Issue 31
Marketing Guide 2000
 

Prairie Grains is the official publication of the Minnesota Association of Wheat Growers, North Dakota Grain Growers Association, South Dakota Wheat, Inc. and the Minnesota Barley Growers Association.

Copyright
Prairie Grains Marketing Guide
2000

Answers to FAQs (Frequently Asked Questions) about LDPs

By Betty Thom

Loan Deficiency Payments (LDPs) have become a major marketing tool in the last few years of low commodity prices.  The LDPs are based on the difference between the county loan rate and the CCC-determined value for a specific commodity, times the quantity.  Quite simply, LDPs are payments that make up the difference between the government loan rate and the market price. Any producer that is eligible for a government commodity loan is eligible for LDPs.

Although producers have become familiar with LDPs, many still have questions. Following are some of the more common questions about LDPs, answered by Larry Lampl, ND Farm Service Agency f arm program specialist.

Is there any paperwork that needs to be filled out before harvest in order to be eligible for LDPs? And can I fax the paperwork?
Perhaps to the first question, and yes to the second.

If you plan on faxing any forms into your local FSA office, you will need to file a Facsimile Signature Authorization & Verification Form (Form FSA-237). Someone at the FSA office needs to witness your signature. Although you can fax LDP requests, payments will not be issued until Form FSA-237 is filed. This same form needs to be filed before loan applications are faxed.

Form CCC-709 needs to be filed before harvest. This agreement allows producers who deliver a commodity right off the combine for a cash sale or to fulfill a forward contract (as well as basis fixed contracts, delayed payment contracts, minimum price contracts, and hedge-to-arrive contracts) and still be eligible for an LDP. The LDP payment rate is based on the date of delivery to a buyer, warehouse or processor.

A separate CCC-709 must be filled out for each commodity. A new CCC-709 must be filed for each crop year. A CCC-709 also covers commodities delivered and not sold, based on the LDP rate on the date of delivery. If specific quantities or special restrictions are required, the producer needs to contact the county office.

Form CCC-666 is used to file for LDP on your stored commodities. If the commodity is stored, you can watch the markets and file at a favorable rate. Once the commodity is sold, you can't apply for LDP.

Producers should know that any forms faxed must be complete or the application will not be valid.

Who is eligible for LDPs?
Any producer who has enrolled the farm in the Production Flexibility contract, reported the planted acreage and has a beneficial interest in the commodity. A beneficial interest means they have control of the commodity (makes the decision affecting the commodity), risk of loss (responsible for any loss or damage of the commodity), and title to the commodity (has not already sold or delivered the commodity). The producer must also comply with conservation and wetland protection requirements. For the 2000 crop only, contract commodities produced on noncontract farms are eligible for LDPs.

Can an application for an LDP be filed for grain already approved for a government loan?
No. The producer can take the LDP or a government loan on the commodity, but not both.

What is the cut off time for faxing the CCC-666?
Faxes must be sent before 6:00 a.m.Central Time to the County FSA office in which the farm is located.

What is the final cut off date for
applying for LDP for the 2000 crop?
The final availability date for a LDP or loan on wheat, barley, oats, canola, rapeseed, crambe or flax is March 31, 2001.

The final availability date for corn, grain sorghum, mustard, safflower, soybeans, and sunflower is May 31, 2001.

Can another county's LDP rate be used if the commodity is sold there?
The LDP is based on the loan rate in the county where it is stored. If an LDP is requested on commodities using the CCC-709, the county loan rate in which the farm is located is used, no matter where it is sold. In either case, the CCC-709 or CCC-666 should be filed with the home county.

Where can the daily LDP rates be found?
You can call your local FSA office after 8:00 a.m. for the updated LDP rate. Local elevators should also have access to this information. LDP's are listed on the Data Transmission Network (DTN) screen under the Grain heading. You can also find LDP rates at www.grainline.com. The current forms can be found online at www.fsa.usda.gov/dafp/psd.

Is the quality of the crop considered when figuring out the LDP rate?
Other than excessive moisture, there are no discounts for the quality of the commodity.

Is there a ceiling on the amount of LDP or market gain a producer can receive?
Yes. A producer can't receive more than $75,000 in LDPs and market loan gains. Last year this limit was raised to $150,000 by an act of Congress. The higher limit applied to the 1999 crop only.

Is a crop still eligible for an LDP if it is used to pay others in the form of grain wages?
A producer can receive an LDP for bushels that are given as grain wages to charities, a spouse or minor children if they do not have other farm interests. However, the right to LDPs is forfeited if grain wages are given to others like a hired man. If a producer wishes to pay bills with grain, their name must be on the sales ticket. Then, a request can be made to the buyer to issue the check to another party(s) name.

Does there have to be proof of the amount of grain in storage?
Any sales and storage evidence must be in the owner's name. Spot checks will be made on farm stored commodities.

Would I ever have to pay back any of the LDP if prices were to go up?
No. However, if you are spot-checked and the amount stored or sold is less than what was declared on the LDP application, the difference must be refunded. Penalties may also apply if the quantity is less than 90% of the certified quantity.