Commodity Credit Corporation Loans
Commodity Credit Corporation loans are the placement of
farm commodities with the Commodity Credit Corporation (CCC) and
accepting a "loan" based upon the publicly announced loan rate
for that commodity. CCC loans have historically been treated as
equivalent to a sale in the agricultural sector accounts. Even though
commonly referred to as a loan, the agreement is a nonrecourse loan,
meaning that it is the farmer's decision as to whether to reverse
the transaction for the purpose of reclaiming the commodity or to
let the government retain possession and ownership. Obviously, the
farmer will reclaim the commodity only if an additional profit can
be made by doing so, meaning that the crop can be sold at a higher
price (or avoid purchasing grain for feed at the higher price).
How are Commodity Credit Corporation loans incorporated in
the income accounts?
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Placement of a crop under CCC loan is treated as a sale and
added to open market sales in computing cash receipts, because
the decision as to whether to repay the loan or keep the funds
is in the producer's hands.
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If a loan is redeemed, the impact consists of a "price differential,"
which is treated as profit and added to cash receipts, thus
ensuring that cash receipts do reflect any difference in the
market price and the loan rate resulting from the two transactions.
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If not redeemed, loan value represents total impact on cash
receipts.
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Treatment does not affect net farm income because the value
of the commodity would be added to inventory if not treated
as a sale.
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