NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665
August 5, 1999
Two key safety-net provisions of the current farm program--marketing loans and loan deficiency payments (LDPs)--may provide North Dakota producers with a significant portion of their potential 1999 income from wheat, feed grains and oilseeds. But for producers to obtain either, they must follow the proper procedures, says an agricultural economist with the North Dakota State University Extension Service.
"Producers need to maintain a beneficial interest in the commodity until they have applied for the LDP, and in the case of a loan, until it is redeemed or forfeited to CCC," explains Dwight Aakre, extension farm management specialist at NDSU.
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, Aakre says. 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 continues. "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."
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.
Producers who deliver grain to the elevator right off the combine for a cash sale or to fulfill a forward contract remain eligible for an LDP as long as they have completed the "CCC-709-Direct Loan Deficiency Payment Agreement" at their county Farm Service Agency office before they sold the grain. Under this arrangement, the LDP payment rate is based on the date of delivery to a buyer, warehouse or processor.
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.
"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 concludes. "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."
###
Source: Dwight Aakre (701) 231-7378
Editor: Dean Hulse (701) 231-6136