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$75K PAYMENT LIMITATION
Sen. Rod Grams office is looking into a legislative proposal to raise the $75,000 limit on marketing loan
gains to $150,000, like last year. State Ag Rep Dave Ladd says there is a measure on the House side (Emerson) but none currently in the Senate. Grams' office is collecting info to counter arguments by some that
raising the limit would benefit only the "big corporate farms." Indeed, even the averaged-size farm is affected by the payment limitation, as evidenced by this example, using LDP rates for East Polk
County, MN, Aug 15, 2000:
55 bu/acre wheat yield x .81 LDP= $44.55/acre x 700 acres= $31,185
30 bu/acre soybean yield x .95 LDP= $28.5/acre x 400=$11,400
150 bu/acre corn yield x $0.48 LDP=$72/acre x 200= $14,400
1700 lbs/acre canola yield x 3.62 LDP= 61.54/acre x 300= $18,462
TOTAL: $75,447
BRAZIL BUYS 50,000 TONNES OF U.S. HARD RED WINTER WHEAT
Brazil's Predileto group confirmed Tuesday that it bought 50,000 tonnes
of hard red winter wheat from the United States. Mill President Antenor Barros Leal said that losses to Brazil's wheat and the "lousy" quality of Argentine wheat had forced the company to look to North
American markets. He said he had heard of no other Brazil-U.S. deals, but there was a possibility of more in the future.
AUSTRALIAN WILL SELL OUT OF WHEAT BEFORE THEIR NEW CROP HARVEST BEGINS IN NOVEMBER
Australian sources indicate Australia's sole
licensed wheat exporter AWB Ltd. expects to be "sold-out" of 1999-00 (Nov-Oct) wheat by November.
"We are on target to completely sell out Australia's wheat for the 1999-00 season. Considering that we had a record crop to sell and ship into a market that has limited export demand, with importers buying hand to mouth, this is an excellent achievement," said AWB Ltd. general manager Peter Geary. He suggested some of the big volume markets this year included Iran, Iraq, Yemen, Japan, S. Korea and Malaysia. Geary indicated the monopoly export organization managed to sell 2.7 MMT of Australian wheat into Iraq this year and will look forward to developing a positive relationship with that country. Moreover, he indicated the AWB has found new marketing opportunities in Italy and Libya and will be looking at "other" opportunities for the upcoming marketing season. Newswire sources report the AWB has exported 14.4 MMT of wheat in 1999-00 since October 1, compared to 13.6 MMT during the same time period in 1998-99.
BUMPER U.S. HARVEST WILL SUPPORT RECORD 2000/01 SOYBEAN EXPORTS
Good precipitation and an absence of extreme heat in July have
resulted in generally favorable conditions for U.S. soybeans. As of August 6, 65 percent of soybeans were rated in good to excellent condition. This ratio is the best since the U.S. record yields of 1994. Like that
year, current pod development
is quite advanced, with 69 percent now in that stage compared with the 5-year average of 47 percent. Moisture availability at this time is a key factor for filling out soybean pods.
Provided no extended hot spell soon emerges, most regions should need little additional precipitation, as there are adequate soil moisture reserves to complete crop maturation.
Record soybean crops are anticipated in Iowa, Illinois, Kansas, Nebraska, Wisconsin, North Dakota, Pennsylvania, Minnesota, Indiana, Missouri, and Michigan,
with record average yields in the latter four States. On the other hand, much of the Southeast still suffers from a moisture deficit, and the dryness has extended into the Delta region. In spite of crop stress in
these locations, a national average soybean yield of 40.7 bushels per acre is
expected this year, exceeded only by the 1994 yield of 41.4 bushels. These southern regions collectively comprise just 9 percent of
the total soybean acreage planted this year. Therefore, U.S. soybean production in 2000 is forecast to rise to 2,989 million bushels, surpassing the 1998 record of 2,741
million.
Smaller expected beginning stocks, totaling 280 million bushels, will offset some of the yield gains. Stocks have declined because of seasonally strong import
demand from China that has raised the 1999/2000 U.S. soybean export forecast to 975 million bushels. For similar reasons, projected South American carryover stocks are also tightening. Adverse weather will maintain
brisk imports by China and push U.S. soybean shipments toward a record 1,010 million bushels in 2000/01.
Slightly higher margins are projected to raise 2000/01 domestic soybean crush to 1,625 million bushels. U.S. soybean meal exports are forecast to rise to 7.4
million short tons. European Union (EU) soybean meal imports are likely to modestly strengthen because of a sharp decline in rapeseed production. U.S. soybean oil exports should also expand to 1,800 million pounds
from 1,200 million in 1999/2000.
The fine condition of the U.S. soybean crop has caused the average cash price in central Illinois to fall from $4.92 per bushel in June to $4.56 in July. Prices
may continue declining if favorable weather this month allows an optimal completion of pod filling. Based on the current soybean supply and use Forecasts, USDA foresees a 2000/01 average U.S. farm price of
$3.90-$4.80 per
bushel.
UNITED KINGDOM'S WHEAT HARVEST BEHIND SCHEDULE AND REDUCING QUALITY
Crop watchers indicate the UK wheat harvest is now running
about 10 days behind last year's schedule, with quality hopes beginning to fade away due to "unfavorable" weather conditions. According to newswire statistics, only 5% to 7% of the 2000-01 UK wheat
crop has been harvested so far.
One source suggested a general sense of depression is beginning to affect wheat farmers' attitudes as harvest progress is slow, and the longer the harvest takes, the worse the overall quality is going to be. However, local analysts agreed they will have a clearer picture about the UK wheat situation in a about a week or so.
EPA REVIEWS BT'S
The EPA, as expected, has announced a comprehensive and public review of the Bt technology as it is used now in
corn and soybeans. In so doing, the agency will make public its risk assessment for comment and is seeking scientific peer review of this assessment by the agency's Scientific Advisory Panel.
At the same time, the agency also announced it was extending the existing registrations for the genetically modified technologies through Sept. 30, 2001. This
lengthy review is likely to be contentious -- at least from the perspective of anti-GMO activists. More information on this issue can be found in documents available through the EPA's Biopesticide Internet site at www.epa.gov/pesticides/biopesticides,
and from the Scientific Advisory Panel Home Page at www.epa.gov/scipoly/sap. The Federal Register, where the review was announced Aug. 9, can be found on the Web at www.epa.gov/fedrgstr/
In other crop protection news, the Scientific Advisory Panel for the
Federal Insecticide, Fungicide, Rodenticide Act will conduct a meeting Aug. 17-18 to
review findings regarding malathion. Recent findings have suggested a link to cancer in humans. The EPA has proposed to classify malathion as having "suggestive evidence of carcinogenicity, but not sufficient
to assess human carcinogenic potential" by all routes of exposure.
CLOSING OUT 1999 CCC CROP LOANS
Written By Kent Thiesse, University of Minnesota Extension Educator
A considerable amount of corn and soybeans that were raised in 1999 were placed under CCC loan at County Farm Service Agency (FSA) Offices. Many of
these nine month loans will be maturing at the end of August or September. Many producers were hoping that a Summer grain market price rally would allow some higher net prices on this stored grain. The price rally
has not happened, so now producers are in a "salvage mode", just wanting to empty their bins and avoid any more financial loss on the stored grain.
Producers that have grain stored under CCC Loan have three options at the end of the nine month loan period. They are :
Repay the CCC loan principle plus interest. - Release the grain at the "Posted County Price" (PCP).
- Forfeit and deliver the grain.
Repaying The CCC Loan Plus Interest
This option is a non-factor for 1999 corn and soybeans stored under CCC Loan. Current PCP's for
corn and soybeans are well below CCC loan rates and are likely to remain below those levels over the next couple of months. This option is only utilized when crop prices are higher than the CCC loan rates.
Release The Grain At The "Posted County Price" (PCP)
This will be the most
common method that will be used to release the current corn and soybeans that are under CCC Loan. Grain may be released at the PCP on a given day. For example corn that was placed under CCC Loan at $1.75 per bushel
in December, 1999, could be released at a PCP of $1.20 per bushel in August, 2000, and the Producer could then sell or feed the corn.
Following are some points to consider when using PCP's :
The PCP is changed daily at County FSA Offices. Most FSA offices have a call-in phone number to check the PCP each day.
Changes in the daily PCP represent changes in the daily close of market prices on the previous day. So, if the market closes strong on a
day, most likely the PCP will also go up on the following day. Vice-versa is true when the grain markets drop. Understanding this concept is a key to utilizing grain release with PCP's and marketing the grain.
Example : Producer puts corn under CCC Loan at $1.75 per bushel in December.Market goes up $.08 per bushel on a given day to $1.28
per bushel.Producer releases CCC Loan corn at $1.20 per bushel PCP on that day.Producer sells the corn at $1.28 per bushel for a net gain of $.08.
The final market price is $1.75 plus $.08 or $1.83 per
bushel. - If it is that easy, how can producers actually lose money when using the PCP to release grain that is under CCC Loan. There are two ways to lose value :
1)One way to lose value in the grain and to lose the protection of the PCP is to release the grain under loan at the PCP, and not
sell the grain or have it pre-sold. In the previous example, the Producer could have released the corn at $1.20 per bushel, but decided not to sell the corn immediately because he thought the cash corn price
was going up. If the corn price actually went down and he was forced to sell the corn at $1.10 per bushel, the Producer would lose $.10 per bushel and net out at $1.65 per bushel.
2) The other way to lose value on the grain under CCC Loan is to sell the grain and wait for the PCP to drop to capture more gain in
price differential. In the previous example, the Producer could be pessimistic about Fall price prospects and decide to sell the corn at $1.28 per bushel and then wait for the PCP to drop before the CCC Loan
matures. If the price does not drop and actually increase, the Producer could be forced to release the corn at $1.40 per bushel, with a locked-in cash sale at $1.28 per bushel, losing $.12 per bushel, and having
a net price of $1.63 per bushel.
BOTH EXAMPLES ARE SPECULATING IN THE GRAIN MARKET !
Producers can use FSA Form CCC-697, "Request To Lock-In A Marketing Loan Repayment Rate" at County FSA Offices to lock-in a PCP for 60 days
. Form CCC-697 expires 14 days before the CCC loan matures, so a Producer has a two week window to exercise a daily PCP to release grain under
loan. - Example : PCP on corn was "locked-in" at $1.45 per
bushel on July 1st. CCC Loan matures on August 31st and PCP is below $1.45. After August 17th, corn may be released at the daily PCP. If the PCP is close to the
"lock-in" price, a Producer should find out from the County FSA Office what day the CCC-697 expires, so they can gain the most benefit.
- If a Producer has an opportunity to price grain at a market price that offers a gain above the PCP, the Producer could use the CCC-697 to lock-in that
gain, and then decide by the "lock-in" expiration date whether to exercise the "lock-in" or to release the grain at the daily PCP after the expiration date. This is not a speculative
strategy. To release the grain with a PCP and not sell the grain is
There are no "overrun" bushels when releasing grain at the PCP. Only the original CCC Loan bushels are eligible to be
released at the PCP.
Forfeit And Deliver The Grain
With the advent of "Marketing Loans" and PCP's , forfeiture of grain under a nine
month CCC Loan is not often considered as an option. Usually, there is a financial advantage with grain market prices to either pay back the loan plus interest or release the grain at the PCP. However, our
current situation with 1999 grain that is under CCC Loans that are maturing in the next couple of months may be different.
Following are some considerations for forfeiture of grain under CCC Loan :
- Producers wishing to forfeit grain must notify the County FSA Office by the date the loan matures and deliver the grain to an approved CCC warehouse by the
designated delivery deadline. Settlements are based on the quantity and quality of grain delivered.
A Producer that is forfeiting grain may deliver up to 110 percent of the bushels listed as the CCC Loan quantity. Payment for the 10
percent extra bushels will be at the County Loan Rate. There is NO extra compensation for "overrun" bushels if CCC Loans are repaid using the PCP method. Generally, there is an advantage to forfeiting the grain under CCC Loan plus the 10 percent extra bushels on any given day, if the
difference between the market price for grain and the PCP is less than 10 percent of the difference between the CCC Loan Rate and the PCP. Example : Producer has 10,000 bushels of corn under Loan at $1.75 per bushel. PCP is at $1.20 per bushel and corn market price is $1.22 per bushel.
The 10 percent extra bushels for forfeiture would be 1,000 bushels. Using the PCP, the Producer would gain $.02/ Bu. on 10,000 bushels. Using forfeiture, the Producer would gain $.55/ Bu. on 1,000 bushels.
- Remember, a Producer must have enough "free-stock" grain that is not under CCC Loan or has not received a "Loan Deficiency Payment" (LDP) to use for the 10 percent extra bushels for forfeiture. Also, Producers that decide to forfeit grain must complete FSA Form CCC-681-1, "Marketing
Authorization Form", when hauling grain. This is necessary when delivering any grain to a warehouse that was under a CCC Marketing Loan.
"CALL BEFORE YOU HAUL !"
Producers should contact their County FSA Office well in advance of the CCC loan maturity dates to explore alternatives for forfeiting grain, as well as to
gain a better understanding of "Posted County Prices". FSA officials can help Producers determine the most profitable alternatives for their grain that is still under a 1999 CCC Loan. FSA Offices can also answer questions about CCC Loans and LDP's for grain that will be harvested in the Fall of 2000.
Generally, with either utilizing a PCP to release grain or forfeiting the grain, there are only a few cents per bushel to be gained.
Don't get too greedy !
Take advantage of minimal market opportunities that are available and avoid getting into "speculative" positions on grain that is stored
under CCC Loan.
Kent Thiesse
Extension Educator
Blue Earth County
Government Center
410 South 5th Street
PO Box 8608
Mankato, MN 56002-8608
Phone (507) 389-8141
Fax (507) 389-8355
email kthiesse@extension.umn.edu
LDP FORMS ON THE WEB
Need an LDP form but can't make it to your FSA office?
Go to this web site and print one out yourself. You will need Adobe Acrobat to run the form.
Go to http://www.adobe.com/products/acrobat/readstep.html to download the free Adobe Acrobat reader.
Then go to this web site to print out your form. www.fsa.usda.gov/dafp/psd/Forms/CCC666ldp.pdf
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