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

Managing the $75K marketing loan/LDP limit

By Agri-Mark Inc.

Many producers will have a problem with the $75,000 limit on marketing loan and LDP gains, unless Uncle Sam changes the rules. However, there is a way to (legally) skirt the limit.

First, address how much LDP you could be working with. A sunflower LDP of $3.70 on a 1,600 pound/acre crop would be $59.20 per acre. Canola at $3.30 would result in similar numbers. A corn LDP at 52 cents with a yield of 125 bu/acre nets $65 per acre. So it won't take long to max out a limit.

The $75K limit applies to the combination of all marketing loan gains, including all LDP and loans taken and paid off with cash. Now, the architects of Freedom To Farm likely never expected average-sized farms would hit such a limit. Rather, it was designed for the large corporate farms, especially in cotton and rice country.

Now, how to skirt the limit (again, nothing illegal, you simply need to request a different method of computation). You can request the Farm Service Agency office to pay off an existing loan with commodity certificates rather than using cash. You will still be able to pay off the loan at the PCP rate. The difference between the PCP and loan will not be counted against your limit if you use certs. The county FSA can issue on-the-spot certs to use. These certs are not traded, nor do they leave the FSA office.

Two points to be aware of: The grain must be under loan to liquidate with certs, so if you have to move grain to commercial storage at harvest, be sure the location can issue a warehouse receipt for a few days/weeks. Next, you cannot use certs to liquidate a loan while it is under the 60-day lock option, but you can once the lock expires.

Agri-Mark, Inc. is a market advisory firm based in West Fargo, ND, ph. 701-282-8123, website: www.agri-mark.com Last year's Prairie Grains Marketing Guide included a listing of marketing advisors in the region. It may be found online at: www. smallgrains.org/springwh/MGuide99/Pro/pro.htm.