of these options are selected on the CCC-694-2:
- 8C for cotton or peanut redemptions by designated agents or buyers (the buyer will then be able to redeem the loan with a CCE if a market gain is in effect. Must be signed prior to loan redemption)
- 8D to convert previous redemptions with market loan gains to CCE. (for 2015, cotton is the only crop this currently applies to.)
If the producer has issued a Power of Attorney (FSA-211) then the representative can sign CCC-694-2 as agent for the producer for MAL purposes.
Important: The CCC-694-2 must be completed in the county office. A completed CCC-694-2 must never:
- leave the County Office
- be copied
- be faxed.
Note: A producer may request Option 8C and 8D for all loans. Option 8C must be selected prior to the redemption for a buyer to use the CCE at redemption.
For more information contact:
Darren G. Owens
Chief Common Management and Price Support Texas State FSA Office