Farm Storage Facility Loan and Sugar Storage Facility Loan Programs, 41581-41592 [E9-19652]

Agencies

• DEPARTMENT OF AGRICULTURE
• Commodity Credit Corporation

[Federal Register Volume 74, Number 158 (Tuesday, August 18, 2009)]
[Rules and Regulations]
[Pages 41581-41592]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-19652]



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Federal Register / Vol. 74, No. 158 / Tuesday, August 18, 2009 / 
Rules and Regulations

[[Page 41581]]



DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1436

RIN 0560-AH60


Farm Storage Facility Loan and Sugar Storage Facility Loan 
Programs

AGENCY: Commodity Credit Corporation and Farm Service Agency, USDA.

ACTION: Final rule.

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SUMMARY: The Commodity Credit Corporation (CCC) is amending the Farm 
Storage Facility Loan (FSFL) and Sugar Storage Facility Loan (SSFL) 
regulations to implement provisions of the Food, Conservation, and 
Energy Act of 2008 (the 2008 Farm Bill). The 2008 Farm Bill adds hay 
and renewable biomass as eligible FSFL commodities, extends the maximum 
loan term to 12 years, and increases the maximum loan amount to 
$500,000. This rule also adds fruits and vegetables (including nuts) as 
eligible facility loan commodities and adds cold storage facilities as 
eligible facilities pursuant to discretionary authority in the 2008 
Farm Bill. This rule amends the regulations to clarify requirements for 
loan security and to allow for a partial loan disbursement during 
construction if certain conditions are met. This rule amends the FSFL 
program regulations, which include SSFLs; however, there are no changes 
to the specific requirements for SSFLs.

DATES: Effective Date: August 17, 2009.

FOR FURTHER INFORMATION CONTACT: DeAnn Allen, Program Manager, Price 
Support Division, FSA, USDA, STOP 0512, 1400 Independence Ave., SW., 
Washington, DC 20250-0512; telephone: (202) 720-9889; facsimile: (202) 
690-3307; e-mail: deann.allen@wdc.usda.gov. Persons with disabilities 
who require alternative means of communication (Braille, large print, 
audio tape, etc.) should contact the USDA Target Center at (202) 720-
2600 (voice and TDD).

SUPPLEMENTARY INFORMATION:

Background

    The U.S. Department of Agriculture (USDA) Farm Service Agency (FSA) 
FSFL program provides low-interest financing for producers to build or 
upgrade farm storage and handling facilities. FSA was initially 
authorized to implement the FSFL program through the CCC Charter Act 
(15 U.S.C. 714b), which provides that CCC may make loans to grain 
producers needing grain storage facilities in areas where the Secretary 
determines there is a deficiency of such storage. When there was no 
documented shortage of storage, such as the period between 1982 and 
2000, the program did not operate. Section 1614 of the 2008 Farm Bill 
(Pub. L. 110-246, 7 U.S.C. 8789) authorizes changes to the FSFL program 
through 2012 without the specific requirement that the Secretary 
determine that there is a deficit in grain storage. This rule therefore 
amends Sec.  1436.2, ``Administration,'' to remove a provision that the 
Deputy Administrator may suspend the program if there is no shortage of 
storage.
    The current FSFL program, which has been operating since May 2000, 
makes loans primarily for grain storage and drying equipment. This rule 
expands the program to include hay and renewable biomass as eligible 
facility loan commodities, as required by the 2008 Farm Bill, and to 
include fruit and vegetables as eligible facility loan commodities, 
which is a discretionary addition permitted by the 2008 Farm Bill.
    The on-farm storage financed by the FSFL program allows producers 
flexibility in timing when to sell their crops. On-farm storage allows 
producers to avoid some fees associated with storing grain at 
commercial facilities (grain elevators). New uses for grain and other 
renewable biomass crops may increase the need for on-farm storage. In 
addition, the costs of building grain storage facilities are 
increasing.
    Most of the current participants in the program are grain 
producers, particularly corn, soybean, and wheat producers. Some dairy 
farms use the program to fund silage storage. The expansions in this 
rule will allow new groups to benefit from the program. Producers of 
fruits and vegetables are expected to participate in the FSFL program 
to fund short-term storage of perishable produce for farmers' markets. 
Producers of hay are expected to participate in the program to fund 
storage of high quality hay for sale to the equine and cow-calf 
industry. Renewable biomass producers are expected to participate in 
the FSFL program to fund storage of these renewable plant materials to 
maintain the quality of the biomass between harvest and delivery to a 
purchaser.
    The amendments in this rule allowing larger loans will address the 
increasing cost for storage facilities. According to studies by Kansas 
State University, in FY 1999, the average cost to construct a bushel of 
grain storage was approximately $1.37 per bushel; by FY 2007, the cost 
had increased to $1.80 per bushel of grain storage.\1\ Producers are 
also constructing larger structures for grain storage. In FY 1999, the 
majority of the bins constructed stored between 10,000 to 50,000 
bushels of grain. In FY 2007, grain bin manufacturers reported the 
majority of the bins constructed had the capacity to store between 
100,000 and 200,000 bushels of grain. The Kansas State University study 
in 2007 also found that producers are demanding larger grain bins. In 
general, larger buildings have a lower per bushel construction cost, 
but a higher total cost. An increasing percentage of FSFLs, over 5 
percent in 2008, are for the maximum dollar amount allowed in the 
current regulations. As specified in the 2008 Farm Bill, the maximum 
cap is raised from $100,000 per borrower to $500,000 per loan, which 
should address the demand for larger and more costly structures.
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    \1\ The KSU studies discussed in this paragraph are available on 
the Internet at: https://www.agrisk.umn.edu/cache/ARL01317.pdf and 
https://www.oznet.ksu.edu/library/agec2/mf2474.pdf.
---------------------------------------------------------------------------

    The prior regulations and the amendments in this rule apply to both 
the FSFL program and the SSFL program, which is a sub-program of the 
main FSFL program. Since the SSFL program was established, CCC has only 
received one loan application. That loan application was withdrawn by 
the applicant before approval. Therefore, most of the discussion in 
this preamble focuses on the FSFL program for all the

[[Page 41582]]

eligible facility loan commodities except sugar. Section 1404 of the 
2008 Farm Bill requires the SSFL program to not charge prepayment 
penalties; no change is needed in this rule to implement that provision 
because the existing regulation already specifies that the loan may be 
paid in full or part without any penalty at any time before maturity. 
This rule makes minor language changes to some of the provisions 
concerning SSFLs, to keep the provisions for SSFLs consistent with the 
provisions for the other eligible facility loan commodities, but makes 
no changes to the substantive requirements for SSFLs.

New and Revised Definitions

    This rule amends Sec.  1436.3, ``Definitions,'' to add hay and 
renewable biomass to the definition of a ``facility loan commodity,'' 
as required by the 2008 Farm Bill. The 2008 Farm Bill also gives the 
Secretary authority to include as eligible facility loan commodities 
``other storable commodities (other than sugar) as determined by the 
Secretary.'' Therefore, as a discretionary change, this rule adds 
fruits and vegetables as eligible facility loan commodities for FSFL. 
Fruits and vegetables include nuts. This rule adds definitions for hay 
and renewable biomass.
    Hay is defined as a grass or legume that has been cut and stored. 
Commonly used grass mixtures include rye grass, timothy, brome, fescue, 
coastal Bermuda, orchard grass, and other native species, depending on 
the region. Forage legumes include alfalfa and clovers. Hay will be 
considered to include grains where the entire plant, including the 
seeds, has been cut, stored, and used for animal feed, such as in the 
case of frost-damaged grain crops harvested as hay. Loans will not be 
made to store wheat straw or corn stalks used for bedding; these are 
not considered hay.
    ``Renewable biomass'' is defined as any organic matter that is 
available on a renewable or recurring basis including renewable plant 
material such as feed grains or other agricultural commodities 
(including, but not limited to, soybeans and switchgrass), other plants 
and trees (excluding old-growth timber), algae, crop residue 
(including, but not limited to, corn stover, various straws and hulls, 
and orchard prunings), other vegetative waste material (including, but 
not limited to, wood waste, wood residues, and food and yard waste) 
used for the production of energy in the form of heat, electricity, and 
liquid, solid, or gaseous fuels. Manure from any source is not 
included.
    This definition is consistent with definitions of renewable biomass 
used by other USDA and Department of Energy (DOE) programs. If 
renewable biomass storage facilities are eligible for other loans or 
grants, such as those provided by USDA Rural Development or DOE, the 
amount of those benefits will be subtracted from the amount of the 
FFSL, so as to avoid duplication of benefits. This is consistent with 
the prior operation of the FSFL program.
    It also adds definitions for ``cold storage facility,'' 
``commercial facility,'' and ``commercial storage.'' The definitions of 
``commercial storage'' and ``commercial facility'' are based on the 
terms commercial purpose and commercial operation that were previously 
in Sec. Sec.  1436.6 and 1436.13. This rule moves the definitions 
related to commercial storage to Sec.  1436.3, ``Definitions,'' and 
amends them to include facilities for the new eligible facility loan 
commodities.
    The definition of ``storage need requirement'' is removed from the 
Definitions section, and expanded specific provisions for storage need 
requirements for each type of eligible commodity are added to Sec.  
1436.9, ``Loan Amount and Loan Application Approvals.''
    This rule adds a definition for ``resale collateral value'' to 
clarify how FSA county committees will determine the value of loan 
collateral if the collateral is removed from its original location and 
sold.
    This rule removes the following terms that are no longer used in 
the rules: Person and Uniform Commercial Code.

Loan Terms, Eligible Storage, and Equipment

    Prior to this rule, the loan term for all storage facilities, 
except sugar facilities, was 7 years, and the useful life of a facility 
was required to be at least 10 years. This rule changes the maximum 
loan term to 12 years in Sec.  1436.7, ``Loan Term,'' and increases the 
required useful life of all facilities to a minimum of 15 years in 
Sec.  1436.6, ``Eligible Storage or Handling Equipment.'' The 12 year 
loan term is required by the Farm Bill; the 15 year minimum useful life 
of the facility is a discretionary change made to ensure that the loan 
will be adequately secured throughout the loan term. For most 
structures, the useful life of the commodity storage facility, if 
properly maintained, is well over 15 years. The required minimum useful 
life of a sugar facility is already set at 15 years in the current 
regulations, and is not changing with this rule. This rule also amends 
Sec.  1436.6 to specify that the loan collateral must be used for the 
purpose for which the storage facility was delivered, erected, 
constructed, assembled, or installed for the entire term of the loan. 
The intent of the program is to provide on-farm storage to producers 
for the storage of eligible facility loan commodities they produce and 
not for any other purpose.
    This rule amends Sec.  1436.6 to allow the Deputy Administrator, 
Farm Programs, to approve rebuild kits that are not from the original 
manufacturer for oxygen-limiting storage structures. Rebuild kits 
typically include new parts for the purpose of rebuilding an existing 
structure to bring it back to a manufacturer's specifications and may 
include, but are not limited to, nuts, bolts, washers, seals, gaskets, 
internal breather bags, a new base kit, and a new floor. Loans have 
been available for remanufactured oxygen-limiting storage structures 
built to the original manufacturer's design specifications using 
rebuild kits, but the prior rule allowed only original manufacturer 
rebuild kits. This discretionary change is necessary because the 
original manufacturer for the majority of the original oxygen-limiting 
structures is no longer in business. There are a number of reputable 
companies manufacturing the rebuild kits.
    This rule amends Sec.  1436.6 to add specific provisions for 
facilities and eligible cost items for hay, renewable biomass, and 
fruit and vegetable storage. In each case, the requirements are similar 
to those for other commodities, with the additional requirement for hay 
and renewable biomass that the flooring be suitable for the region in 
which the facility is located, and designed according to acceptable 
guidelines. This requirement is to ensure that the program makes loans 
for facilities that are appropriately designed for the intended 
purpose, and not for some other purpose. For fruit and vegetable cold 
storage facilities, the allowable cost items include building 
insulation to help limit the loss of cool air from the structure.
    No loans will be approved for any portable structures, portable 
handling and cooling equipment, or used or pre-owned structures and 
equipment. Loans may be approved for modifications to existing 
structures. Loans will not be made for existing structures, but may be 
made for new components added to existing structures. Remanufactured 
oxygen-limited structures rebuilt to the original specifications are 
not considered used, due to the extensive nature of the remanufacturing 
process.
    This rule amends Sec.  1436.9, ``Loan Amount and Loan Application 
Approvals,'' to specify that any portion of a storage structure that is 
not used for storing facility loan commodities, such

[[Page 41583]]

as an office space or display area, will not be eligible for loan. The 
loan amount will be adjusted to exclude this ineligible space. This 
provision was already in the regulation, but is clarified and expanded.
    This rule further clarifies that FSFL structures are prohibited 
from being used for any commercial storage. The purpose of the FSFL 
program is to provide low-cost financing to producers to store the 
commodities that they produce. Accordingly, the program does not 
provide financing for commercial storage facilities.
    This rule amends Sec.  1436.9 to add provisions regarding how 
storage need requirements will be determined for specific eligible 
facility loan commodities. These requirements were previously in the 
Definitions section. The purpose of these requirements is to ensure 
that CCC uses its limited resources to finance storage facilities that 
are of a capacity appropriate to the needs of the producer. Storage 
capacity for two years will be used to estimate the storage needs for 
hay and renewable biomass commodities. This is the same time period 
used for all of the other originally approved facility loan commodities 
in the current regulations. For fruits and vegetables, the cold storage 
need requirement will be determined based on production for one year. 
Fruits and vegetables are perishable commodities and their quality can 
only be maintained for a limited period of time. Cold storage 
facilities can extend this period of time, but a cold storage facility 
cannot maintain the quality of fruits and vegetables for longer than a 
year. Although apples may be stored from between 3 to 8 months, and 
carrots will maintain their quality for approximately 6 months, the 
quality for many fruits and vegetables in cold storage can typically be 
maintained for only a week to 10 days.

Eligible Borrowers

    Section 1614(b) of the 2008 Farm Bill (7 U.S.C. 8789(b)) requires 
that producers eligible for FSFLs have a satisfactory credit history, 
demonstrate the ability to repay the loan, and show a need for 
increased storage capacity. These requirements were already included in 
the regulations in Sec.  1436.5, ``Eligible Borrowers.'' This rule 
makes only minor changes, described below, to the regulations 
specifying borrower eligibility requirements.
    Prior to this rule, the regulations allowed a producer to construct 
storage using as eligibility the producer's own share of the crop. On 
occasion, a crop share landlord or tenant requests to construct a 
storage structure to store all commodities produced on the farm but 
only one of the individuals wishes to assume liability for the loan. 
This rule amends Sec.  1436.5 to address this situation. A new 
provision in this rule allows the Deputy Administrator, Farm Programs, 
to issue a waiver to use all production from the farm to compute FSFL 
eligibility for a crop share landlord or tenant. These waivers must be 
requested by the applicant in writing, and will be issued on a case by 
case basis.
    Prior to this rule, the regulations required borrowers to carry 
crop insurance on all crops of economic significance. However, crop 
insurance under the Federal Crop Insurance Program is not available for 
some of the renewable biomass commodities, and as an example, hay may 
not be an economically significant crop on a particular farm depending 
upon the total expected value of all crops grown by the applicant. This 
rule amends this section of the regulations to clarify that if crop 
insurance is not available for a commodity for which a producer is 
requesting FSFL, crop insurance is not a requirement. This rule also 
adds a requirement that borrowers with outstanding FSFLs must present 
proof of crop insurance annually to the FSA office servicing their 
loan, and clarifies that crop insurance or Noninsured Crop Disaster 
Assistance Program (NAP) coverage, if available, is required on all the 
commodities stored in the FSFL-funded facility, whether economically 
significant or not.
    Loans are approved and disbursed to a farming operation that is an 
eligible entity or an eligible producer at the time of approval. This 
rule amends Sec.  1436.16 ``Foreclosure, Liquidation, Assumptions, 
Sales or Conveyance, or Bankruptcy'' to add one more available option 
to address the situation where changes are made to the farming 
operation after the loan is disbursed. This rule adds a new paragraph 
(d) to Sec.  1436.16 to specify that if any significant changes are 
made, as determined by CCC, to the legal or operating status of the 
farming operation with an outstanding FSFL, such as changing from a 
partnership to a corporation, or discontinuing farming, the borrower 
must do one of the following:
     Find an eligible borrower or entity to assume the loan;
     repay the loan; or
     undergo new financial analysis as approved and determined 
by CCC to ensure that CCC's interests are protected and it is 
determined by CCC that the current borrower is in a position to 
continue making the scheduled loan payments.
    The provisions for loan assumption or repayment are not changing; 
the financial analysis provision is a new option to allow flexibility 
in situations where changes are made to the farming operation after the 
loan is disbursed. This situation typically occurs when a borrower 
retires and wishes to maintain ownership of a structure but is no 
longer receiving a share of the crop. CCC will allow the loan to 
continue, provided the scheduled payments are made, the facility is not 
used as a commercial facility or operation, and one of the three 
provisions for addressing changes to the farming operation is met.

Loan Terms, New Loan Limit

    Prior to this rule, the FSFL regulation at Sec.  1436.9 limited 
FSFLs for all eligible facility loan commodities except sugar to a 
maximum of $100,000 for each borrower signing the note and security 
agreement. This rule increases that limit to $500,000 per loan, not per 
borrower, as required by the 2008 Farm Bill. This rule continues to 
specify the loan limit as 85 percent of the qualified costs to 
construct an on-farm storage structure, which is not a change from the 
prior regulation. With the new maximum limit of $500,000, it will be 
possible for an eligible borrower to construct a structure costing 
nearly $589,000. It will also be possible for a borrower to qualify for 
multiple loans for multiple facilities, but such borrower must 
separately qualify for each loan and CCC will administer each loan 
separately.
    As discussed earlier, the loan term is extended to a maximum of 12 
years, as required by section 1614 of the 2008 Farm Bill. This rule 
amends Sec.  1436.7, ``Loan term,'' to specify the loan term of 7, 10, 
or 12 years, with the loan term determined by the amount of loan 
principal; within the specific options set by this rule, the borrower 
may choose the term as follows:
     For a loan with the total principal of $100,000 or less, 
the term will be set at 7 years.
     For loans from $100,000.01 through $250,000, the borrower 
can choose a loan term of 7 or 10 years.
     For loans from $250,000.01 through $500,000, the borrower 
can choose a loan term of 7, 10, or 12 years.
    The requested loan term will be specified by the borrower at the 
time of loan application on the loan application form, as the required 
financial analysis must take into account the annual payment amount. 
The borrower may change the loan term prior to the final loan 
disbursement if the principal amount qualifies the loan for a different

[[Page 41584]]

term and if a new financial analysis indicates the annual payments will 
be manageable as determined by CCC. If a partial disbursement has been 
issued, the term on the amount disbursed can not be adjusted because 
the promissory note and the security agreement establishing the 
interest rate and loan term have already been completed and the lien 
perfected.
    This rule amends Sec.  1436.12, ``Interest and fees,'' to clarify 
how the interest rate is determined for FSFLs. CCC borrows from the U. 
S. Treasury to fund the FSFL program. The FSFL interest rates are 
equivalent to the rate of interest charged on Treasury Securities of a 
comparable term and maturity. For this reason, the interest rate on the 
7, 10, and 12 year FSFL loan terms may be different. The rates will be 
published on the FSA website and posted in the county office.
    This rule also amends Sec.  1436.12 to specify that the loan 
application fee for FSFLs will be assessed per loan borrower and not 
per loan. The non-refundable loan application fee for each FSFL is 
increased from not less than $45 per loan to not less than $100 per 
borrower. This discretionary change is needed to cover the cost to CCC 
of making these loans. CCC is required to conduct lien searches, obtain 
credit reports, and file liens on the loan security for all borrowers 
on a loan. The cost to CCC for these lien searches, security filings, 
and credit reports has increased since the regulations were published 
in 2001. The purpose of the loan application fee is to cover the cost 
of the fees associated with the loan.

Security for Loan

    This rule makes a number of changes to Sec.  1436.8, ``Security for 
Loan,'' to implement provisions of the 2008 Farm Bill regarding loan 
security. Section 1614(f)(2) of the 2008 Farm Bill (7 U.S.C. 
8789(f)(2)) provides that a severance agreement from the holder of any 
prior lien on the real estate parcel on which the storage facility is 
located will not be required if the borrower agrees to increase the 
down payment on the storage facility loan in an amount determined by 
the Secretary or provides another form of security acceptable to the 
Secretary. This rule amends the regulations to include this provision. 
CCC has determined that if the borrower increases the down payment from 
15 percent to 20 percent, severance agreements will not be required. 
This will only apply to loans $50,000 or less because all other loans 
already require additional security and in most instances when CCC has 
a mortgage on the real estate, the facility is not severed from the 
real estate.
    Section 1614(f)(3) of the 2008 Farm Bill (7 U.S.C. 8789(f)(3)) 
requires that CCC allow a borrower to use a parcel of real estate to 
secure a loan if this acreage is not subject to any other liens or 
mortgages superior to CCC's lien interest, and is of adequate size and 
value to secure the loan and insure repayment. That is consistent with 
current CCC policy. This rule amends the regulations to specifically 
include this provision.
    This rule also amends Sec.  1436.8 to require loans for $50,000 or 
less that are secured by collateral with no resale value, as determined 
by CCC, to have additional security. Additional security on loans of 
$50,000 or less has not been required in the past unless the aggregate 
outstanding FSFL balance for the borrower exceeds $50,000 or CCC 
determines as a result of financial analysis that additional security 
is required. Some FSFL facilities, such as poured cement open bunker 
silos, have nothing that can be removed and sold if a borrower defaults 
on the loan. CCC will now require county committees to determine if a 
structure has resale collateral value and if additional security is 
required for the loan. This change is needed to protect CCC's interests 
in case of default. Most of the loans in the FSFL program are under 
$50,000.

Disbursement

    Section 1614(e) of the 2008 Farm Bill (7 U.S.C. 8789(e)) requires 
the availability of one partial loan disbursement and the final loan 
disbursement. This rule amends Sec.  1436.10, ``Down Payment,'' and 
Sec.  1436.11, ``Disbursements and Assignments,'' to implement the new 
provisions regarding the partial and final loan disbursement. The 
partial loan disbursement must be requested by the borrower and will be 
made to facilitate the purchase and construction of an eligible 
facility. The partial loan disbursement will be available after a 
portion of the construction has been done and commensurate with the 
amount of construction completed on the approved structure. CCC has 
determined at this time that the maximum amount of the partial loan 
disbursement will be 50 percent of the projected and approved total 
loan amount, and cannot exceed $250,000. The borrower will need to 
provide acceptable documentation specifying the cost of the completed 
portion of the structure to CCC, then FSA will inspect the facility to 
verify the amount of the construction completed. Security required for 
the principal amount of the partial loan disbursement will be required 
before the partial disbursement is finalized. CCC will make the final 
loan disbursement after the borrower provides acceptable documentation 
specifying the total cost of the facility to CCC and after the facility 
is completely delivered, erected, constructed, assembled, or installed. 
An FSA representative will inspect and approve the facility prior to 
the final loan disbursement. All security needed to fully secure both 
the partial and final loan disbursements must be received before the 
final loan disbursement.
    For SSFLs, the option for a partial loan disbursement is not 
available, because section 1404 of 2008 Farm Bill, which amends 7 
U.S.C. 7971(c), which contains provisions specific to SSFLs, does not 
include this provision.
    As a conforming change, this rule amends Sec.  1436.10 to specify 
that the down payment will be made before either the partial or final 
loan disbursements.

Fruits and Vegetables

    The discretionary change to add cold storage for fruits and 
vegetables into the farm storage facility loan program regulation is 
one avenue USDA is implementing to help farmers. The post-harvest 
cooling of produce to remove the field heat is necessary to reduce 
incidents of microbial contamination. Cooling also extends the shelf 
life of produce.
    Cooling facilities are an expensive outlet for beginning and start-
up growers. Many farmers indicate a need to have on-farm or proximate 
access to cooling facilities, but found that financing them was 
difficult given the seasonal nature of their use. With credit more 
difficult to obtain, many producers have found they are unable to get 
commercial lending for a cold storage facility.
    Small farms are diversifying to make a profit and with the emphasis 
of buying locally grown food, many small fruit and vegetable producers 
market their crops at farmers markets. To remove the field heat from 
their produce, a cold storage facility is needed to cool down their 
crops immediately after harvest and prior to trucking to a farmers 
market. Many producers must truck their produce to a cold storage 
facility up to 2 hours away to remove the field heat, and go back to 
retrieve it before proceeding to the market.
    The 2008 Farm Bill increased the loan limit from $100,000 per 
borrower to a maximum of $500,000 per loan. Even with the maximum loan 
amount, considering the cost of a cold storage

[[Page 41585]]

facility, only a small to moderate size facility could be constructed, 
thereby benefiting the small to mid size farmers. The smaller producers 
store their crops for a much shorter term and are constantly moving in 
and out a variety of different crops.
    A study entitled ``2007 Pennsylvania Shipping Point Market 
Feasibility Study,'' by Philip Gottwals, Duke Burruss, and Ali Church 
indicated that a self enclosed modular forced air cooling and cold 
storage facility that would meet the needs of the small producer cost 
approximately $28,000 in 2007. This facility has a capacity of 20 
pallets and would remove field heat by forced air cooling and serve as 
a temporary cold storage room. The structure in this example is 8 feet 
x 40 feet x 8.5 feet high equaling 2,720 cu. feet of storage space. The 
price is still around $28,000.
    A cold storage building measuring 40 feet x 60 feet x 14 feet high 
where half of the structure (16,800 Cu. feet) was refrigerated for cold 
storage, cost $125,000. This is considered a small cold storage 
facility.
    The addition of cold storage facilities for fruits and vegetables 
will help the Department's outreach goals and initiatives to expand 
access of USDA programs and services to underserved groups. Underserved 
groups include small farms, beginning farmers, and racial and ethnic 
minority groups. Only 2 percent of all U.S. farms primarily grow 
vegetables, whereas vegetable production is the primary enterprise for 
6 percent of Black farmers, 13 percent of Asian farmers, and 9 percent 
of American Indian farmers. Fruits or nuts are the primary enterprise 
for 4 percent of all U.S. farms, but are the primary enterprise for 37 
percent of Asian farmers and 16 percent of Hispanic origin farmers. 
Small farms and beginning farmers also are more likely to be involved 
in these farm enterprises. Therefore, adding these agricultural 
products to the eligible commodities increases the Departments outreach 
to these underserved groups.
    Specialty crops, which include fruits and vegetables, account for 
most direct-to-consumer sales, and are produced at a high frequency by 
small farmers. The direct-to-consumer sales through local markets play 
a pivotal role in maintaining the viability of family farmers by 
providing them direct access to markets close to home. Farmers who sell 
directly to their customers receive more of the full retail price for 
their food, which means that many small farmers are able to earn 
greater returns.

Other Miscellaneous Changes

    This rule amends Sec.  1436.4, ``Availability of Loans,'' to 
designate where the producer must submit loan applications for 
renewable biomass commodity facilities and cold storage facilities for 
fruits and vegetables. This rule amends that section to specify that if 
the commodities will be produced on land that has farm records 
established in a county office, the application must be submitted to 
that office. If the commodities will be produced on land that does not 
have farm records established in a county office, the application must 
be submitted to the county FSA office that services the county where 
the facility will be located. This amendment is needed to clarify where 
the loan applications should be filed, because the new eligible 
facility loan commodities may be produced on land that does not 
currently have FSA farm records.
    This rule amends Sec.  1436.9, ``Loan Amount and Loan Application 
Approvals,'' to allow the Deputy Administrator, Farm Programs, to set a 
limit for the approval authority of original loan applications by 
county and State FSA committees that is lower than the maximum loan 
amount. The intent of this amendment is to protect the financial 
interests of CCC.
    This rule also amends Sec.  1436.9 to allow the State FSA committee 
the authority to extend the loan approval period for an additional 4 
months for a total of 12 months from the original approval date. In the 
current rule, the initial loan approval period is set at 4 months from 
the county or State committee approval date. The FSA State committee or 
its representative can currently extend approval for another 4 months. 
This rule will change that to allow a second extension, for a total of 
12 months. Currently, if the producer cannot complete construction of 
the facility in 8 months, the State Committee has to send the loan 
approval to the FSA headquarters office to formally approve the 
extension. There are common reasons why a facility cannot be completed 
in 8 months, such as weather, part defects, contractor scheduling 
issues, and other construction delays. The change will expedite and 
simplify the loan extension process for producers who have routine 
construction delays, by allowing a second loan extension to be made at 
the State committee level. Only the State committee will have the 
authority to extend the loan approval period to 12 months and that 
authority cannot be delegated. This change is permitted for all 
eligible facility loan commodities except sugar. The provisions 
regarding the extension for SSFLs remain unchanged.
    This rule amends Sec.  1436.13, ``Loan Installments, Delinquency, 
and Acceleration of Maturity Date,'' to clarify that the producer's 
first installment payment is due and payable to CCC one year from the 
date of each of the partial and final loan disbursements. Producers 
that request a partial disbursement, which will therefore also 
necessitate a final payment, will have two notes for the one loan with 
two payment schedules. One note will be for the partial disbursement 
and the second note will be for the final disbursement of the loan; 
there will be only one loan application required for the two notes. 
Producers that request a partial disbursement will have two annual 
installments due one year from each disbursement and annually on these 
dates until the loans have been paid in full.
    This section is also amended to clarify the procedure for 
rescheduling debts. Any rescheduling or alternate repayment 
arrangements on any outstanding loans will require prior written 
approval from the Deputy Administrator, Farm Programs. This is a 
discretionary change to protect CCC's financial interest by assuring 
that proper procedure is followed in rescheduling any FSFL debts.
    This rule adds retail and wholesale cold storage facilities to the 
provisions prohibiting commercial facilities for outstanding FSFLs in 
this section.
    This section allows CCC to declare the entire loan immediately due 
and payable if the facility is used for a commercial operation, which 
is not a change from the previous rule.
    In addition, nonsubstantive, housekeeping changes are being made to 
the regulations to fix typos and add to the clarity, readability, plain 
language, and consistency of the regulations. Some examples of these 
changes include:
     Clarifying the list of commodities to reflect the full 
list throughout the regulation, for example in the definition of 
``facility loan commodity,'' some of the commodities had not been added 
the last time the regulations were revised;
     Referring consistently to a commodity as a ``facility loan 
commodity'' instead of ``grain'' versus ``commodities'' or 
``agricultural commodities.'' The same type of wording change was made 
for commercial operations, facility, storage, and other terms where 
consistency was needed;

[[Page 41586]]

     Clarifying which provisions apply to sugar and which do 
not apply; and
     Replacing ``shall'' with ``will'' or ``must'' based on 
context where deemed appropriate.

Notice and Comment

    These regulations are exempt from notice and comment provisions of 
5 U.S.C. 553, as specified in section 1601(c) of the 2008 Farm Bill, 
which requires that the regulations be promulgated and administered 
without regard to the notice and comment provisions of section 5 or 
title 5 of the United States Code or the Statement of Policy of the 
Secretary of Agriculture effective July 24, 1971 (36 FR 13804), 
relating to notices of proposed rulemaking and public participation in 
rulemaking.

Executive Order 12866

    This final rule is economically significant and was reviewed by the 
Office of Management and Budget (OMB) under Executive Order 12866. A 
Cost Benefit Analysis is summarized below and is available from the 
contact information listed above.

Summary of Economic Impacts

    The amendments to the FSFL program in this rule will add costs of 
$6 million in 2009, $28 million in 2010, $30 million in 2011, and $32 
million in 2012 over the cost of the existing program. This rule was 
designated as economically significant based on original estimates that 
included the full cost of the program instead of the regulatory impact 
of the changes to the existing program. The majority of the increase in 
demand for loans will come from the increase in loan size eligibility 
from $100,000 to $500,000; the remaining increase will come from demand 
for storage of the additional eligible crops for storage (hay, fruits 
and vegetables, and renewable biomass). The total program cost includes 
a roughly 3% increase per year in lending volumes, due to increased 
construction costs and capacity needs.
    The total benefit to producers per year from the FSFL program is 
about $10 million per year in interest rate savings over what they 
would have had to pay to finance comparable loans from commercial 
lenders. Assuming that all those producers could have gotten a 
commercial loan and would have done so, commercial lenders have an 
equivalent $10 million loss in loan revenue per year. If credit markets 
remain tight, the benefits to producers could be larger, because the 
spread between FSFL rates and commercial rates might be larger. The 
availability of below-market rate loans for on-farm storage facilities 
has a small potential negative impact on commercial storage facilities, 
such as grain elevators. FSFL has funded less than 4% of the on-farm 
storage capacity in the U.S., so it is unlikely that the program is 
having a significant impact on commercial storage facilities at a 
national level, although there may be more significant localized 
effects in locations where FSFL has a relatively larger share of the 
new facility loan market.

Regulatory Flexibility Act

    This rule is not subject to the Regulatory Flexibility Act because 
CCC is not required to publish a notice of proposed rulemaking for the 
subject matter of this rule.

Environmental Review

    FSA has prepared a Programmatic Environmental Assessment (PEA) to 
evaluate the environmental consequences associated with implementing 
the changes to the FSFL Program authorized by the 2008 Farm Bill. The 
PEA notice is published elsewhere in this issue of the Federal 
Register. In consideration of the analysis documented in the PEA and 
the reasons outlined in the Finding of No Significant Impact (FONSI), 
the Preferred Alternative would not constitute a major Federal action 
that would significantly affect the quality of the human environment. 
Therefore, an environmental impact statement will not be prepared.

Executive Order 12372

    This program is not subject to Executive Order 12372, which 
requires consultation with State and local officials. See the notice 
related to 7 CFR part 3015, subpart V, published in the Federal 
Register on June 24, 1983 (48 FR 29115).

Executive Order 12988

    The final rule has been reviewed under Executive Order 12988. This 
rule preempts State laws that are inconsistent with its provisions. 
This rule is not retroactive and does not preempt State or local laws, 
regulations, or policies unless they present an irreconcilable conflict 
with this rule. Before any judicial action may be brought regarding the 
provisions of this rule the administrative appeal provisions of 7 CFR 
parts 11 and 870 must be exhausted.

Executive Order 13132

    The policies contained in this rule do not have any substantial 
direct effect on States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government. Nor does this 
rule impose substantial direct compliance costs on State and local 
governments. Therefore, consultation with the States is not required.

Executive Order 13175

    The policies contained in this rule do not impose substantial 
unreimbursed direct compliance costs on Indian tribal governments or 
have tribal implications that preempt tribal law.

Unfunded Mandates

    This 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. 
In addition, CCC was not required to publish a notice of proposed 
rulemaking for this rule. Therefore, this rule is not subject to the 
requirements of sections 202 and 205 of the UMRA.

Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA)

    Section 1601(c)(3) of the 2008 Farm Bill requires that the 
Secretary use the authority in section 808 of title 5, United States 
Code, which allows an agency to forgo SBREFA's usual 60-day 
Congressional Review delay of the effective date of a major regulation 
if the agency finds that there is a good cause to do so. This rule 
affects a large number of agricultural producers who are dependent upon 
these provisions for financing farm storage and need to know the 
details as soon as possible because it affects their planting, 
marketing, and building decisions. Accordingly, this rule is effective 
upon the date of filing for public inspection by the Office of the 
Federal Register.

Federal Assistance Programs

    The changes in this rule affect the following FSA programs as 
listed in the Catalog of Federal Domestic Assistance:
    10.056--Farm Storage Facility Loans.

Paperwork Reduction Act

    The regulations in this rule are exempt from requirements of the 
Paperwork Reduction Act (44 U.S.C. Chapter 35), as specified in section 
1601(c)(2) of the 2008 Farm Bill, which provides that these regulations 
be promulgated and administered without regard to the Paperwork 
Reduction Act.

E-Government Act Compliance

    CCC is committed to complying with the E-Government Act, to promote 
the

[[Page 41587]]

use of the Internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes.

List of Subjects in 7 CFR Part 1436

    Administrative practice and procedure, Loan programs-agriculture, 
Penalties, Price support programs, Reporting and recordkeeping 
requirements.

0
For the reasons discussed above, this rule amends 7 CFR part 1436 as 
follows:

PART 1436--FARM STORAGE FACILITY LOAN PROGRAM REGULATIONS

0
1. Revise the authority citation for part 1436 to read as follows:

    Authority: 7 U.S.C. 7971 and 8789; and 15 U.S.C. 714-714p.


Sec.  1436.1  [Amended]

0
2. Amend Sec.  1436.1 by removing the word ``state'' and adding in its 
place the word ``State''.

0
3. Amend Sec.  1436.2 as follows:
0
a. Amend paragraphs (a), (c), introductory text, (d) and (f) second 
sentence, by removing the word ``shall'' each time it appears and 
adding in its place the word ``will'' and
0
b. Revise paragraph (g) to read as set forth below.


Sec.  1436.2  Administration.

* * * * *
    (g) The purpose of the Farm Storage Facility Loan program is to 
provide CCC funded loans for producers of grains, oilseeds, pulse 
crops, sugar, hay, renewable biomass, fruits and vegetables (including 
nuts), and other storable commodities, as determined by the Secretary, 
to construct or upgrade storage and handling facilities for the 
eligible facility loan commodities they produce.

0
4. Amend Sec.  1436.3 as follows:
0
a. Amend the undesignated introductory paragraph, by removing the word 
``shall'' each time it appears and adding in its place the word 
``will'',
0
b. Add new definitions, in alphabetical order, for the terms ``cold 
storage facility,'' ``commercial facility,'' ``commercial storage,'' 
``hay,'' ``renewable biomass,'' and ``resale collateral value'' as set 
forth below,
0
c. Revise the definitions of ``collateral'' and ``facility loan 
commodity'' to read as set forth below, and
0
d. Remove the definitions of ``person,'' ``storage need requirement,'' 
and ``Uniform Commercial Code''.


Sec.  1436.3  Definitions.

* * * * *
    Collateral means the storage structure; the drying, handling, and 
cold storage equipment; and any other equipment securing the loan.
    Cold storage facility means a facility or rooms within a facility 
that are specifically designed and constructed for the cold temperature 
storage of perishable commodities. The temperature and humidity in 
these facilities must be able to be regulated to specified conditions 
required for the commodity requiring storage.
    Commercial facility means any structure, used in connection with or 
by any commercial operation including, but not limited to, grain 
elevators, warehouses, dryers, processing plants, or cold storage 
facilities used for the storage and handling of any agricultural 
product, whether paid or unpaid. Any structure suitable for the storage 
of an agricultural product that is in working proximity to any 
commercial storage operation will be considered to be part of a 
commercial storage operation.
    Commercial storage means the storing of any agricultural product, 
whether paid or unpaid, for persons other than the owner of the 
structure, except for family members and tenants or landlords with a 
share in the eligible facility loan commodity requiring storage.
* * * * *
    Facility loan commodity means corn, grain sorghum, oats, wheat, 
barley, rice, raw or refined sugar, soybeans, sunflower seed, canola, 
rapeseed, safflower, flaxseed, mustard seed, crambe, sesame seed, other 
oilseeds as determined and announced by CCC, dry peas, lentils, or 
chickpeas harvested as whole grain, peanuts, hay, renewable biomass, 
and fruits and vegetables (including nuts). Corn, grain sorghum, wheat, 
and barley are included whether harvested as whole grain or other than 
whole grain.
* * * * *
    Hay means a grass or legume that has been cut and stored. Commonly 
used grass mixtures include rye grass, timothy, brome, fescue, coastal 
Bermuda, orchard grass, and other native species, depending on the 
region. Forage legumes include alfalfa and clovers.
* * * * *
    Renewable biomass means any organic matter that is available on a 
renewable or recurring basis including renewable plant material such as 
feed grains or other agricultural commodities (including, but not 
limited to, soybeans and switchgrass), other plants and trees 
(excluding old-growth timber), algae, crop residue (including, but not 
limited to, corn stover, various straws and hulls, and orchard 
prunings), other vegetative waste material (including, but not limited 
to, wood waste, wood residues, and food and yard waste) used for the 
production of energy in the form of heat, electricity, and liquid, 
solid, or gaseous fuels. Manure from any source is not included.
    Resale collateral value means collateral that can be sold and moved 
to a new location for which compensation equal to the outstanding loan 
value can be expected.
* * * * *

0
5. Revise Sec.  1436.4 to read as follows:


Sec.  1436.4  Application for loans.

    (a) An application for a loan must be submitted:
    (1) For all loans, except loans for renewable biomass storage 
facilities and cold storage facilities for fruits and vegetables, to 
the administrative county office that maintains the records of the farm 
or farms to which the application applies. With State office approval, 
loans may be made or serviced by a county office other than the 
administrative county office.
    (2) For loans for renewable biomass storage facilities and cold 
storage facilities for fruits and vegetables, to the administrative 
county FSA office that maintains the records of the farm or farms to 
which the application applies, if the facility will be located on land 
that has farm records established at the county office. If the 
commodities will be produced on land that does not have farm records 
established at the county office, the application must be submitted to 
the county FSA office that services the county where the facility will 
be located.
    (b) Upon request, the applicant must furnish information and 
documents as the State or county committee deems reasonably necessary 
to support the application. This may include financial statements, 
receipts, bills, invoices, purchase orders, specifications, drawings, 
plats, or written authorization of access.
    (c) For sugar storage facility loans, a loan application must be 
submitted to the county FSA office that maintains the applicant's 
records. If no such records exist, loan applications must be submitted 
to the county office serving the headquarters location of the sugar 
processor.
    (d) Submitting an application does not ensure loan approval nor 
create any liability on behalf of CCC. Borrowers who authorize 
delivery, site

[[Page 41588]]

preparation, or construction actions without an approved loan, do so at 
their own risk.

0
6. Amend Sec.  1436.5 as follows:
0
a. Amend paragraph (a)(4) by adding the words ``as determined'' 
immediately before the words ``by CCC;''
0
b. Revise paragraphs (a)(5) and (a)(6) to read as set forth below,
0
c. Amend paragraph (a)(7) by removing the acronym ``USDA'' and adding, 
in its place the words ``the U.S. Department of Agriculture (USDA)'',
0
d. Amend paragraph (a)(11) by adding the words ``or a crop insurance 
violation'' immediately after the word ``violation,'' and
0
e. In paragraph (b), introductory text, remove the word ``related''.


Sec.  1436.5  Eligible borrowers.

    (a) * * *
    (5) Demonstrates a need for increased storage capacity as 
determined by CCC if the applicant is applying for a loan for a storage 
structure. The Deputy Administrator, Farm Programs, may issue a waiver, 
if requested, on a case by case basis if a crop share landlord or 
tenant requests to construct a structure to store commodities produced 
on the farm but only one of the two wishes to accept loan liability;
    (6) Annually provides proof of crop insurance offered under the 
Federal Crop Insurance Program for insurable crops of economic 
significance on all farms operated by the borrower in the county where 
the storage facility is located. Crop insurance or Noninsured Crop 
Disaster Assistance Program (NAP) coverage, if available, is required 
on all the commodities stored in the FSFL-funded facility, whether 
economically significant or not; crop insurance under the Federal Crop 
Insurance Program may not be available for certain renewable biomass 
commodities;
* * * * *

0
7. Amend Sec.  1436.6 as follows:
0
a. Revise paragraphs (a), introductory text, and (a)(2) to read as set 
forth below,
0
b. In paragraph (a)(1) remove the number ``10'' and add, in its place, 
the number ``15'',
0
c. In paragraph (a)(3) remove the number ``10'' and add, in its place, 
the number ``15'' and remove the word ``and'' at the end,
0
d. In paragraph (a)(4) remove the number ``10'' and add, in its place, 
the number ``15'' and remove the period at the end and add, in its 
place, a semicolon.
0
e. Add new paragraphs (a)(5) and (a)(6) to read as set forth below,
0
f. Revise paragraph (b) introductory text to read as set forth below,
0
g. Amend paragraph (b)(3) to remove the word ``grain'' and add, in its 
place, the words ``eligible facility loan commodity'',
0
h. Amend paragraph (b)(4) to remove the word ``grain'' and add, in its 
place, the words ``eligible facility loan commodity'' and remove the 
word ``and'' at the end,
0
i. Amend paragraph (b)(5) to remove the word ``grain'' and add, in its 
place, the words ``eligible facility loan commodity'' and remove the 
period at the end and add, in its place ``; and'',
0
j. Add new paragraph (b)(6) to read as set forth below,
0
k. Revise paragraphs (c), introductory text, (c)(3), and (c)(5) to read 
as set forth below,
0
l. Revise paragraph (d) to read as set forth below,
0
m. Amend paragraph (e) in the first sentence to add the words ``for all 
eligible facility loan commodities except sugar and fruits and 
vegetables'' immediately after the word ``Loans'' and remove the number 
``10'' and add, in its place, the number ``15'',
0
n. Add introductory text to paragraph (f) to read as set forth below,
0
o. Remove paragraph (f)(1),
0
p. Redesignate paragraph (f)(2) as paragraph (f)(1) and amend newly 
designated paragraph (f)(1) in the first sentence, by removing the 
words ``For sugar-related loans, the'' and adding, in their place, the 
word ``The'',
0
q. Redesignate paragraph (f)(4) as paragraph (f)(2) and remove the 
words ``For sugar-related loans,'' and add, in their place, the words 
``Sugar storage facility'',
0
r. Revise paragraph (f)(3) introductory text to read as set forth 
below, and
0
s. Add paragraph (g) to read as set forth below.


Sec.  1436.6  Eligible storage or handling equipment.

    (a) For all eligible facility loan commodities, except sugar and 
fruits and vegetables, loans may be made only for the purchase and 
installation of eligible storage facilities, and permanently affixed 
drying and handling equipment, or for the remodeling of existing 
storage facilities or permanently affixed drying and handling equipment 
as provided in this section. The loan collateral must be used for the 
purpose for which it was delivered, erected, constructed, assembled, or 
installed for the entire term of the loan. Eligible storage and 
handling facilities include the following:
* * * * *
    (2) New oxygen-limiting storage structures or remanufactured 
oxygen-limiting storage structures built to the original manufacturer's 
design specifications using original manufacturer's rebuild kits or 
kits from a supplier approved by the Deputy Administrator, Farm 
Programs, and other upright silo-type structures designed for whole 
grain storage or other than whole grain storage and with a useful life 
of at least 15 years; and
* * * * *
    (5) New structures suitable for storing hay that are built 
according to acceptable design guidelines from the Cooperative State 
Research, Education, and Extension Services (CSREES) or land-grant 
universities and with a useful life of at least 15 years; and
    (6) New structures suitable for storing renewable biomass that are 
built according to acceptable industry guidelines and with a useful 
life of at least 15 years.
    (b) For all eligible facility loan commodities, except sugar and 
fruits and vegetables, the calculation of the loan amount may include 
costs associated with building, improving, or renovating an eligible 
storage or handling facility, including:
* * * * *
    (6) Flooring appropriate for storing hay and renewable biomass 
suitable for the region where the facility is located and designed 
according to acceptable guidelines from CSREES or land-grant 
universities.
    (c) For all eligible facility loan commodities, except sugar and 
fruits and vegetables, no loans will be made for installation or 
related costs of:
* * * * *
    (3) Used structures or handling equipment, not including 
remanufactured oxygen-limiting storage structures built to the 
manufacturer's original design specifications as specified in paragraph 
(a)(2) of this section;
* * * * *
    (5) Storage structures to be used as a commercial facility. Any 
facility that is in working proximity to any commercial storage 
operation will be considered to be part of a commercial storage 
operation; and
* * * * *
    (d) Loans for all eligible facility loan commodities, except sugar 
and fruits and vegetables, may be approved for financing additions to 
or modifications of an existing storage facility with an expected 
useful life of at least 15 years if the county committee determines 
there is a need for the capacity of the structure, but loans will not 
be approved solely for the replacement of

[[Page 41589]]

worn out items such as motors, fans, or wiring.
* * * * *
    (f) The provisions of this paragraph apply only to sugar storage 
facility loans.
* * * * *
    (3) No sugar storage facility loans will be made for:
* * * * *
    (g) The provisions of this paragraph apply only to fruit and 
vegetable cold storage facility loans.
    (1) For cold storage facility loans, the loan amount may include 
costs associated with the purchase, installation, building, improving, 
remodeling, or renovating an eligible storage or handling facility. 
Costs associated with the construction of a permanently installed cold 
storage facility include, but are not limited to, the following: An 
insulated cement slab floor, insulation for walls and ceiling 
(including, but not limited to, loose fill cellulose, foam insulation 
sheets, sprayed-on and foam-in-place materials), and a vapor barrier.
    (2) Eligible facilities include, but are not limited to, the 
following:
    (i) A new cold storage facility of wood pole and post construction, 
steel, or concrete, that is suitable for storing the fruits and 
vegetables produced by the borrower and with a useful life of at least 
15 years;
    (ii) New walk-in prefabricated permanently installed cold storage 
coolers that are suitable for storing the producer's fruits and 
vegetables and with a useful life of at least 15 years;
    (iii) Permanently affixed equipment necessary for a cold storage 
facility such as refrigeration units or system and circulation fans;
    (iv) Permanently installed equipment to maintain or monitor the 
quality of produce stored in a cold storage facility;
    (v) Electrical equipment, including labor and materials for 
installation, such as lighting, motors, and wiring integral to the 
proper operation of a cold storage facility.
    (3) For cold storage facility loans, loans may be approved for 
financing additions or modifications to an existing storage facility 
with an expected useful life of at least 15 years if CCC determines 
there is a need for the capacity of the structure.
    (4) No cold storage facility loans will be made for:
    (i) Portable structures;
    (ii) Portable handling and cooling equipment;
    (iii) Used or pre-owned structures, or cooling and handling 
equipment; or
    (iv) Structures that are not suitable for a fruit or vegetable cold 
storage facility.

0
8. Revise Sec.  1436.7 to read as set forth below:


Sec.  1436.7  Loan term.

    (a) For eligible facility loan commodities other than sugar, the 
term of the loan will be 7, 10, or 12 years, based on the total loan 
principal, from the date a promissory note and security agreement is 
completed on both the partial and final loan disbursements. The 
applicant will choose, if applicable, a loan term when submitting the 
loan application and total cost estimates.
    (1) For a loan with the principal of $100,000 or less, the term is 
7 years.
    (2) For loans from $100,000.01 through $250,000, the borrower will 
choose a term of 7 or 10 years.
    (3) For loans from $250,000.01 through $500,000, the borrower will 
choose a loan term of 7, 10, or 12 years.
    (b) No extensions of the loan term will be granted. The loan 
balance and all related costs are due at the end of the loan term.
    (c) For a sugar-related loan:
    (1) CCC, at its discretion, may authorize a maximum loan term of 15 
years. The minimum loan term of a sugar-related loan is 7 years.
    (2) The loan balance and costs are due at the end of the loan term, 
which will be established on the date the promissory note and security 
agreement is executed.

0
9. Revise Sec.  1436.8 to read as follows:


Sec.  1436.8  Security for loan.

    (a) Except as agreed to by CCC, all loans must be secured by a 
promissory note and security agreement covering the farm storage 
facility and such other assurances as CCC may demand, subject to the 
following:
    (1) The promissory note and security agreement must grant CCC a 
security interest in the collateral and must be perfected in the manner 
specified in the laws of the State where the collateral is located.
    (2) CCC's security interest in the collateral must be the sole 
security interest in such collateral except for prior liens on the 
underlying real estate that by operation of law attach to the 
collateral if it is or will become a fixture. If any such prior lien on 
the real estate will attach to the collateral, a severance agreement 
must be obtained in writing from each holder of such a lien, including 
all government or USDA agencies. No additional liens or encumbrances 
may be placed on the storage facility after the loan is approved unless 
CCC approves otherwise in writing.
    (b) For any loan amounts of $50,000 or less, CCC will not require a 
severance agreement from the holder of any prior lien on the real 
estate parcel on which the storage facility is located, if the 
borrower:
    (1) Agrees to increase the down payment on the storage facility 
loan from 15 percent to 20 percent; or
    (2) Provides other security such as an irrevocable letter of 
credit, bond, or other form of security, as approved by CCC.
    (c) For loan amounts exceeding $50,000, or when the aggregate 
outstanding balance will exceed $50,000 or for loans in which the 
approving county or State committee determines, as a result of 
financial analysis, that additional security is required, a lien on the 
real estate parcel on which the farm storage facility is located is 
required in the form of a real estate mortgage, deed of trust, or other 
security instrument approved by USDA's Office of the General Counsel, 
provided further that:
    (1) CCC's interest in the real estate must be superior to all other 
liens, except a loan may be secured by a junior lien on real estate 
when the loan is adequately secured and a severance agreement is 
obtained from prior lien holders.
    (2) A loan will be considered to be adequately secured when the 
real estate security for the loan is at least equal to the loan amount.
    (3) If the real estate is covered by a prior lien, a lien waiver 
may be obtained by means of a subordination agreement approved for use 
in the State by USDA's Office of the General Counsel. CCC will not 
require such an agreement from any agency of USDA.
    (d) Title insurance or a title opinion is required for loans 
secured by real estate.