From the Desk of…: Producers qualify for deficiency payments

Once again, local commodity producers are watching regional and national grain markets closely as the markets begin their “up and down” fluctuation associated with the onset of the fall harvest. Generally, the direction the markets take has little to do with local production, but is based on the overall predictions and demands of the commodities for the nation as a whole. With so many outside factors impacting the commodity prices, producers are looking for any advantages available to offset the price swings of commodity production.

One such marketing tool available through USDA’s Farm Service Agency, is the use of Loan Deficiency Payments, often referred to as LDPs. These payments offer a “cushion” to falling prices that farmers may be currently experiencing. The deficiency payments are derived by calculating the difference between the loan rate for the commodity posted in the county and the posted county price of the commodity for the county. When the posted county price falls below the loan rate, a loan deficiency payment rate becomes effective. The LDP rate is subject to change on a daily basis, so producers must monitor the changes and determine when the most appropriate time to “lock in” a rate occurs.

For the 2005 crop year, the loan rate for corn in Warren County is $2.04 per bushel; soybeans is $5.13 per bushel, and grain sorghum is $3.59 per hundredweight.

To be eligible to receive loan deficiency payments, producer must “lock in” a deficiency payment rate prior to losing beneficial interest in the commodity produced. Producers are considered to have beneficial interest in the quantity and commodity if the producer maintains (1) risk of loss in the commodity, (2) title to the commodity, and (3) control of the commodity. USDA has revised the form used to request loan deficiency payments and now uses form CCC-633 EZ. Each person who shares in the proceeds from commodities must complete the loan deficiency payment forms to receive their individual shares of commodity deficiency payments.

Corn growers who harvest corn as silage are eligible to “lock in” a deficiency rate based upon the yield established for corn grown on the same farm and harvested as grain, or by an assigned yield based on other similar farms in the county as approved by the local County FSA Committee. Quantities of corn or silage fed to livestock must be “locked in” before the grain or silage is fed; otherwise, it is considered ineligible.

Once a price and quantity is frozen or “locked in”, that price cannot be adjusted. Grain that has been sold prior to certification or grain that has been fed to livestock prior to certification is not eligible for loan deficiency payments.

The Warren County Farm Service Agency is currently taking requests from producers for LDPs. Producers can stop by the county office located at 811 Faulkner Springs Road during regular business hours of 8:00-4:30 Monday through Friday and complete form CCC-633 EZ.