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Farmers' Response to the Commodity Credit Corporation's Loan Program

Author

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  • Miller, Ronald R.
  • Meyers, William H.
  • Lancaster, Michael A.

Abstract

The Commodity Credit Corporation (CCC), established by Executive Order in 1933 and granted a federal charter in 1948, is authorized to extend nonrecourse loans to farmers who use agricultural commodities from the most recent harvest as collateral. The loan program was designed to foster a more orderly marketing procedure and stabilize agricultural prices and income, but farmers also use this program as both a residual market and a speculation and marketing aid. The amount loaned to a farmer equals the quantity of the commodity pledged as collateral times a fixed per unit value (loan rate) which is announced prior to the production period. Eligibility of a farmer for a CCC loan may require compliance with USDA allotment or set-aside programs and storage of the commodity in a CCC approved facility. The CCC's commodity demand via the loan program is perfectly elastic at the loan rate and farmers can supply as much as they desire. When the loan matures the farmer can either repay it with interest or default on both principal and interest, in which case the CCC assumes ownership of the pledged commodity.

Suggested Citation

  • Miller, Ronald R. & Meyers, William H. & Lancaster, Michael A., 1978. "Farmers' Response to the Commodity Credit Corporation's Loan Program," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 10(2), pages 157-164, December.
    • Handle: RePEc:cup:jagaec:v:10:y:1978:i:02:p:157-164_01
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    Cited by:

    1. Schouten, Duane & Meyers, William H., 1985. "Endogenizing Loan Activity in an Inventory Model for U.S. Corn," 1985 Annual Meeting, August 4-7, Ames, Iowa 278509, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Westcott, Paul C. & Hull, David B., 1985. "A Quarterly Forecasting Model for U.S. Agriculture," Technical Bulletins 156815, United States Department of Agriculture, Economic Research Service.
    3. Meyers, William H. & Jolly, Robert W., 1980. "Price Implications of Farmers' Response to the Farmer-Owned Reserve Program," 1980 Annual Meeting, July 27-30, Urbana-Champaign, Illinois 278855, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Schouten, Duane, 1985. "An analysis of corn loan and reserve program provisions using endogenous loan and reserve behavioral models," ISU General Staff Papers 1985010108000018103, Iowa State University, Department of Economics.

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