In U.S. price support programs, the "loan rate" is the proportion of the farmer's crop he can loan to the government. the difference between the market price and the target price. the interest rate a farmer must pay if he borrows from the government with his crop as collateral. determined by Federal Reserve policy. the effective price (i.e. price floor) for the commodity to ensure loan repayment.

It shall be noted that in US, under price support program, the loan rate is referred to the support price.

The farmers can avail 9-month loan equal to the production quantity of the grains times the support price, keeping the grains production quantity as collateral.

Hence, it is not that a farmer is lending crop to the government.

If, during the term of the loan, the market price rises above the support price, farmers repay the loans with interest and sell the grain in the market. If the market price remains at or below the loan rate, farmers forfeit the grain to the Commodity Credit Corporation, keep the money, and have no further obligation. Such loans are called non-recourse loans, meaning that the lender has no claim on the borrower beyond the collateral (in this case the crop).

Thus, loan rate is not the difference between the market price and target price. Neither it is determined by Federal Reserve policy.

There is no requirement that farmer would need to pay an interest rate for the loan with his crops as collateral.

Hence, the correct answer is: the effective price (that is price floor) for the commodity to ensure loan repayment.