Storage Requirements for Grain Security for Marketing Assistance Loans, 37857-37862 [E6-10368]

Download as PDF Federal Register / Vol. 71, No. 127 / Monday, July 3, 2006 / Proposed Rules rwilkins on PROD1PC63 with PROPOSAL_1 economic impact on a substantial number of small entities. Small agricultural service firms, which include producers, handlers, and accredited certifying agents, have been defined by the Small Business Administration (SBA) (13 CFR 121.201) as those having annual receipts of less than $6,500,000 and small agricultural producers are defined as those having annual receipts of less than $750,000. This proposed rule would have an impact on a substantial number of small entities. The U.S. organic industry at the end of 2001 included nearly 6,949 certified organic crop and livestock operations. These operations reported certified acreage totaling more than 2.09 million acres of organic farm production. Data on the numbers of certified organic handling operations (any operation that transforms raw product into processed products using organic ingredients) were not available at the time of survey in 2001; but they were estimated to be in the thousands. By the end of 2004, the number of certified organic crop, livestock, and handling operations totaled nearly 11,400 operations. Based on 2003 data, certified organic acreage increased to 2.2 million acres. U.S. sales of organic food and beverages have grown from $1 billion in 1990 to an estimated $12.2 billion in 2004. Organic food sales are projected to reach $14.5 billion for 2005; total U.S. organic sales, including nonfood uses, are expected to reach $15 billion in 2005. The organic industry is viewed as the fasting growing sector of agriculture, representing 2 percent of overall food and beverage sales. Since 1990, organic retail sales have historically demonstrated a growth rate between 20 to 24 percent each year. This growth rate is projected to decline and fall to a rate of 5 to 10 percent in the future. In addition, USDA has accredited 94 certifying agents who have applied to USDA to be accredited in order to provide certification services to producers and handlers. A complete list of names and addresses of accredited certifying agents may be found on the AMS NOP Web site, at http:// www.ams.usda.gov/nop. AMS believes that most of these entities would be considered small entities under the criteria established by the SBA. D. Paperwork Reduction Act No additional collection or recordkeeping requirements are imposed on the public by this proposed rule. Accordingly, OMB clearance is not required by section 350(h) of the Paperwork Reduction Act of 1995, 44 U.S.C. 3501, et seq., or OMB’s VerDate Aug<31>2005 17:19 Jun 30, 2006 Jkt 208001 implementing regulations at 5 CFR part 1320. AMS is committed to compliance with the Government Paperwork Elimination Act (GPEA), which requires Government agencies in general to provide the public the option of submitting information or transacting business electronically to the maximum extent possible. E. General Notice of Public Rulemaking This proposed rule reflects recommendations submitted to the Secretary by the NOSB. The 2 substances proposed to be added to the National List were based on petitions from the industry. The NOSB evaluated each petition using criteria in the OFPA. Because these substances are critical to organic production and handling operations, producers and handlers should be able to use them in their operations as soon as possible. A 30 day period for interested persons to comment on this rule is provided. List of Subjects in 7 CFR Part 205 Administrative practice and procedure, Agriculture, Animals, Archives and records, Imports, Labeling, Organically produced products, Plants, Reporting and recordkeeping requirements, Seals and insignia, Soil conservation. For the reasons set forth in the preamble, 7 CFR part 205, subpart G is proposed to be amended as follows: PART 205—NATIONAL ORGANIC PROGRAM 1. The authority citation for 7 CFR part 205 continues to read as follows: Authority: 7 U.S.C. 6501–6522. 2. In § 205.601 a new paragraph (e)(9) is added to read as follows: § 205.601 Synthetic substances allowed for use in organic crop production. * * * * * (e) * * * (9) Sucrose octanoate esters (CAS #s— 42922–74–7; 58064–47–4)—in accordance with approved labeling. * * * * * 3. In § 205.603 a new paragraph (b)(7) is added to read as follows: § 205.603 Synthetic substances allowed for use in organic livestock production. * * * * * (b) * * * (7) Sucrose octanoate esters (CAS #s— 42922–74–7; 58064–47–4)—in accordance with approved labeling. * * * * * PO 00000 Frm 00004 Fmt 4702 Sfmt 4702 37857 Dated: June 26, 2006. Lloyd C. Day, Administrator, Agricultural Marketing Service. [FR Doc. E6–10393 Filed 6–30–06; 8:45 am] BILLING CODE 3410–02–P DEPARTMENT OF AGRICULTURE Commodity Credit Corporation 7 CFR Part 1421 RIN 0560–AH52 Storage Requirements for Grain Security for Marketing Assistance Loans Commodity Credit Corporation, USDA. ACTION: Proposed rule. AGENCY: SUMMARY: This rule proposes changes to the regulations governing the Marketing Assistance Loan Programs of the Commodity Credit Corporation (CCC) that are authorized by the Farm Security and Rural Investment Act of 2002 (2002 Act). CCC is proposing to no longer require a Federally-licensed warehouse operator, or in a State with a warehouse licensing programs, a State-licensed warehouse operator to execute a CCC storage agreement. Nothing in this proposed rule will affect the administration of the United States Warehouse Act by USDA. DATES: Comments should be received on or before August 2, 2006. ADDRESSES: CCC invites interested persons to submit comments on this proposed rule and on the collection of information required to administer the affected regulations. Comments may be submitted by any of the following methods: • E-Mail: Send comments to: kimberly.graham@wdc.usda.gov. • Fax: Submit comments by facsimile transmission to: (202) 690–1536. • Mail: Send comments to: Director, Price Support Division, Farm Service Agency, United States Department of Agriculture (USDA), Room 4095–S, 1400 Independence Avenue, SW., Washington, DC 20250–0512. • Hand Delivery or Courier: Deliver comments to the above address. • Federal Rulemaking Portal: Go to http://www.regulations.gov. Follow the online instructions for submitting comments. All written comments will be available for public inspection at the above address during business hours from 8 a.m. to 5 p.m., Monday through Friday. E:\FR\FM\03JYP1.SGM 03JYP1 37858 Federal Register / Vol. 71, No. 127 / Monday, July 3, 2006 / Proposed Rules FOR FURTHER INFORMATION CONTACT: Kimberly Graham; phone: (202) 720– 9154; e-mail: kimberly.graham@wdc.usda.gov, or fax: (202) 690–1536. SUPPLEMENTARY INFORMATION: Background Since the enactment of the Agricultural Act of 1949, the major activity of CCC has been the administration and implementation of nonrecourse marketing assistance loans to producers of major agricultural commodities. Generally, Congress established loan rates for certain commodities, e.g. $1.95 per bushel for corn, for the 2004 through 2007 crop years. Under nonrecourse loan provisions, the producer may satisfy the loan obligation through forfeiture to CCC of the commodity pledged as collateral for the loan. Since 1949, the commodities pledged as collateral for these loans could be stored on the producer’s farm or in approved warehouses. Historically, approved warehouses have been warehouse operators who entered into storage agreements with CCC that set forth terms and conditions regarding: (1) Financial aspects of the warehouse; (2) rates that are applicable to the storage of CCC owned inventory and CCC loan collateral; (3) handling and delivery charges with respect to these commodities; and (4) related storage issues. Most States, as well as the Department of Agriculture (USDA), have a warehouse licensing regime for the storage of agricultural commodities. In these States, generally, an entity must have a State or Federal license to engage in storing these commodities. These licensed entities issue warehouse receipts that evidence ownership of commingled commodities. In general, those non-licensed entities in States with licensing programs may not store agricultural commodities on behalf of producers but are free to purchase commodities from producers. Accordingly, in such States, commercial feed lots, ethanol plants, wool pools, and other entities that are the ‘‘end users’’ of the commodity are not licensed warehouses and, therefore, may not store commodities on behalf of producers. In those States that do not have such a licensing regime, warehouses must still follow State laws relating to bailment and storage. The State laws relating to bailment and storage may vary from State to State. As a result of the accumulation of large quantities of commodities forfeited under nonrecourse loans, in the mid1980’s Congress instituted a fundamental change to CCC loan programs when market prices are below the CCC loan rate. The change allows producers the opportunity to repay the nonrecourse loan at a price determined by CCC and to retain any difference between the amount of the loan value and the repayment value. Under these ‘‘marketing assistance loans (MAL),’’ the producer still has the option of forfeiting the loan collateral to CCC. MAL’s accomplish two objectives. First, they provide producers with interim financing to continue farming operations without having to market Production bil. bushels Commodity year rwilkins on PROD1PC63 with PROPOSAL_1 their crop during a period of low market prices. Second, these loans facilitate the orderly marketing and distribution of commodities throughout the year. The three largest amounts of acreage planted to agricultural commodities for which marketing assistance loans are available are devoted to corn, soybeans and wheat. The following chart shows the estimated production of these commodities, as determined by the National Agricultural Statistics Service of USDA, and the quantity of such crops forfeited to CCC in the 2000 through 2004 crop years. With respect to the 2004 crop, the increase in forfeitures was attributable to the disruption in marketing channels caused by Hurricane Katrina. This hurricane occurred when a significant number of corn and soybean marketing assistance loans matured in the upper Midwest. The closing of the Mississippi River in the New Orleans area and damage to grain handling facilities in that area caused significant reductions in commodity prices. As a result, there was an abnormal increase in forfeitures to CCC; however, to mitigate this impact, CCC provided producers with farmstored loans the opportunity to store these CCC-owned stocks on their farm for up to 60 days with the option of purchasing the commodity at a price CCC would use in completing a marketing loan transaction. Accordingly, while CCC took title to a larger quantity of 2004 crops compared to the previous two years, such stocks moved into commercial distribution as soon as was practicable in as normal a way as possible. Corn: 2000 ...................................................................................................................................... 2001 ...................................................................................................................................... 2002 ...................................................................................................................................... 2003 ...................................................................................................................................... 2004 ...................................................................................................................................... Soybeans: 2000 ...................................................................................................................................... 2001 ...................................................................................................................................... 2002 ...................................................................................................................................... 2003 ...................................................................................................................................... 2004 ...................................................................................................................................... Wheat: 2000 ...................................................................................................................................... 2001 ...................................................................................................................................... 2002 ...................................................................................................................................... 2003 ...................................................................................................................................... 2004 ...................................................................................................................................... CCC’s ownership interest in these major commodities is insignificant. The percentage of other marketing loan VerDate Aug<31>2005 17:19 Jun 30, 2006 Jkt 208001 commodities owned by CCC as a percentage of total production is similar to these commodities. When a PO 00000 Frm 00005 Fmt 4702 Sfmt 4702 Forfeitures mil. bushels Percent of production forfeited 9.915 9.502 8.966 10.089 11.807 26.596 0.017 1.892 1.037 24.382 0.2682 0.0002 0.0211 0.0103 0.2065 2.757 2.890 2.756 2.453 3.123 5.704 0.054 0.205 0.122 0.483 0.2069 0.0019 0.0074 0.0050 0.0154 2.228 1.947 1.605 2.344 2.158 12.749 0.442 1.507 2.480 9.401 0.5722 0.0227 0.0939 0.1058 0.3247 comparison is made with the quantities of commodities forfeited to CCC as a percentage of the quantities pledged as E:\FR\FM\03JYP1.SGM 03JYP1 37859 Federal Register / Vol. 71, No. 127 / Monday, July 3, 2006 / Proposed Rules collateral for such loans, CCC takes possession of less than 0.4 percent of the commodities pledged as collateral for marketing assistance loans. The amount of the monetary gain producers may obtain by repaying CCC marketing assistance loans at repayment rates below their loan rate can be substantial. Therefore, there is a significant incentive for a producer to obtain these loans solely for this benefit. However, both the producer and CCC incur costs in completion of the loan transaction due to costs associated with lien searches and lien filing fees as well as USDA personnel costs incurred in processing these loans. To reduce the costs associated with the delivery of this benefit, producers may simply request that a payment be made to them in an amount equal to what would be realized if the loan had been made and immediately repaid at the lower repayment rate. In return for the payment, referred to as a ‘‘loan deficiency payment (LDP)’’, the producer agrees that the commodity for which the LDP was provided will not be pledged as collateral for a CCC marketing assistance loan. The LDP amount is equal to the established loan rate for the applicable loan commodity less the repayment rate multiplied by the eligible quantity of the commodity. With respect to commodities such as wheat, rice, feed grains, minor oilseeds, wool, mohair and pulse crops, section 1205 of the 2002 Act provides that these payments are made with respect to ‘‘producers on a farm that, although eligible to obtain a marketing assistance loan under section 1201 with respect to a loan commodity, agree to forgo obtaining the loan for the commodity in return for loan deficiency payments. * * *’’ A similar provision is set forth in section 1307 of the 2002 Act for producers of peanuts. With the advent of marketing assistance loans and LDP’s in the mid1980’s, producers’ use of these benefits has shifted substantially from the marketing loan option to the LDP option. The following chart sets forth the number of marketing assistance loans and LDP’s approved by CCC as of March 31, 2006, for the 2003, 2004, and 2005 crops. Warehouse loans Commodity year rwilkins on PROD1PC63 with PROPOSAL_1 Corn: 2003 ...................................................................................................................................... 2004 ...................................................................................................................................... 2005 ...................................................................................................................................... Soybeans: 2003 ...................................................................................................................................... 2004 ...................................................................................................................................... 2005 ...................................................................................................................................... Wheat: 2003 ...................................................................................................................................... 2004 ...................................................................................................................................... 2005 ...................................................................................................................................... Generally, in those years in which market prices remain below the CCC loan rate, there is a significantly greater use made of LDP’s than marketing assistance loans. However, as demonstrated by the issuance of only 7 loan deficiency payments with respect to the 2003 crop of soybeans, and the issuance of approximately 22,000 marketing assistance loans, producers still avail themselves of the loan program for financing purposes. The CCC storage payment with respect to peanuts and upland cotton pledged as collateral for marketing assistance loan programs encourages the use of such loans instead of loan deficiency payments; thus, the percentages of loan placements for these commodities are statistically larger than for other commodities. Similarly, the use of commodity certificates under section 166 of the Federal Agriculture Improvement and Reform Act of 1996, as amended, (the 1996 Act) also encourages the use of these loans in lieu of loan deficiency payments for several reasons, further skewing the distribution of these benefits. The use of these certificates by large marketing cooperatives facilitates the repayment of VerDate Aug<31>2005 17:19 Jun 30, 2006 Jkt 208001 marketing assistance loans because the benefits attributable to the use of these certificates do not count against the statutory payment limitation provisions of the Food Security Act of 1985, as amended, which would otherwise limit: (1) The amount of a gain that a producer would be able to receive through a marketing assistance loan; and (2) the amount of loan deficiency payments that would be made to the producer. Thus, the number of warehouse-stored loans made with respect to upland cotton and rice is greater, and the use of loan deficiency payments less, than would otherwise be anticipated in the absence of section 166 of the 1996 Act. The manner in which agricultural commodities are marketed and used has changed substantially since the enactment of the Agricultural Act of 1949. Changes in commodity marketing and use have been driven in part by the dramatic consolidation in farm operations since the middle 1900’s. Advances in agronomics and technology, including biotechnology, have allowed producers to significantly expand the sizes of their operations and benefit from crop specialization and economies of scale. Coincident to this PO 00000 Frm 00006 Fmt 4702 Sfmt 4702 Farm loan Loan deficiency payments 3,465 6,952 4,594 47,933 50,684 34,031 99,617 1,079,690 1,155,137 3,256 15,258 14,239 18,538 40,318 39,587 7 463,338 86,170 5,749 5,440 3,596 8,295 9,569 8,464 103,418 55,725 17,571 have been structural changes in the livestock and poultry feeding sectors and the remarkable growth in ethanol production. These changes have pushed larger and larger quantities of agricultural commodities into commercial marketing channels and away from the primary on-farm uses of the early 1900’s. Based on the U.S. Census of Agriculture, the number of U.S. farms dropped from 5.4 million in 1950 to 2.1 million in 2002. Much of the loss in farm numbers, however, occurred by the mid-1970’s. The 1974 Census of Agriculture reported 2.3 million farms. Despite the slowing decline in farm numbers, the size of farm operations continues to grow. In 1974, there were 32,752 farms with 1,000 acres or more land. In 2002, there were 176,990 farms with 1,000 acres of more land. The number of farms with 2,000 acres or more increased more than 13 fold during this time, going from only 5,862 farms in 1974 to 77,970 farms in 2002. Accompanying this consolidation in farm numbers and growth in farm size has been a similarly dramatic consolidation in the livestock and poultry feeding sectors. Based on the E:\FR\FM\03JYP1.SGM 03JYP1 rwilkins on PROD1PC63 with PROPOSAL_1 37860 Federal Register / Vol. 71, No. 127 / Monday, July 3, 2006 / Proposed Rules U.S. Census of Agriculture, 3 out of every 4 farms had cattle and 1 out of every 2 farms had hogs in 1950. In 2002, only 1 in every 2 farms had cattle, and only 1 in every 25 had hogs. Numbers are just as dramatic for poultry. In 1950, 4 of every 5 farms had chickens or turkeys. In 2002, only 1 out of every 14 farms had chickens or turkeys. The consolidation of cattle, hog, and poultry feeding into fewer and larger capital intensive operations has shifted feed use away from the farms where grains and oilseeds are produced. This has left grain and oilseed producers increasingly reliant on commercial grain marketing channels as outlets for their production and sources of their revenue. These structural changes have had a significant impact on the amount of grain used on the farms where it is produced. During the 1949/50 marketing year just more than half of all grain and oilseed (wheat, corn, barley, oats, rye, sorghum, rice, and soybeans) production was consumed on the same farms where it was produced. Since then, while production of these commodities has increased more than three-fold, the amount used on the same farm where it was produced has dropped by more than one-third. The bulk of this decline in on-farm use reflects consolidation in livestock and poultry feeding and specialization in grain and oilseed farming. It also reflects the phenomenal expansion in fuel ethanol production which has grown from a negligible share of domestic corn use in the 1970’s to more than 12 percent of domestic use during the 2004/05 marketing year. Less significant, but also affecting this decline in on-farm use has been the shift away from bin-run seed in the small grains and soybean sectors as commercial seed varieties have become ever more dominant. The decline in on-farm use has substantially increased the volume of grain moving through commercial marketing channels. In the early 1950’s, 50 percent of all grain and oilseed production was sold commercially. In recent years, 90 percent of all grain and oilseed production has been sold commercially. As on-farm use has fallen since 1949/50, the volume that is marketed commercially has increased six-fold, twice the rate of increase in production. CCC nonrecourse loan provisions have been modified over the years to better reflect the needs of producers who must respond to these changes in commodity marketing and use. Particularly important in this regard has been the marketing assistance loan provisions that have given CCC tools VerDate Aug<31>2005 17:19 Jun 30, 2006 Jkt 208001 like alternative marketing loan repayment rates and the LDP which have significantly reduced the quantity of loan collateral forfeited to CCC. With greater ability to minimize forfeitures, CCC inventories and quantities of grains and oilseeds otherwise controlled by CCC have dramatically declined since the 1980’s. Producers who do not have storage facilities on their farms, and who desire to obtain a marketing assistance loan, may deliver the commodity to a CCCapproved warehouse and tender to CCC as collateral for a loan a warehouse receipt that reflects the quantity and quality of the commodity produced and delivered to such facility. Commodities delivered to other non-CCC-approved warehouses and to facilities that commingle the commodity with the commodities of other persons may not be tendered to CCC as loan collateral, except as provided in section 1201(c) of the 2002 Act. To be a CCC-approved warehouse the warehouse must enter into a CCC storage agreement and meet certain financial requirements. This agreement was required because, prior to authorization and use of marketing assistance loans, in some years, producers tendered to CCC over 75 percent of the annual production of some crops. If market prices remained below the CCC loan rate, the producers would forfeit the commodity to CCC. CCC required producers with warehouse-stored loans to store the loan collateral in CCC-approved warehouses to protect CCC’s interest in the commodity by storing the commodity where CCC could readily assume ownership. CCC takes title from a warehouse according to its agreement upon maturity of the loan with no action needed on the part of the producer. The warehouse receipt is simply endorsed in blank to vest title in the holder, which is CCC. If a farmstored loan was involved, CCC would direct the producer to deliver the commodity to a CCC-approved warehouse. Other statutes precluded the sale of CCC-owned commodities unless market prices reached certain levels, thus requiring CCC to own commodities for prolonged periods of time. Thus, CCC was dependent upon commercial warehouses for the storage of large quantities of grain, and, in the event of collateral forfeiture, the approved warehouse could continue to store the commodity for extended periods. CCC still requires the storage of its loan collateral only in CCC-approved warehouses regardless of its license status. PO 00000 Frm 00007 Fmt 4702 Sfmt 4702 Proposed Changes The first change proposed by this rule is that CCC will no longer require a Federally-licensed warehouse operator also to maintain a CCC storage agreement. With respect to warehouses licensed by USDA under the United States Warehouse Act, the conditions that a warehouse operator must meet for obtaining a Federal license exceed those that must be met for obtaining a CCC storage agreement. While the CCC storage agreement, unlike a Federal warehouse license, specifies storage rates that CCC will pay in the unlikely event the commodity is forfeited to CCC, CCC has maintained a policy since the late 1980’s to move commodities it obtains as forfeitures into the market place as quickly as possible. Thus, minimal storage costs are incurred by CCC. Accordingly, CCC has determined that requiring a Federally-licensed warehouse operator to also maintain a CCC storage agreement provides no additional protection to CCC’s interests as a lender in the administration of the marketing assistance loan programs and CCC will no longer require such warehouse operators to also maintain a storage agreement. CCC may, however, continue to utilize storage agreements in those instances where it is engaged in the long-term storage of commodities for use in CCC domestic and international feeding programs, i.e. wheat stored under the Bill Emerson Humanitarian Trust. Second, in a State with a warehouse licensing program, CCC will no longer require the use of a CCC storage agreement for a State-licensed warehouse. In such States, especially those with grain indemnity funds that provide cash payments to depositors in the event of the insolvency of the warehouse operator, CCC has adequate protection as a secured lender. There are redundant costs to the warehouse operator in meeting, and maintaining, compliance with both the State license and the CCC storage agreement. Even without the storage agreement CCC will still have clear title to the commodity in the event of the insolvency of the warehouse operator. If the loan is repaid, CCC has no interest at stake. Thus, for State-licensed warehouses, a CCC storage agreement will not be required, except possibly in the case of the long term storage of CCC-owned grain. A small number of States do not have warehouse licensing programs. In these States, warehouse operators must still comply with State laws pertaining to storage and bailment. CCC will not require these entities to execute a CCC E:\FR\FM\03JYP1.SGM 03JYP1 Federal Register / Vol. 71, No. 127 / Monday, July 3, 2006 / Proposed Rules storage agreement before a producer may obtain a marketing assistance loan with respect to commodities stored in such warehouse, but may require that the warehouse be approved in advance by CCC as a location where CCC loan collateral may be stored using the same general criteria currently used in the administration of CCC storage agreements. In making these determinations, CCC may require that the storing warehouse meet certain financial requirements and that the structure in which the commodity is stored meets conditions needed to protect CCC’s interest in these States. A list of approved warehouses may be obtained from FSA State and county offices. These changes will allow producers to obtain warehouse-stored loans at all warehouses, both State and Federallylicensed, thus expanding the amount of storage available for use by producers who wish to obtain such loans. This is particularly beneficial since commercial warehouse capacity has declined over the past 15 years while the amount of commodities produced in that time has increased—9.4 billion bushels of commercial storage available in the United States in 1990, compared to 8.5 billion in 2005. Production of wheat, corn, soybeans, rice, grain sorghum, and barley during that same time increased from 13.9 billion bushels to 17.3 billion bushels. Marketing patterns have changed during this time, for example, many buyers have turned to a ‘‘timedto-arrive’’ basis and do not maintain large stocks of commodities at their facilities. The proposed regulatory changes are intended to compliment these changing patterns. This proposed rule will have no impact on the administration of the U.S. Warehouse Act. Notice and Comment rwilkins on PROD1PC63 with PROPOSAL_1 Section 1601(c) of the 2002 Act provides that the regulations needed to implement Title I of the 2002 Act, which include those involved here, may be promulgated without regard to the notice and comment provisions of 5 U.S.C. 553 or the Statement of Policy of the Secretary of Agriculture effective July 24, 1971 relating to notices of proposed rulemaking and public participation in rulemaking. Executive Order 12866 This rule is issued in conformance with Executive Order 12866, was determined to be not significant and has not been reviewed by the Office of Management Budget. VerDate Aug<31>2005 17:19 Jun 30, 2006 Jkt 208001 Regulatory Flexibility Act It has been determined that the Regulatory Flexibility Act is not applicable to this rule because CCC is not required by 5 U.S.C. 533 or any other law to publish a notice of proposed rulemaking for the subject matter of this rule. Environmental Assessment The environmental impacts of this rule have been considered consistent with the provisions of the National Environmental Policy Act of 1969 (NEPA), 42 U.S.C. 4321 et seq., the regulations of the Council on Environmental Quality (40 CFR parts 1500–1508), and the FSA regulations for compliance with NEPA, 7 CFR part 799. FSA concluded that the rule requires no further environmental review because it is categorically excluded. No extraordinary circumstances or other unforeseeable factors exist which would require preparation of an environmental assessment or environmental impact statement. Executive Order 12988 This rule has been reviewed in accordance with Executive Order 12988. This rule will preempt State laws that are inconsistent with it. Before any legal action may be brought regarding a determination under this rule, the administrative appeal provisions set forth at 7 CFR parts 11 and 780 must be exhausted. Executive Order 12372 This program is not subject to the provisions of Executive Order 12372, which require intergovernmental consultation with State and local officials. See the notice related to 7 CFR part 3014, subpart V, published at 48 FR 29115 (June 24, 1983). Unfunded Mandates Reform Act of 1995 The rule contains no Federal mandates under the regulatory provisions of Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) for State, local, and tribal governments or the private sector. Thus, this rule is not subject to the requirements of sections 202 and 205 of the UMRA. Paperwork Reduction Act Section 1601(c) of the 2002 Act provides that the promulgation of regulations and the administration of Title I of the 2002 Act shall be made without regard to chapter 5 of title 44 of the United States Code (the Paperwork Reduction Act). Accordingly, these regulations and the forms and other information collection activities PO 00000 Frm 00008 Fmt 4702 Sfmt 4702 37861 needed to administer the program authorized by these regulations are not subject to review by OMB under the Paperwork Reduction Act. Executive Order 12612 This rule does not have sufficient Federalism implications to warrant the preparation of a Federalism Assessment. The provisions contained in this rule will not have substantial direct effect on States or their political subdivisions or on the distribution of power and responsibilities among the various levels of government. Government Paperwork Elimination Act CCC is committed to compliance with the Government Paperwork Elimination Act (GPEA) and the Freedom to E-File Act, which require Government agencies in general and FSA in particular to provide the public the option of submitting information or transacting business electronically to the maximum extent possible. The forms and other information collection activities required for participation in the program are available electronically through the USDA eForms Web site at http://www.sc.egov.usda.gov for downloading. The regulation is available at FSA’s Price Support Division Internet site at http:// www.fsa.usda.gov/dafp/psd. Applications may be submitted at the FSA county offices, by mail or by FAX. At this time, electronic submission is not available. Full development of electronic submission is underway. Federal Assistance Programs The title and number of the Federal assistance program found in the Catalog of Federal Domestic Assistance to which this final rule applies are: Commodity Loans and Loan Deficiency Payments, 10.051. List of Subjects in 7 CFR Part 1421 Agricultural commodities, Feed grains, Grains, Loan programsagriculture, Oilseeds, Price support programs, Reporting and recordkeeping requirements. For the reasons set out in the preamble, 7 CFR part 1421 is amended as follows: PART 1421—GRAINS AND SIMILARLY HANDLED COMMODITIES— MARKETING ASSISTANCE LOANS AND LOAN DEFICIENCY PAYMENTS FOR THE 2002 THROUGH 2007 CROP YEARS 1. The authority citation for part 1421 continues to read as follows: E:\FR\FM\03JYP1.SGM 03JYP1 37862 Federal Register / Vol. 71, No. 127 / Monday, July 3, 2006 / Proposed Rules Authority: 7 U.S.C. 7231–7237 and 7931 et seq.; 15 U.S.C. 714b and 714c. NUCLEAR REGULATORY COMMISSION Subpart A—General 10 CFR Parts 20 and 32 2. Revise § 1421.13 to read as follows: § 1421.13 Special marketing assistance loans and loan deficiency payments. (a) Commodities stored in an unapproved storage facility may be pledged as collateral for a marketing assistance loan if the producer: (1) Makes request of the marketing assistance loan and obtains the commodity certificate to immediately exchange for the requested loan collateral at the same time at the county office that, under part 718 of this title, is responsible for administering the programs for the farm on which the commodity was produced. (2) Submits the marketing assistance loan request and the commodity certificate exchange before or on the date of delivery to the unapproved facility. (b) Eligible producers of hay and silage derived from an eligible loan commodity as provided in § 1421.5 are eligible to request hay and silage quantities for a loan deficiency payment in accordance with § 1421.200. Subpart B—Marketing Assistance Loans 3. Revise § 1421.103(c) to read as follows: § 1421.103 Approved storage. * * * * (c)(1) Approved warehouse storage consists of warehouses that are: (i) If Federally-licensed, in compliance with 7 CFR part 735; or (ii) If not Federally-licensed, in compliance with State laws and is a warehouse that issues a warehouse receipt that meets the criteria set forth in § 1421.107. (2) CCC may, on a case-by-case basis, require a warehouse operator that is not Federally-or State-licensed to enter into an agreement with CCC that sets forth requirements to adequately protect CCC’s security interest in commodities pledged as collateral for a loan in accordance with this part. 4. Remove §§ 1421.5551 through 1421.5559. rwilkins on PROD1PC63 with PROPOSAL_1 * Signed in Washington, DC, on June 16, 2006. Thomas B. Hofeller, Acting Executive Vice President, Commodity Credit Corporation. [FR Doc. E6–10368 Filed 6–30–06; 8:45 am] BILLING CODE 3410–05–P VerDate Aug<31>2005 17:19 Jun 30, 2006 Jkt 208001 RIN 3150–AH48 National Source Tracking of Sealed Sources: Extension of Comment Period Nuclear Regulatory Commission. ACTION: Proposed rule: Extension of comment period. AGENCY: SUMMARY: On June 13, 2006, the Nuclear Regulatory Commission (NRC) published for public comment a proposal to change the basis for the national source tracking rule from the NRC’s authority to promote the common defense and security to protection of the public health and safety. The comment period for this proposed rule was to have expired on July 3, 2006. Senator Hillary Rodham Clinton and Representative Edward Markey requested an extension to the comment period. The NRC has decided to extend the comment period for an additional 25 days. DATES: The comment period for the proposed rule published on June 13, 2006 (71 FR 34024), has been extended and now expires on July 28, 2006. Comments received after this date will be considered if it is practical to do so, but the Commission is able to ensure consideration only for comments received before this date. ADDRESSES: You may submit comments by any one of the following methods. Please include the following number (RIN 3150–AH48) in the subject line of your comments. Comments on rulemakings submitted in writing or in electronic form will be made available to the public in their entirety on the NRC rulemaking Web site. Personal information will not be removed from your comments. Mail comments to: Secretary, U.S. Nuclear Regulatory Commission, Washington, DC 20555–0001, ATTN: Rulemakings and Adjudications Staff. E-mail comments to: SECY@nrc.gov. If you do not receive a reply e-mail confirming that we have received your comments, contact us directly at (301) 415–1966. You may also submit comments via the NRC’s rulemaking Web site at http://ruleforum.llnl.gov. Address questions about our rulemaking website to Carol Gallagher (301) 415– 5905; e-mail cag@nrc.gov. Comments can also be submitted via the Federal Rulemaking Portal http:// www.regulations.gov. PO 00000 Frm 00009 Fmt 4702 Sfmt 4702 Hand deliver comments to: 11555 Rockville Pike, Rockville, Maryland 20852, between 7:30 a.m. and 4:15 p.m. Federal workdays. (Telephone (301) 415–1966). Fax comments to: Secretary, U.S. Nuclear Regulatory Commission at (301) 415–1101. Publicly available documents related to this rulemaking may be examined and copied for a fee at the NRC’s Public Document Room (PDR), Public File Area O1 F21, One White Flint North, 11555 Rockville Pike, Rockville, Maryland. Selected documents, including comments, can be viewed and downloaded electronically via the NRC rulemaking Web site at http:// ruleforum.llnl.gov. 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E6–10422 Filed 6–30–06; 8:45 am] BILLING CODE 7590–01–P DEPARTMENT OF THE TREASURY Office of Thrift Supervision 12 CFR Part 563 [No. 2006–24] RIN 1550–AC06 Subordinated Debt Securities and Mandatorily Redeemable Preferred Stock Office of Thrift Supervision, Treasury. ACTION: Notice of proposed rulemaking. AGENCY: E:\FR\FM\03JYP1.SGM 03JYP1

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[Federal Register Volume 71, Number 127 (Monday, July 3, 2006)]
[Proposed Rules]
[Pages 37857-37862]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-10368]


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DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1421

RIN 0560-AH52


Storage Requirements for Grain Security for Marketing Assistance 
Loans

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This rule proposes changes to the regulations governing the 
Marketing Assistance Loan Programs of the Commodity Credit Corporation 
(CCC) that are authorized by the Farm Security and Rural Investment Act 
of 2002 (2002 Act). CCC is proposing to no longer require a Federally-
licensed warehouse operator, or in a State with a warehouse licensing 
programs, a State-licensed warehouse operator to execute a CCC storage 
agreement. Nothing in this proposed rule will affect the administration 
of the United States Warehouse Act by USDA.

DATES: Comments should be received on or before August 2, 2006.

ADDRESSES: CCC invites interested persons to submit comments on this 
proposed rule and on the collection of information required to 
administer the affected regulations. Comments may be submitted by any 
of the following methods:
     E-Mail: Send comments to: kimberly.graham@wdc.usda.gov.
     Fax: Submit comments by facsimile transmission to: (202) 
690-1536.
     Mail: Send comments to: Director, Price Support Division, 
Farm Service Agency, United States Department of Agriculture (USDA), 
Room 4095-S, 1400 Independence Avenue, SW., Washington, DC 20250-0512.
     Hand Delivery or Courier: Deliver comments to the above 
address.
     Federal Rulemaking Portal: Go to http://
www.regulations.gov. Follow the online instructions for submitting 
comments.
    All written comments will be available for public inspection at the 
above address during business hours from 8 a.m. to 5 p.m., Monday 
through Friday.

[[Page 37858]]


FOR FURTHER INFORMATION CONTACT: Kimberly Graham; phone: (202) 720-
9154; e-mail: kimberly.graham@wdc.usda.gov, or fax: (202) 690-1536.

SUPPLEMENTARY INFORMATION:

Background

    Since the enactment of the Agricultural Act of 1949, the major 
activity of CCC has been the administration and implementation of 
nonrecourse marketing assistance loans to producers of major 
agricultural commodities. Generally, Congress established loan rates 
for certain commodities, e.g. $1.95 per bushel for corn, for the 2004 
through 2007 crop years. Under nonrecourse loan provisions, the 
producer may satisfy the loan obligation through forfeiture to CCC of 
the commodity pledged as collateral for the loan.
    Since 1949, the commodities pledged as collateral for these loans 
could be stored on the producer's farm or in approved warehouses. 
Historically, approved warehouses have been warehouse operators who 
entered into storage agreements with CCC that set forth terms and 
conditions regarding: (1) Financial aspects of the warehouse; (2) rates 
that are applicable to the storage of CCC owned inventory and CCC loan 
collateral; (3) handling and delivery charges with respect to these 
commodities; and (4) related storage issues.
    Most States, as well as the Department of Agriculture (USDA), have 
a warehouse licensing regime for the storage of agricultural 
commodities. In these States, generally, an entity must have a State or 
Federal license to engage in storing these commodities. These licensed 
entities issue warehouse receipts that evidence ownership of commingled 
commodities. In general, those non-licensed entities in States with 
licensing programs may not store agricultural commodities on behalf of 
producers but are free to purchase commodities from producers. 
Accordingly, in such States, commercial feed lots, ethanol plants, wool 
pools, and other entities that are the ``end users'' of the commodity 
are not licensed warehouses and, therefore, may not store commodities 
on behalf of producers. In those States that do not have such a 
licensing regime, warehouses must still follow State laws relating to 
bailment and storage. The State laws relating to bailment and storage 
may vary from State to State.
    As a result of the accumulation of large quantities of commodities 
forfeited under nonrecourse loans, in the mid-1980's Congress 
instituted a fundamental change to CCC loan programs when market prices 
are below the CCC loan rate. The change allows producers the 
opportunity to repay the nonrecourse loan at a price determined by CCC 
and to retain any difference between the amount of the loan value and 
the repayment value. Under these ``marketing assistance loans (MAL),'' 
the producer still has the option of forfeiting the loan collateral to 
CCC. MAL's accomplish two objectives. First, they provide producers 
with interim financing to continue farming operations without having to 
market their crop during a period of low market prices. Second, these 
loans facilitate the orderly marketing and distribution of commodities 
throughout the year.
    The three largest amounts of acreage planted to agricultural 
commodities for which marketing assistance loans are available are 
devoted to corn, soybeans and wheat. The following chart shows the 
estimated production of these commodities, as determined by the 
National Agricultural Statistics Service of USDA, and the quantity of 
such crops forfeited to CCC in the 2000 through 2004 crop years. With 
respect to the 2004 crop, the increase in forfeitures was attributable 
to the disruption in marketing channels caused by Hurricane Katrina. 
This hurricane occurred when a significant number of corn and soybean 
marketing assistance loans matured in the upper Midwest. The closing of 
the Mississippi River in the New Orleans area and damage to grain 
handling facilities in that area caused significant reductions in 
commodity prices. As a result, there was an abnormal increase in 
forfeitures to CCC; however, to mitigate this impact, CCC provided 
producers with farm-stored loans the opportunity to store these CCC-
owned stocks on their farm for up to 60 days with the option of 
purchasing the commodity at a price CCC would use in completing a 
marketing loan transaction. Accordingly, while CCC took title to a 
larger quantity of 2004 crops compared to the previous two years, such 
stocks moved into commercial distribution as soon as was practicable in 
as normal a way as possible.

----------------------------------------------------------------------------------------------------------------
                                                                                                    Percent of
                         Commodity year                             Production      Forfeitures     production
                                                                   bil. bushels    mil. bushels      forfeited
----------------------------------------------------------------------------------------------------------------
Corn:
    2000........................................................           9.915          26.596          0.2682
    2001........................................................           9.502           0.017          0.0002
    2002........................................................           8.966           1.892          0.0211
    2003........................................................          10.089           1.037          0.0103
    2004........................................................          11.807          24.382          0.2065
Soybeans:
    2000........................................................           2.757           5.704          0.2069
    2001........................................................           2.890           0.054          0.0019
    2002........................................................           2.756           0.205          0.0074
    2003........................................................           2.453           0.122          0.0050
    2004........................................................           3.123           0.483          0.0154
Wheat:
    2000........................................................           2.228          12.749          0.5722
    2001........................................................           1.947           0.442          0.0227
    2002........................................................           1.605           1.507          0.0939
    2003........................................................           2.344           2.480          0.1058
    2004........................................................           2.158           9.401          0.3247
----------------------------------------------------------------------------------------------------------------

    CCC's ownership interest in these major commodities is 
insignificant. The percentage of other marketing loan commodities owned 
by CCC as a percentage of total production is similar to these 
commodities. When a comparison is made with the quantities of 
commodities forfeited to CCC as a percentage of the quantities pledged 
as

[[Page 37859]]

collateral for such loans, CCC takes possession of less than 0.4 
percent of the commodities pledged as collateral for marketing 
assistance loans.
    The amount of the monetary gain producers may obtain by repaying 
CCC marketing assistance loans at repayment rates below their loan rate 
can be substantial. Therefore, there is a significant incentive for a 
producer to obtain these loans solely for this benefit. However, both 
the producer and CCC incur costs in completion of the loan transaction 
due to costs associated with lien searches and lien filing fees as well 
as USDA personnel costs incurred in processing these loans. To reduce 
the costs associated with the delivery of this benefit, producers may 
simply request that a payment be made to them in an amount equal to 
what would be realized if the loan had been made and immediately repaid 
at the lower repayment rate. In return for the payment, referred to as 
a ``loan deficiency payment (LDP)'', the producer agrees that the 
commodity for which the LDP was provided will not be pledged as 
collateral for a CCC marketing assistance loan. The LDP amount is equal 
to the established loan rate for the applicable loan commodity less the 
repayment rate multiplied by the eligible quantity of the commodity. 
With respect to commodities such as wheat, rice, feed grains, minor 
oilseeds, wool, mohair and pulse crops, section 1205 of the 2002 Act 
provides that these payments are made with respect to ``producers on a 
farm that, although eligible to obtain a marketing assistance loan 
under section 1201 with respect to a loan commodity, agree to forgo 
obtaining the loan for the commodity in return for loan deficiency 
payments. * * *'' A similar provision is set forth in section 1307 of 
the 2002 Act for producers of peanuts.
    With the advent of marketing assistance loans and LDP's in the mid-
1980's, producers' use of these benefits has shifted substantially from 
the marketing loan option to the LDP option. The following chart sets 
forth the number of marketing assistance loans and LDP's approved by 
CCC as of March 31, 2006, for the 2003, 2004, and 2005 crops.

----------------------------------------------------------------------------------------------------------------
                                                                                                       Loan
                         Commodity year                              Warehouse       Farm loan      deficiency
                                                                       loans                         payments
----------------------------------------------------------------------------------------------------------------
Corn:
    2003........................................................           3,465          47,933          99,617
    2004........................................................           6,952          50,684       1,079,690
    2005........................................................           4,594          34,031       1,155,137
Soybeans:
    2003........................................................           3,256          18,538               7
    2004........................................................          15,258          40,318         463,338
    2005........................................................          14,239          39,587          86,170
Wheat:
    2003........................................................           5,749           8,295         103,418
    2004........................................................           5,440           9,569          55,725
    2005........................................................           3,596           8,464          17,571
----------------------------------------------------------------------------------------------------------------

    Generally, in those years in which market prices remain below the 
CCC loan rate, there is a significantly greater use made of LDP's than 
marketing assistance loans. However, as demonstrated by the issuance of 
only 7 loan deficiency payments with respect to the 2003 crop of 
soybeans, and the issuance of approximately 22,000 marketing assistance 
loans, producers still avail themselves of the loan program for 
financing purposes.
    The CCC storage payment with respect to peanuts and upland cotton 
pledged as collateral for marketing assistance loan programs encourages 
the use of such loans instead of loan deficiency payments; thus, the 
percentages of loan placements for these commodities are statistically 
larger than for other commodities. Similarly, the use of commodity 
certificates under section 166 of the Federal Agriculture Improvement 
and Reform Act of 1996, as amended, (the 1996 Act) also encourages the 
use of these loans in lieu of loan deficiency payments for several 
reasons, further skewing the distribution of these benefits. The use of 
these certificates by large marketing cooperatives facilitates the 
repayment of marketing assistance loans because the benefits 
attributable to the use of these certificates do not count against the 
statutory payment limitation provisions of the Food Security Act of 
1985, as amended, which would otherwise limit: (1) The amount of a gain 
that a producer would be able to receive through a marketing assistance 
loan; and (2) the amount of loan deficiency payments that would be made 
to the producer. Thus, the number of warehouse-stored loans made with 
respect to upland cotton and rice is greater, and the use of loan 
deficiency payments less, than would otherwise be anticipated in the 
absence of section 166 of the 1996 Act.
    The manner in which agricultural commodities are marketed and used 
has changed substantially since the enactment of the Agricultural Act 
of 1949. Changes in commodity marketing and use have been driven in 
part by the dramatic consolidation in farm operations since the middle 
1900's. Advances in agronomics and technology, including biotechnology, 
have allowed producers to significantly expand the sizes of their 
operations and benefit from crop specialization and economies of scale. 
Coincident to this have been structural changes in the livestock and 
poultry feeding sectors and the remarkable growth in ethanol 
production. These changes have pushed larger and larger quantities of 
agricultural commodities into commercial marketing channels and away 
from the primary on-farm uses of the early 1900's.
    Based on the U.S. Census of Agriculture, the number of U.S. farms 
dropped from 5.4 million in 1950 to 2.1 million in 2002. Much of the 
loss in farm numbers, however, occurred by the mid-1970's. The 1974 
Census of Agriculture reported 2.3 million farms. Despite the slowing 
decline in farm numbers, the size of farm operations continues to grow. 
In 1974, there were 32,752 farms with 1,000 acres or more land. In 
2002, there were 176,990 farms with 1,000 acres of more land. The 
number of farms with 2,000 acres or more increased more than 13 fold 
during this time, going from only 5,862 farms in 1974 to 77,970 farms 
in 2002.
    Accompanying this consolidation in farm numbers and growth in farm 
size has been a similarly dramatic consolidation in the livestock and 
poultry feeding sectors. Based on the

[[Page 37860]]

U.S. Census of Agriculture, 3 out of every 4 farms had cattle and 1 out 
of every 2 farms had hogs in 1950. In 2002, only 1 in every 2 farms had 
cattle, and only 1 in every 25 had hogs. Numbers are just as dramatic 
for poultry. In 1950, 4 of every 5 farms had chickens or turkeys. In 
2002, only 1 out of every 14 farms had chickens or turkeys. The 
consolidation of cattle, hog, and poultry feeding into fewer and larger 
capital intensive operations has shifted feed use away from the farms 
where grains and oilseeds are produced. This has left grain and oilseed 
producers increasingly reliant on commercial grain marketing channels 
as outlets for their production and sources of their revenue. These 
structural changes have had a significant impact on the amount of grain 
used on the farms where it is produced. During the 1949/50 marketing 
year just more than half of all grain and oilseed (wheat, corn, barley, 
oats, rye, sorghum, rice, and soybeans) production was consumed on the 
same farms where it was produced. Since then, while production of these 
commodities has increased more than three-fold, the amount used on the 
same farm where it was produced has dropped by more than one-third. The 
bulk of this decline in on-farm use reflects consolidation in livestock 
and poultry feeding and specialization in grain and oilseed farming. It 
also reflects the phenomenal expansion in fuel ethanol production which 
has grown from a negligible share of domestic corn use in the 1970's to 
more than 12 percent of domestic use during the 2004/05 marketing year. 
Less significant, but also affecting this decline in on-farm use has 
been the shift away from bin-run seed in the small grains and soybean 
sectors as commercial seed varieties have become ever more dominant.
    The decline in on-farm use has substantially increased the volume 
of grain moving through commercial marketing channels. In the early 
1950's, 50 percent of all grain and oilseed production was sold 
commercially. In recent years, 90 percent of all grain and oilseed 
production has been sold commercially. As on-farm use has fallen since 
1949/50, the volume that is marketed commercially has increased six-
fold, twice the rate of increase in production.
    CCC nonrecourse loan provisions have been modified over the years 
to better reflect the needs of producers who must respond to these 
changes in commodity marketing and use. Particularly important in this 
regard has been the marketing assistance loan provisions that have 
given CCC tools like alternative marketing loan repayment rates and the 
LDP which have significantly reduced the quantity of loan collateral 
forfeited to CCC. With greater ability to minimize forfeitures, CCC 
inventories and quantities of grains and oilseeds otherwise controlled 
by CCC have dramatically declined since the 1980's.
    Producers who do not have storage facilities on their farms, and 
who desire to obtain a marketing assistance loan, may deliver the 
commodity to a CCC-approved warehouse and tender to CCC as collateral 
for a loan a warehouse receipt that reflects the quantity and quality 
of the commodity produced and delivered to such facility. Commodities 
delivered to other non-CCC-approved warehouses and to facilities that 
commingle the commodity with the commodities of other persons may not 
be tendered to CCC as loan collateral, except as provided in section 
1201(c) of the 2002 Act.
    To be a CCC-approved warehouse the warehouse must enter into a CCC 
storage agreement and meet certain financial requirements. This 
agreement was required because, prior to authorization and use of 
marketing assistance loans, in some years, producers tendered to CCC 
over 75 percent of the annual production of some crops. If market 
prices remained below the CCC loan rate, the producers would forfeit 
the commodity to CCC. CCC required producers with warehouse-stored 
loans to store the loan collateral in CCC-approved warehouses to 
protect CCC's interest in the commodity by storing the commodity where 
CCC could readily assume ownership. CCC takes title from a warehouse 
according to its agreement upon maturity of the loan with no action 
needed on the part of the producer. The warehouse receipt is simply 
endorsed in blank to vest title in the holder, which is CCC. If a farm-
stored loan was involved, CCC would direct the producer to deliver the 
commodity to a CCC-approved warehouse. Other statutes precluded the 
sale of CCC-owned commodities unless market prices reached certain 
levels, thus requiring CCC to own commodities for prolonged periods of 
time. Thus, CCC was dependent upon commercial warehouses for the 
storage of large quantities of grain, and, in the event of collateral 
forfeiture, the approved warehouse could continue to store the 
commodity for extended periods. CCC still requires the storage of its 
loan collateral only in CCC-approved warehouses regardless of its 
license status.

Proposed Changes

    The first change proposed by this rule is that CCC will no longer 
require a Federally-licensed warehouse operator also to maintain a CCC 
storage agreement. With respect to warehouses licensed by USDA under 
the United States Warehouse Act, the conditions that a warehouse 
operator must meet for obtaining a Federal license exceed those that 
must be met for obtaining a CCC storage agreement. While the CCC 
storage agreement, unlike a Federal warehouse license, specifies 
storage rates that CCC will pay in the unlikely event the commodity is 
forfeited to CCC, CCC has maintained a policy since the late 1980's to 
move commodities it obtains as forfeitures into the market place as 
quickly as possible. Thus, minimal storage costs are incurred by CCC. 
Accordingly, CCC has determined that requiring a Federally-licensed 
warehouse operator to also maintain a CCC storage agreement provides no 
additional protection to CCC's interests as a lender in the 
administration of the marketing assistance loan programs and CCC will 
no longer require such warehouse operators to also maintain a storage 
agreement. CCC may, however, continue to utilize storage agreements in 
those instances where it is engaged in the long-term storage of 
commodities for use in CCC domestic and international feeding programs, 
i.e. wheat stored under the Bill Emerson Humanitarian Trust.
    Second, in a State with a warehouse licensing program, CCC will no 
longer require the use of a CCC storage agreement for a State-licensed 
warehouse. In such States, especially those with grain indemnity funds 
that provide cash payments to depositors in the event of the insolvency 
of the warehouse operator, CCC has adequate protection as a secured 
lender. There are redundant costs to the warehouse operator in meeting, 
and maintaining, compliance with both the State license and the CCC 
storage agreement. Even without the storage agreement CCC will still 
have clear title to the commodity in the event of the insolvency of the 
warehouse operator. If the loan is repaid, CCC has no interest at 
stake. Thus, for State-licensed warehouses, a CCC storage agreement 
will not be required, except possibly in the case of the long term 
storage of CCC-owned grain.
    A small number of States do not have warehouse licensing programs. 
In these States, warehouse operators must still comply with State laws 
pertaining to storage and bailment. CCC will not require these entities 
to execute a CCC

[[Page 37861]]

storage agreement before a producer may obtain a marketing assistance 
loan with respect to commodities stored in such warehouse, but may 
require that the warehouse be approved in advance by CCC as a location 
where CCC loan collateral may be stored using the same general criteria 
currently used in the administration of CCC storage agreements. In 
making these determinations, CCC may require that the storing warehouse 
meet certain financial requirements and that the structure in which the 
commodity is stored meets conditions needed to protect CCC's interest 
in these States. A list of approved warehouses may be obtained from FSA 
State and county offices.
    These changes will allow producers to obtain warehouse-stored loans 
at all warehouses, both State and Federally-licensed, thus expanding 
the amount of storage available for use by producers who wish to obtain 
such loans. This is particularly beneficial since commercial warehouse 
capacity has declined over the past 15 years while the amount of 
commodities produced in that time has increased--9.4 billion bushels of 
commercial storage available in the United States in 1990, compared to 
8.5 billion in 2005. Production of wheat, corn, soybeans, rice, grain 
sorghum, and barley during that same time increased from 13.9 billion 
bushels to 17.3 billion bushels. Marketing patterns have changed during 
this time, for example, many buyers have turned to a ``timed-to-
arrive'' basis and do not maintain large stocks of commodities at their 
facilities. The proposed regulatory changes are intended to compliment 
these changing patterns.
    This proposed rule will have no impact on the administration of the 
U.S. Warehouse Act.

Notice and Comment

    Section 1601(c) of the 2002 Act provides that the regulations 
needed to implement Title I of the 2002 Act, which include those 
involved here, may be promulgated without regard to the notice and 
comment provisions of 5 U.S.C. 553 or the Statement of Policy of the 
Secretary of Agriculture effective July 24, 1971 relating to notices of 
proposed rulemaking and public participation in rulemaking.

Executive Order 12866

    This rule is issued in conformance with Executive Order 12866, was 
determined to be not significant and has not been reviewed by the 
Office of Management Budget.

Regulatory Flexibility Act

    It has been determined that the Regulatory Flexibility Act is not 
applicable to this rule because CCC is not required by 5 U.S.C. 533 or 
any other law to publish a notice of proposed rulemaking for the 
subject matter of this rule.

Environmental Assessment

    The environmental impacts of this rule have been considered 
consistent with the provisions of the National Environmental Policy Act 
of 1969 (NEPA), 42 U.S.C. 4321 et seq., the regulations of the Council 
on Environmental Quality (40 CFR parts 1500-1508), and the FSA 
regulations for compliance with NEPA, 7 CFR part 799. FSA concluded 
that the rule requires no further environmental review because it is 
categorically excluded. No extraordinary circumstances or other 
unforeseeable factors exist which would require preparation of an 
environmental assessment or environmental impact statement.

Executive Order 12988

    This rule has been reviewed in accordance with Executive Order 
12988. This rule will preempt State laws that are inconsistent with it. 
Before any legal action may be brought regarding a determination under 
this rule, the administrative appeal provisions set forth at 7 CFR 
parts 11 and 780 must be exhausted.

Executive Order 12372

    This program is not subject to the provisions of Executive Order 
12372, which require intergovernmental consultation with State and 
local officials. See the notice related to 7 CFR part 3014, subpart V, 
published at 48 FR 29115 (June 24, 1983).

Unfunded Mandates Reform Act of 1995

    The rule contains no Federal mandates under the regulatory 
provisions of Title II of the Unfunded Mandates Reform Act of 1995 
(UMRA) for State, local, and tribal governments or the private sector. 
Thus, this rule is not subject to the requirements of sections 202 and 
205 of the UMRA.

Paperwork Reduction Act

    Section 1601(c) of the 2002 Act provides that the promulgation of 
regulations and the administration of Title I of the 2002 Act shall be 
made without regard to chapter 5 of title 44 of the United States Code 
(the Paperwork Reduction Act). Accordingly, these regulations and the 
forms and other information collection activities needed to administer 
the program authorized by these regulations are not subject to review 
by OMB under the Paperwork Reduction Act.

Executive Order 12612

    This rule does not have sufficient Federalism implications to 
warrant the preparation of a Federalism Assessment. The provisions 
contained in this rule will not have substantial direct effect on 
States or their political subdivisions or on the distribution of power 
and responsibilities among the various levels of government.

Government Paperwork Elimination Act

    CCC is committed to compliance with the Government Paperwork 
Elimination Act (GPEA) and the Freedom to E-File Act, which require 
Government agencies in general and FSA in particular to provide the 
public the option of submitting information or transacting business 
electronically to the maximum extent possible. The forms and other 
information collection activities required for participation in the 
program are available electronically through the USDA eForms Web site 
at http://www.sc.egov.usda.gov for downloading. The regulation is 
available at FSA's Price Support Division Internet site at http://
www.fsa.usda.gov/dafp/psd. Applications may be submitted at the FSA 
county offices, by mail or by FAX. At this time, electronic submission 
is not available. Full development of electronic submission is 
underway.

Federal Assistance Programs

    The title and number of the Federal assistance program found in the 
Catalog of Federal Domestic Assistance to which this final rule applies 
are: Commodity Loans and Loan Deficiency Payments, 10.051.

List of Subjects in 7 CFR Part 1421

    Agricultural commodities, Feed grains, Grains, Loan programs-
agriculture, Oilseeds, Price support programs, Reporting and 
recordkeeping requirements.

    For the reasons set out in the preamble, 7 CFR part 1421 is amended 
as follows:

PART 1421--GRAINS AND SIMILARLY HANDLED COMMODITIES--MARKETING 
ASSISTANCE LOANS AND LOAN DEFICIENCY PAYMENTS FOR THE 2002 THROUGH 
2007 CROP YEARS

    1. The authority citation for part 1421 continues to read as 
follows:


[[Page 37862]]


    Authority: 7 U.S.C. 7231-7237 and 7931 et seq.; 15 U.S.C. 714b 
and 714c.

Subpart A--General

    2. Revise Sec.  1421.13 to read as follows:


Sec.  1421.13  Special marketing assistance loans and loan deficiency 
payments.

    (a) Commodities stored in an unapproved storage facility may be 
pledged as collateral for a marketing assistance loan if the producer:
    (1) Makes request of the marketing assistance loan and obtains the 
commodity certificate to immediately exchange for the requested loan 
collateral at the same time at the county office that, under part 718 
of this title, is responsible for administering the programs for the 
farm on which the commodity was produced.
    (2) Submits the marketing assistance loan request and the commodity 
certificate exchange before or on the date of delivery to the 
unapproved facility.
    (b) Eligible producers of hay and silage derived from an eligible 
loan commodity as provided in Sec.  1421.5 are eligible to request hay 
and silage quantities for a loan deficiency payment in accordance with 
Sec.  1421.200.

Subpart B--Marketing Assistance Loans

    3. Revise Sec.  1421.103(c) to read as follows:


Sec.  1421.103  Approved storage.

* * * * *
    (c)(1) Approved warehouse storage consists of warehouses that are:
    (i) If Federally-licensed, in compliance with 7 CFR part 735; or
    (ii) If not Federally-licensed, in compliance with State laws and 
is a warehouse that issues a warehouse receipt that meets the criteria 
set forth in Sec.  1421.107.
    (2) CCC may, on a case-by-case basis, require a warehouse operator 
that is not Federally-or State-licensed to enter into an agreement with 
CCC that sets forth requirements to adequately protect CCC's security 
interest in commodities pledged as collateral for a loan in accordance 
with this part.
    4. Remove Sec. Sec.  1421.5551 through 1421.5559.

    Signed in Washington, DC, on June 16, 2006.
Thomas B. Hofeller,
Acting Executive Vice President, Commodity Credit Corporation.
 [FR Doc. E6-10368 Filed 6-30-06; 8:45 am]
BILLING CODE 3410-05-P