June 14, 2002

Wheat and Minor Oilseeds See Most Significant Changes in Marketing Loan Rates

Among county level commodity loan rates for 2002 the USDA released earlier this month, the biggest changes were in wheat and minor oilseeds, says an agricultural economist at North Dakota State University.

"Loan rates for the 2002 crop wheat are differentiated by classes of wheat. For North Dakota that means separate loan rates for hard red spring, hard amber durum and hard red winter wheat. Previously there has been a single loan rate that applied to all classes, " says Dwight Aakre, farm management specialist with the NDSU Extension Service.

Commodity rates were adjusted to reflect the higher national loan rates recently enacted as well as changes to reflect recent market price relationships among counties. For 2002, the loan rate for durum will be 96 cents per bushel higher than the loan rate for 2001 in all counties in North Dakota. The loan rate for 2002 hard red spring wheat will average 25 cents per bushel higher across the state; however, the increase varies by county. Hard red winter wheat loan rate increases also vary by county with an average statewide increase of 9 cents per bushel.

National loan rates for 2002 crop minor oilseeds are differentiated by different oilseed types, Aakre says. These include oil-type sunflower seed, other-type sunflower seed, flaxseed, canola, rapeseed, safflower and mustard seed. "Previously a single national average loan rate for all minor oilseeds was used, although there were some differences in loan rates between oilseed types within counties. The differences for 2002, however, are considerably greater," he says.

Aakre explains that the 2002 crop national loan rates for minor oilseeds are based on five-year average price relationships among the oilseeds and are production weighted to equal the statutorily-mandated other oilseed loan rate of 9.6 cents per pound. The 2002 crop national loan rates per hundredweight are: oil-type sunflower seed $9.15, other-type sunflower seed $12.10, flaxseed $6.98, canola $9.49, rapeseed $9.47, safflower $12.53 and mustard seed $9.88.

For North Dakota the adjustment to the sunflower loan rate was uniform across all counties. Oil-type sunflower loan rates are 11 cents per hundredweight lower and other-type sunflower rates are $3.03 higher than last year. Flaxseed loan rates were also adjusted uniformly across all counties dropping $2.32 per hundredweight. The loan rate for canola was increased by 13 cents per hundredweight across the state. Safflower loan rates increased $3.34 per hundredweight from $7.01 to $10.35. Mustard seed loan rates increased 54 cents per hundredweight in all counties.

Loan rates for 2002 crop feed grains increased in all counties in line with the increase in the national loan rate. Barley rates increased uniformly by 25 cents per bushel. The loan rate for oats increased from 11 cents to 16 cents per bushel across the state, and the corn loan rate increased from 6 cents to 13 cents per bushel.

The soybean loan rate was lowered by 25 cents per bushel in all counties. The county loan rates for lentils, field peas and small chickpeas have not yet been released. The new farm bill does not mandate a program for crambe and sesame, and USDA no longer designates them as loan-eligible oilseeds.

"With depressed market prices, the loan rates become an important factor in determining which crops to plant," Aakre notes. "Obviously this release of loan rates is too late to impact 2002 planting decisions, but they likely will affect what producers choose to plant next year."

However, the impact of the loan rates will be realized for the 2002 crop when counter-cyclical payments are calculated, Aakre says. That’s because several of the announced loan rates are likely above the marketing-year average price.

"A major question about counter-cyclical payment calculations became apparent for wheat and minor oilseeds with the release of the loan rates. Wheat and minor oilseeds each have a single target price but multiple and significantly different loan rates. How this will factor into the calculation of the counter-cyclical payment remains to be seen," Aakre says.

Two scenarios seem possible. One method would be to use a weighted loan rate (the national average specified in the legislation) and the weighted national average market price. Another method would be to use the national average loan rate and market price by class of wheat and minor oilseeds.

"These two scenarios would lead to significantly different counter-cyclical payment rates. This could also impact the decision on updating program bases as well," he says.

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Source: Dwight Aakre, (701) 231-7378, daakre@ndsuext.nodak.edu
Editor: Tom Jirik, (701) 231-9629, tjirik@ndsuext.nodak.edu