 |
|
Issue 23 |
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
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 Assocation. |
|
|
Copyright Prairie |
|
|
Know the rules for loans, LDPs By Tracy Sayler
Maintaining beneficial interest is a key rule for grain to be eligible for a loan deficiency payment (LDP), or in the case of a marketing loan, until
the grain is redeemed or forfeited to the Commodity Credit Corporation (CCC). Farm Service Agency officials say some producers in 1998 and again during the 1999 harvest sold or gave up ownership of their grain
before applying for an LDP, and weren't able to collect. Some producers forgot about this rule when LDPs were triggered late last winter. They were ineligible to receive an LDP, since they applied for it after
they sold their grain. Contracting for delivery or delay pricing your grain can affect beneficial interest. If you are planning to sell your grain, be sure to investigate your options with the FSA office before
you sacrifice control of the commodity. Beneficial interest in a commodity is retained as long as a producer has control of the commodity, incurs any risk of loss and maintains title of the commodity, explains Dwight
Aakre, extension farm management specialist at North Dakota State University. A producer who maintains control of the commodity retains all authority regarding storage decisions, as well as when and where to
market the commodity. The producer is at risk of loss as long as he is responsible for any loss of value for the commodity. "If the commodity is insured, any indemnity must be payable to the producer," Aakre says.
"Title of the commodity changes hands when an agreement to sell has been reached and the commodity or warehouse receipts have been delivered. It is not necessary for payment to have been received." Form 666 or 709? Forward contracting is a common
marketing practice used to take advantage of higher prices that often occur prior to harvest. A producer may still be eligible for an LDP on forward-contracted grain as long as payment has not yet been received and
title and risk of loss still remain with the producer. Aakre stresses that once a producer receives payment, his beneficial interest is lost. FSA offers two different types of LDPs: the regular LDP (form CCC-666 LDP)
is requested in the same manner as a CCC loan, after the grain has been harvested and put into storage. The direct sale LDP agreement (form CCC-709 Direct LDP Agreement) must be filed with FSA prior to harvest.
Under this arrangement, the LDP payment rate is based on the date of delivery to a buyer, warehouse or processor. Producers who deliver grain to the elevator 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 remain eligible for an LDP as long as they have completed form CCC-709 at their
county FSA office before they sold the grain. Producers can use the CCC-709 form to cover some or all of their production, Aakre says. They can use it for a specific quantity of production, production from an
individual farm unit, production delivered to a specific elevator or total production. By completing this form, producers may deliver grain for cash sale as harvest progresses and not have to incur storage at the
elevator while waiting to apply for an LDP. Since the direct agreement locks a producer to the rate in effect on the date of delivery to the buyer, the regular LDP (form CCC-666) is often preferred, since it allows
the producer to watch the market and request the LDP when the rate is at its greatest. Be sure not to sell off the combine until you visit with FSA, and make sure you have the right documentation if grain is stored at
the elevator. Otherwise, you may be ineligible for the LDP. Growers are encouraged to visit with their local FSA offices about their loan and LDP options. "The critical issue for the 1999 crop is the fact that
the overall price level is so low that most production of wheat, feed grains and oilseeds will be eligible for an LDP," Aakre says. "Producers need to know that they can receive an LDP only if they apply for it while
still having beneficial interest in the crop. If they have any questions about how beneficial interest is determined, they should call their local FSA office before making any marketing decision."
More LDP notes • FSA is watching the rules more closely on completed applications. While LDPs last year could be based on
date of approval, it's now based upon the date that the completed application is received at the FSA office. You cannot complete an LDP over the phone. Assembly sheets from the elevator are not acceptable as an
LDP application. Faxing a completed form CCC-666 or CCC-709 is acceptable. • If more than one person or party is involved in the application of an LDP, such as in the case of spouse, crop share, or partnership
agreements, their signatures need to be included in the application. Production evidence should be in the name of the person or persons who take an LDP. Grain elevators or other points of sale should also be
aware of these agreements so paperwork can be filed accordingly. • Complete LDP paperwork before gifting grain. You lose beneficial interest or grain ownership if you give grain to charity or use grain for
payment, such as a hired man in exchange for services. • Production evidence is no longer required and bin measuring won't be needed to confirm bushels under LDP. There will be spot checks, however, and
paperwork should match up with certified production. • If you take the LDP, don't just sit on the grain and wait for cash prices to move up. You'll do better by using hedging strategies. Consult a
professional marketing advisor for a plan that works best for you. • The final availability date is March 31, 2000, to take out an LDP or loan on wheat, barley, oats, canola, rapeseed, crambe or flax harvested in
1999. The final availability date for corn, grain sorghum, mustard, safflower, soybeans, and sunflower is May 31, 2000. |