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USDA implements new storage loan provisions

WILLMAR -- In accordance with the 2008 farm bill, the U.S. Department of Agriculture is implementing new provisions that will allow producers of eligible commodities to obtain low-interest financing to build or upgrade farm storage and handling facilities.

The new provisions, which went into effect on Aug. 17, will either amend or supplement the Farm Storage Facility Loan program that is administered by USDA's Farm Service Agency.

The key program provisions that were amended include: an increase in maximum loan amounts; the availability of extended loan terms; and an expanded list of commodities and crops that will qualify for the program.

Previously, the maximum loan amount, including the remaining balance on any other outstanding Farm Storage Facility loans, was limited to $100,000. Under the new provisions, the maximum loan amount was increased to $500,000.

As in the past, any loans in excess of $50,000 will require additional security. The additional security can consist of either a first lien on the underlying real estate or another form of security, such as a guaranteed line of credit that meets the approval of USDA.

Also unchanged was the requirement that borrowers provide a down payment of 15 percent, with USDA providing a loan for the remaining 85 percent of the net cost of the eligible storage facility, permanent grain drying equipment or grain handling equipment. However, if the borrower provides a down payment of 20 percent, a severance agreement would not be needed for loans that require a real estate lien.

Previously, loan terms were limited to a maximum of 7 years. Under the new provisions, loan terms of 7, 10 or 12 years are available depending on the amount of the loan. However, the interest rate in effect for each term may be different, based on the rate at which USDA borrows from the Treasury Department.

The new farm bill also expanded the list of Farm Storage Facility Loan eligible commodities. In addition to the typical grain crops of corn, soybeans and small grains, the list of eligible commodities now includes hay, fruit and vegetable crops, and a wide variety of renewable biomass crops.

Also new is a provision that will allow for a partial disbursement of loan proceeds. The partial disbursement will be available after a portion of the construction has been completed, with a final disbursement once all construction is completed.

The amount of the partial disbursement cannot exceed 50 percent of the approved loan amount.

Applications for the program will be accepted at the FSA county office that maintains the applicant's farm records. Producers will need to submit a nonrefundable $100 application fee at time of application.

Applications must be submitted and loan approval received before any site preparation or construction can begin.

FSA payments subject to Treasury Offset Program

Producers should be aware of several changes that have been implemented for payments issued via direct deposit by USDA's Farm Service Agency.

To be compliant with the Debt Collection Improvement Act of 1996, all FSA payments will be processed through the Treasury Offset Program. This will allow the government to offset any delinquent federal debt.

This new process will result in a delay in the receiving of direct deposit payments by one business day.

If the Treasury Offset Program database finds a match for a taxpayer identification number and name, the payment will be offset for the delinquent debt. The U.S. Treasury Department will notify the payment recipient of any offsets taken for debts due other agencies.

Recipients of FSA direct deposit payments will also notice a change in the payment description provided on their bank accounts and bank statements. Previously, the description on the payee's bank statement read "USDA-FSAKCMOCDSP." The new description will now read, "FSA TREAS 310."

USDA and DOJto host public workshops

Officials from the U.S. Department of Agriculture and the Department of Justice have announced that they will host joint public workshops to explore competition issues affecting the agriculture industry, and the appropriate role for antitrust and regulatory enforcement in the industry. These will be the first joint USDA/DOJ workshops ever held to discuss competition and regulatory issues in the agriculture industry.

The workshops will address the dynamics of competition in agricultural markets including, among other things, buyer power and vertical integration. In addition, the hearings will provide farmers, ranchers, consumer groups, processors and agribusinesses with the opportunity to provide examples of potentially anticompetitive conduct.

The first workshop will be held in early 2010. While some of the workshops may be held in Washington, D.C., others will be held regionally. Additional information about the date, time and location of the workshops will be provided at a later date.

Wes Nelson is executive director of the USDA Farm Service Agency in Kandiyohi County.