NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665
June 15, 2000
George Flaskerud, Extension Crops Economist
NDSU Extension Service
What should you do with poor quality durum under government loan? Do not assume the best deal is to forfeit the durum to the Commodity Credit Corporation (CCC). Check the quality of your durum and evaluate your alternatives.
Check the quality by first getting a representative sample for each bin by using a probe. Make sure you get a sample for each bin. Some elevators will secure samples for you. Have one or more elevators grade each sample and determine falling numbers. Samples can also be sent to a licensed official agency for evaluation.
To get an idea of the value of your durum in each bin, obtain several bids on the samples from elevators. Take the grades on your durum samples to your local Farm Service Agency (FSA) for their estimate of the loan settlement value on each sample.
Keep in mind that an estimate of loan settlement value is just that, an estimate, and is based on your sample. It does not matter whether the sample was taken by you or the elevator. These estimates are not binding with the FSA, since the loan settlement value of forfeited durum is based only on the grade of the durum actually delivered.
Elevator bids based on samples are also generally not binding. However, some elevators may give you a binding bid if they sample your bins.
Getting evaluations from elevators and the FSA is always important when considering forfeiture to the CCC. The emphasis in this article is on low quality durum because there seems to be a perception by many that forfeiture is the best alternative. One reason for this perception might be because forfeited loans are not discounted for falling numbers. But the CCC does discount for grade factors.
CCC discounts for 1999 crop durum are 35 cents for Grade U.S. No. 4 , 45 cents for No. 5, and 50 cents for Sample Grade. There are also subclass discounts such as 20 cents for the subclass of Durum. There can also be additional discounts for smutty durum, heat-damaged kernels, total-damaged kernels, moisture, test weight, infestation and other factors.
Continue evaluating alternatives even after hauling your durum to an elevator. Once the durum has been delivered to an elevator, the grade on the delivered durum should be checked again with FSA before making a final determination on whether to forfeit or sell at the elevator bid. Since the durum has been actually delivered, all bids at this time are binding.
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Source: George Flaskerud (701) 231-7377
Editor: Dean Hulse (701) 231-6136