Marketing Certificates Should Be Retained

The availability of marketing certificates enhances producer income.

Published: September 10, 2001
Updated: September 10, 2001

The Availability of Marketing Certificates Enhances Producer Income

Marketing Certificates Prevent Stock Overhang from Depressing Prices

Without certificates, there will be an even larger stock overhang going into next year, weakening next year’s prices – making it more difficult for farmers to secure operating loans.

Marketing Certificates Enhance Producer Income

Marketing Certificates give producers the opportunity to market their commodity directly, even during times of very low prices, as opposed to forfeiting the loan to the CCC.

Without certificates, a significant quantity of U.S. production would become government inventory. It would be taken out of private channels. In the end, merchants will buy from the government, and the farmer will get less.

Marketing Certificates Avoid Market Disruptions Caused by Payment Limits

The limit on marketing assistance loan gains is inconsistent with the marketing loan program.

  • In perverse fashion, the limitation on gains from marketing loans hurts producers more when such assistance is most needed and inflates the federal government’s budgetary costs.
  • As prices deteriorate, producers will see more marketing loan gains and hit the loan gain limit quicker than ever before.
  • Because the prices of all major commodities have declined so much, producers who never expected they would hit the marketing loan gain limit will be surprised as they add up the gains attributed to cotton, soybeans, wheat and corn.
  • When the limit is hit, producers will do the obvious, they will forfeit their commodity to the CCC, helping make the United States a residual supplier of commodities in world markets.

Marketing Certificates Prevent Loan Forfeitures

Without marketing certificates, producers would place their crop into the CCC loan and would likely forfeit the commodity, tying up storage, and leaving government to market commodities almost certainly at a substantial loss and definitely in competition with the private sector during the following year’s harvest.

All Producers Have Equal Access to Certificates

This marketing mechanism is available to all commodities. Initially, a significant number of wheat, rice and feed grain producers took advantage of this program.

Use of Marketing Certificates Has Significant Precedent

14 years of precedent -- Certificates were used to redeem cotton from the loan at the AWP under 1985 and 1990 farm law. The 1996 FAIR Act, and the clarifying amendments contained in the FY 2000 appropriations act, are very similar to the statutory language contained in the ’85 and ’90 Acts. Regulations governing the exchange of marketing certificates are in place.