Costs and Other Information on USDA's Commodity Certificates

GAO discussed the Department of Agriculture's Commodity Credit Corporation's (CCC) use of commodity certificates in lieu of cash payments under commodity price-support loan programs and the cost of issuing certificates instead of cash. Farmers who receive certificates may exchange them for their crops or cash, or sell them to other farmers, grain companies, or any other interested buyers. The cost of these certificates depends on how they are used and the market conditions. Although certificates can affect the budget, the greatest impact is on price-support loan outlays, the measure of dollars loaned to farmers less cash repayments. When certificates are exchanged for commodities, the outlays rise. However, they reduce short-run storage costs when they are exchanged for CCC-owned inventory, farmer-owned reserve loan collateral, or regular collateral the farmers would have forfeited to CCC. Substitution of certificates for cash payments can shift outlays from one year to the next. This may lessen the usefulness to Congress of the budget and its reported outlay amounts. Farmers can take out loans and immediately exchange certificates for the loan crops at posted county prices. This allows them to obtain the full return from the loan program because they avoid storage costs. Certificates also give grain companies greater access to CCC-owned grain at market prices and in commodity exchanges that are worth more to them than the established prices. Because of these benefits, farmers and others are willing to buy certificates at premiums.