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USDA Unveils Credit Guarantee Program


October 31, 2008
By U.S. Grains Council

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October 31, 2008- The United States Department of Agriculture recently announced $3.5 billion in credit guarantees for the 2009 fiscal year. Specifically, the USDA’s Commodity Credit Corporation (CCC) administers export credit guarantees for commercial financing of U.S. agricultural exports. The guarantees encourage exports to buyers in countries where credit is necessary to maintain or increase U.S. sales but where financing may not be available without CCC guarantees.

Ken Hobbie, U.S. Grains Council president and CEO, said given the state of global banking industries, overseas customers are going to need credit. The Export Credit Guarantee Program (GSM-102) covers credit terms up to three years. GSM-102 underwrites credit extended by the private banking sector in the United States to approved foreign banks using letters of credit to pay for food and agricultural products sold to foreign buyers.
 
“This program provides the opportunity to our overseas customers to obtain credit that in many cases they wouldn’t be able to get as a result of the volatile state of the global economy. This program truly allows overseas livestock and feed industries to be able to produce food for growing populations, which in turn works to reduce global hunger, ” Hobbie said. “Programs like this are particularly important in countries like Korea, Egypt, Morocco and Algeria, to name a few, because they don’t have well developed banking industries.”
 
While the program benefits U.S. overseas customers, Hobbie said the program also benefits U.S. farmers and serves “almost as a guarantee” that they have buyers for their feed grains. GSM-102 mandates the overseas buyers to purchase the needed commodities from the United States. In Korea, for example, the country is turning to cheaper feed wheat coming from the Black Sea region rather than opting to purchase high-quality feed grains from U.S. growers.
 
“This program ensures that U.S. farmers and agribusinesses have markets for their barley, corn, sorghum and their co-products. It also guarantees livestock producers will have the feed ingredients they need to produce meat, milk and eggs for their consumers, despite weakened banking industries. This is truly one of the best programs the U.S. government has in place for enabling trade,” Hobbie said.

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