Melvin Brees
Farm Management Specialist
University of Missouri Extension

 

 

 

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Please send your comments and send suggestions to Melvin Brees, Farm Management Specialist, University of Missouri Extension, #1 Courthouse Square,  Fayette, MO 65248, call 660-248-2272, or send messages by e-mail to: breesm@missouri.edu.
October 29, 1999

Government Aid and Marketing

"Uncle Sam" is pouring a lot of money into agriculture. Much of this assistance is intended to support sagging farm income resulting from low market prices. Many producers are collecting the LDP (loan deficiency payment) for corn and soybeans. Currently (Friday, 10-29-99) these amount to $1.02 per bushel for soybeans and $0.29 for corn in Central Missouri. These payments provide price support and add significant cash flow dollars if you have decent yields.

President Clinton has now signed the $8.7 billion agriculture appropriations package that provides additional "market loss" payments. The FSA (Farm Service Agency) will be sending another AMTA (Agriculture Marketing Transition Act) payment equal to this year's (1999) earlier payment and next year's (2000) will be available soon. Oilseed (soybean, etc.) market loss payments, totaling $475 million, based on 1997 or 1998 production will be determined and paid early next year. In addition there will be $328 million in payments to tobacco producers and $125 million to dairy producers. The legislation also includes "production loss" funds amounting to $1.2 billion for crop producers and $200 million for livestock producers. If you didn't produce the bushels to reap the LDP benefits, you may qualify for production loss payments.

These additional dollars may not entirely make up for low prices and some low yields, but they will help meet cash needs. This inflow of government dollars reduces the need for many to actually sell their grain right now. When you meet short-term needs by collecting LDPs and other payments, it's easy to delay making decisions and not think about marketing strategies. It's important to understand that LDPs, AMTA payments and market loss or production loss payments are not a substitute for marketing!

There is considerable risk and uncertainty in the markets that could result in positive or negative price action. World supplies are large, but demand is strong. Next year's production good or bad in either the Southern or Northern Hemisphere will have significant impact on prices. The Asian economies seem to be recovering, which would might improve our exports, but China is expected to compete strongly for these markets. U.S. grain and oilseed supplies appear more than adequate and ending stocks are expected to increase. A lot of grain has gone into storage and many have taken the attractive LDPs. Much of this grain now has no price protection and represents free market supplies. The market "knows" about these unprotected supplies and that there are no "price floors." If you've taken the LDP and are storing corn and beans, it very important that you understand the risks!

It's a complex marketing situation. You must deal with storage costs, basis, LDPs and marketing loans along with price expectations and the potential for storage returns. The government assistance may provide some cash relief, but marketing still demands a lot of your attention.

-- Melvin


University of Missouri ExtensionDecisive Marketing - October 29, 1999
http://outreach.missouri.edu/agconnection/DCT/DM991029.html -- Revised: April 20, 2004
breesm@missouri.edu