The National Cotton Council joined other commodity groups for a meeting with several USDA officials, including Deputy Secretary Krysta Harden and Under Secretary Michael Scuse, regarding the recent announcement that sequestration of 5.1 percent would apply to 2013-crop marketing assistance loans (MAL) distributed after Oct. 1.

An American Cotton Shippers Association representative also participated in the session, along with staff from peanuts, rice and sugar organizations.

The group conveyed the serious concerns regarding the impact on producer income resulting from reduced loan proceeds and the detrimental constraints on cash flow due to the combination of lowering proceeds and delays in loan processing.

The group also reminded USDA that sequestration did not apply to 2012 crop MALs and that sequestration on direct payments actually was increased to 8.5 percent to avoid having to “claw back” SURE payments.

USDA was asked to consider using similar discretionary authority to make adjustments so they would not have to apply sequestration to 2013 crop MALs beginning on Oct. 1, and as result, loan software would not have to be rewritten, which will further suspend loan processing beyond the delay that occurs due to the shutdown.

USDA officials explained that under the statute, MALs are defined as payments, and, therefore, must be subject to sequestration. Officials confirmed that any 2013 crop loans made before Oct. 1 would not be retroactively reduced. However, USDA could not provide details on the redemption process of sequestered loans. The industry group stressed that those details are needed as soon as possible.

Loan entries and redemptions both will be suspended while software changes are being made.

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Under Secretary Scuse pledged to get the loan process running as soon as possible once government is reopened, but added the process would take up to 14 days, which would be measured from the date the government reopens.

Further details from the meeting are available in the first item on the NCC’s home page, (members only document).