SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Cost of Production Safety Net Act of 
1998''.

SEC. 2. DEFINITIONS.

    In this Act:
            (1) Loan commodity.--The term ``loan commodity'' means 
        wheat, corn, oats, rye, barley, and grain sorghums.
            (2) Secretary.--The term ``Secretary'' means the Secretary 
        of Agriculture.

SEC. 3. FAIR RETURN COMMODITY LOANS FOR WHEAT AND FEED GRAINS.

    (a) In General.--
            (1) Loans.--For each of the 1998 and subsequent crops of a 
        loan commodity, the Secretary shall make available to producers 
        on a farm described in paragraph (2) nonrecourse fair return 
        commodity loans at such rate as the Secretary determines will 
        provide a fair return to the producers in relation to the cost 
        of production of the loan commodity.
            (2) Eligibility.--To be eligible to obtain a loan for a 
        loan commodity under paragraph (1), the producers on a farm 
        must agree to forgo obtaining a marketing assistance loan under 
        subtitle C of the Agricultural Market Transition Act (7 U.S.C. 
        7231 et seq.) with respect to the loan commodity.
    (b) Loan Rates.--
            (1) Wheat and corn.--
                    (A) In general.--The loan rate for wheat and corn, 
                respectively, determined under subsection (a) shall not 
                be less than 75 percent of the simple average of the 
                annual economic costs of production of wheat and corn, 
                respectively, in the United States during the most 
                recent 5 crop years for which data are available.
                    (B) Calculation.--The costs of production under 
                subparagraph (A) shall be based on the yield for each 
                planted acre, as determined by the Secretary using the 
                economic costs of production data series of the 
                Economic Research Service.
            (2) Other feed grains.--The loan rate for grain sorghum, 
        barley, and oats, respectively, determined under subsection (a) 
        shall be established at such level as the Secretary determines 
        is fair and reasonable in relation to the rate that loans are 
        made available for corn, taking into consideration the feeding 
        value of the commodity in relation to the feeding value of 
        corn.
    (c) Term of Loans.--
            (1) In general.--Subject to paragraph (2), a fair return 
        commodity loan made under this section shall have a term of 12 
        months beginning on the first day of the first month after the 
        month in which the loan is made.
            (2) Extension.--The Secretary may extend the term of a fair 
        return commodity loan made to producers on a farm for any loan 
        commodity for 1 6-month period if the Secretary determines that 
        the extension would be beneficial to the producers in marketing 
        the loan commodity.
    (d) Repayment Rates.--The Secretary shall permit the producers on a 
farm to repay a fair return commodity loan under this section for a 
loan commodity at a rate that is the lesser of--
            (1) the loan rate established for the loan commodity under 
        subsection (b), plus interest (as determined by the Secretary); 
        or
            (2) a rate that the Secretary determines will--
                    (A) minimize potential loan forfeitures;
                    (B) minimize the accumulation of stocks of the loan 
                commodity by the Federal Government;
                    (C) minimize the cost incurred by the Federal 
                Government in storing the loan commodity; and
                    (D) allow the loan commodity produced in the United 
                States to be marketed freely and competitively, 
                domestically and internationally.

SEC. 4. LIMITATIONS.

    (a) Maximum Quantity of Loan Commodities.--The maximum quantity of 
a loan commodity that producers on a farm are eligible to place under 
loan to receive a fair return commodity loan under this Act during any 
crop year shall be--
            (1) in the case of wheat, 20,000 bushels;
            (2) in the case of corn, 30,000 bushels; and
            (3) in the case of grain sorghum, barley, and oats, a 
        quantity that the Secretary determines is equivalent to 30,000 
        bushels of corn.
    (b) Maximum Amount of Loans and Payments.--
            (1) In general.--The total amount of fair return commodity 
        loans that a person shall be entitled to receive under this Act 
        for 1 or more loan commodities during any crop year shall not 
        exceed $100,000.
            (2) Regulation.--
                    (A) In general.--The Secretary shall promulgate a 
                regulation--
                            (i) defining the term ``person'' for 
                        purposes of this subsection; and
                            (ii) prescribing such rules as the 
                        Secretary determines are necessary to ensure a 
                        fair and reasonable application of the 
                        limitation established under this subsection.
                    (B) Related provisions.--Except as provided in 
                subsection (g), the regulation shall be consistent with 
                paragraphs (5) through (7) of section 1001 of the Food 
                Security Act of 1985 (7 U.S.C. 1308).
    (c) Eligibility for Loans and Payments.--To be eligible for a fair 
return commodity loan for a loan commodity under this Act, the 
producers on a farm shall--
            (1) be individuals who own the loan commodity, directly or 
        indirectly;
            (2) provide resident, day-to-day labor for and management 
        of the farm; and
            (3) provide capital investment in--
                    (A) the operation of the farm; and
                    (B) the leasing or ownership of the farm.

SEC. 5. ADMINISTRATION.

    (a) Regulations.--Not later than 90 days after the date of 
enactment of this Act, the Secretary and the Commodity Credit 
Corporation, as appropriate, shall promulgate such regulations as are 
necessary to carry out this Act.
    (b) Related Provisions.--Subtitle E of the Agricultural Market 
Transition Act (7 U.S.C. 7281 et seq.) shall apply to fair return 
commodity loans made under this Act.

SEC. 6. EXTENSION OF MARKETING ASSISTANCE LOANS.

    Section 133 of the Agricultural Market Transition Act (7 U.S.C. 
7233) is amended by striking subsection (c) and inserting the 
following:
    ``(c) Extension.--The Secretary may extend the term of a marketing 
assistance loan made to producers on a farm for any loan commodity for 
1 9-month period if the Secretary determines that the extension would 
be beneficial to the producers in marketing the loan commodity.''.
Cost of Production Safety Net Act of 1998 - Directs the Secretary of Agriculture to make nonrecourse commodity loans available at fair return rates to wheat or feed grain producers who agree to forgo obtaining marketing assistance loans.  Sets forth loan provisions.
Cost of Production Safety Net Act of 1998