CCC Loan FAQ and Glossary

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CCC Cotton Loan Frequent Asked Questions

Find answers, little known facts about CCC's Cotton Loan program, and a glossary of terms.

If you have a specific question, please contact us at econs@cotton.org

 
When is the deadline to redeem cotton or claim a Loan Deficiency Payment under the effective rate?

Producers should be aware that to redeem loan at current adjusted world price (AWP), repayments, including CCC Form 605 with original signatures, must be filed no later than 3:59 p.m. Eastern Time Thursday. Loan deficiency payment (LDP) application must be submitted and approved by Farm Service Agency (FSA) by 3:59 p.m. eastern time Thursday to obtain LDP rate applicable under current AWP. No loan repayments or LDP applications are processed between 4 and 5 p.m. on Thursday. At 5 p.m. EDT, FSA begins processing loans and LDPs using new AWP.



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How do I know if I can claim a Loan Deficiency Payment?

Producer is eligible to receive LDPs only with respect to cotton that is eligible to be placed in loan program. Cotton that has previously been sold or previously been placed in loan is not eligible for LDP. Producer must have beneficial interest in cotton on which LDP is to be made. To receive LDP, producer must file application form with Farm Service Agency (FSA). LDP rate is locked in on date form is appropriately filed.

FSA recently issued notice requiring presentation of warehouse receipts in order to receive LDP. Gin tag lists can be used for '98 crop with respect to cotton that is sold gin-direct. FSA may accept gin tag lists for '97 crop only if producer can otherwise prove beneficial interest in cotton and cotton is eligible for loan.



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Glossary

"A" Index: is a proxy for the world price of cotton. It is an average of the cheapest five quotations from a selection of the principal upland cottons (currently 19) traded internationally. For a more detailed description visit the Cotlook, Ltd. website. In August 2004, "A" Index changed emphasis by representing offering prices based on CFR Far Eastern main ports terms.

Adjusted World Price (AWP): USDA's estimated world price adjusted for U.S. quality and location. The loan differential between qualities 31-3-35 and base quality 41-4-34 is subtracted from the prevailing world price (average of 5 lowest Far East quotes). Additionally, average transportation costs are subtracted from the world price. For certain higher qualities, the Secretary shall further reduce the AWP to reflect differences between premiums in the U.S. market and international markets (fine count adjustment).

Loan Deficiency Payment (LDP): is direct payment that producer can receive in lieu of placing cotton in CCC loan and redeeming cotton at adjusted world price (AWP).

Farm Service Agency (FSA): USDA agency responsible for administration of federal farm programs. Cotton responsibilities include the loan program and price support programs.