CURRENT MAL/LDP RATES
|CATEGORY||2020 LOAN RATE||EFFECTIVE|
CLEAN PRICES in $ per Pound
|<18.6 Micron||3.88||3.54||$.34 LDP Available|
|18.6 - 19.5||3.38||3.24||$.14 LDP Available|
|19.6 - 20.5||2.94||3.10||Not Available|
|20.6 - 22.0||2.72||3.22||Not Available|
|22.1 - 23.5||2.56||3.82||Not Available|
|23.6 - 25.9||2.33||2.79||Not Available|
|26.0 - 28.9||1.78||1.30||$.48 LDP Available|
|> 29 Micron||1.38||0.88||$.50 LDP Available|
|GREASE PRICES in $ per Pound|
|Ungraded Wool||40 cents||10 cents||$.30 LDP Available|
|Unshorn PELT||6.865 lbs x Ungraded Wool LDP||$2.0595 LDP Available|
For questions about these programs, to apply, and for more information, please contact your local Farm Service Agency Office. Find your local FSA Office Here
Money is available to wool producers through the Farm Bill in the form of Wool Marketing Assistance Loans (MAL’s) and Loan Deficiency Payments (LDP’s). These programs are intended to:
- minimize potential loan forfeitures;
- subsequent government accumulation of stocks;
- minimize the cost incurred by the Federal Government in storing the commodity; and
- allow a commodity produced in the United States to be marketed freely and competitively both domestically and internationally.
Loan and payment options:
- Loan- graded wool
- Loan- ungraded wool
- Loan Deficiency Payment- graded wool
- Loan Deficiency Payment- ungraded wool
- Loan Deficiency Payment- pelts
Growers can choose the option(s) most financially beneficial for their operation.
To be eligible to apply for these programs the producer must:
- meet the definition of an eligible producer
- sheep must be grown and shorn in the U.S.
- have ownership of the sheep at least 30 days before shearing
- wool must be shorn and in storable condition
- have ownership and beneficial interest in the wool
Other eligibility and documentation requirements may apply.
Marketing Assistance Loan (MAL) Loan from the Government
- Wool is used as collateral for a loan
- Loan available for up to 9 months (currently extended to 12 months until Sept. 30, 2020, CARES Act – Co-Vid)
- Costs – Low FSA interest rate + filing fee
- Repay loan anytime (currently 12 months) at either loan rate or repayment rate – which ever is lower!
- Operating capital ($$$ vs LDP)
- Cannot sell the wool until loan is repaid
Loan Deficiency Payment (LDP)
- Difference between loan rate and weekly effective repayment rate
- Only available when repayment rate is below loan rate (i.e.- low wool prices)
- Think of an LDP as an “on the spot” price payment for low wool prices
- Need to file with FSA before you sell wool
- Pick the day you want to take LDP
- Sell wool later when prices improve
Marketing Assistance Loans (MAL’s)
MAL’s provide interim financing by providing money for continued operation while allowing the wool to be marketed at a later time. Producers may apply for a loan, using the wool as collateral, at the yearly loan rate (set annually by USDA) on graded and/or ungraded wool. After wool is shorn, the 9-month loan may be taken with a small initial filing fee. (The term is currently extended to 12 months for loans requested before September 30, 2020.) The wool CAN NOT be sold while under loan.
A grower can repay the loan at any time during the 9 months by: (1) repay the loan at either the loan rate or the announced repayment rate (whichever is lower) and reclaim the wool, (2) forfeit the wool, or (3) use a commodity certificate exchange.
Instead of repaying a MAL loan, producers can forfeit their commodity; the USDA then takes possession and ownership of the wool and the owner keeps the loan money, including any gains over market price. Forfeiture essentially creates a “guaranteed buyer” from the USDA.
Commodity Certificate Exchange
Another option is to use a Commodity Certificate Exchange where a paper certificate with a dollar denomination can be exchanged for commodities in the USDA inventory. Commodity certificate exchanges are not available when the exchange rate is more than the loan rate.
Loan Deficiency Payments (LDP’s)
Producers can choose to forgo a Marketing Assistance Loan and receive an “on-the-spot” payment on their wool when global prices are lower than expected. An LDP is only available when the yearly loan rate is above the current repayment rate (announced weekly, they depend on the international wool market prices and currency exchange rates).
LDP’s on Pelts
Producers can also collect an LDP on unshorn slaughter lamb pelts. The be eligible, the producer must: meet the definition of an eligible producer, own the lambs for at least 30 days before slaughter, sell the unshorn lamb for immediate slaughter or slaughter the unshorn lamb for personal use, have beneficial interest in the pelts, sheep must be of U.S. origin, the pelt must be unshorn, and submit production evidence.
Graded vs. Ungraded Programs
- Loan rate is established yearly based on 8 micron categories
- Participation requires core test information on your wool
- Graded Wool LDPs are reported in Clean Prices – and calculations are made based upon core test data
- Loan rate is set at 40 cents per pound
- Does not require core test
- USDA announces Weekly effective repayment rate for Ungraded wool
- Ungraded LDP is the difference between loan rate (40 cents) and effective Repayment Rate.
Both graded and ungraded programs require a weigh of the wool.
Graded rates/prices are reported on a clean basis (accounting for wool yield). Ungraded wool is reported on a grease basis.
The graded program requires producers to also provide a core test report/certificate from a CCC-approved testing facility; currently only New Zealand Wool Testing Authority (NZWTA) is approved.
Growers can participate in a graded or ungraded programs or a combination of both, whatever is most beneficial to them. For example, a grower could choose to use the graded LDP program for their fleece wool and ungraded LDP program for off-sorts (tags, crutchings, bellies, pieces).
Wool Pools and Cooperatives
Ungraded and graded LDP’s are available to wool pools; loans are not permitted as delivery to a pooling location is considered the day that growers lose beneficial interest of the wool.
Steps to Take:
- Contact your local USDA FSA (Farm Service Agency) Office- preferably before wool/pelts are harvested. Fill out forms and discuss plans and documentation needed.
- Documentation on your wool:
- Total weight of wool
- Micron and yield core test report/certificate (only needed for graded wool programs)
- Other (may include storage documentation, delivery documentation, etc.)
- Complete forms and documentation with your local FSA Office.
The information on this page is provided for informational purposes only, for detailed information please contact your local FSA office.