The U.S. Department of Agriculture yesterday extended the deadline for temporary use of outside storage of cotton pledged as collateral for Commodity Credit Corporation marketing assistance loans until May 1, 2006.
On Jan.18, 2006, in Notice to the Trade BCD-117, USDA allowed cotton warehouse operators located in certain eligible counties to request approval for short-term outside storage of CCCís loan collateral. The deadline initially established under this exemption was originally limited to the earlier of 90 days from the original outside storage date or April 1, 2006. This extension of time is being granted to facilitate continued robust shipments of the 2005 bumper cotton crop.
Under this extension, cotton may be stored outside at warehouses approved for this temporary storage until May 1, 2006. CCC will advance the maturity date of any cotton marketing assistance loans if the cotton securing the loan is stored outside as of May 1, 2006.
After May 1, producers will be granted 15 days to redeem such cotton at the adjusted world price level, after which the loan must be repaid at principal plus interest.
USDA warehouse examiners will continue to conduct warehouse spot-checks of cotton pledged as loan collateral. If an examiner discovers loan bales stored outside without CCC approval in place, CCC will give the warehouse operator 15 days to either move the bales inside a CCC-approved warehouse or request approval for temporary outside storage until May 1. All producers with cotton at such a warehouse will be notified by letter of the situation.
Operators not previously approved to use temporary yard storage who do not rectify the situation within 15 days will be removed from the CCC list of approved warehouses the day after the 15-day grace period expires.
Producers with cotton at the warehouse cannot receive a CCC marketing assistance loan until approval is re-instated and the cotton is moved inside. Cotton that is already under loan but is stored outside at an unapproved facility is considered ineligible to be pledged as collateral for a CCC loan, and such loans are subject to repayment at principal plus interest without storage credit after the 15-day grace period.
Separately, USDA is also developing a plan to allow re-concentration of loan cotton between warehouses.
More information on the issue of outside storage of cotton under loan is available at local FSA offices.