Time for a New Farmer-Owned Reserve?

The current farm program contains a marketing loan program that offers grain farmers two options at harvest time to counter low market prices. Farmers can either take a loan deficiency payment (LDP) on harvested production, or farmers can place production "under loan." The LDP pays the farmer the difference between the loan rate and a government-calculated price (the posted county price), which changes daily. Once the LDP has been taken the farmer can either market the crop or store it, but all further government assistance is ended. A farmer who puts the crop under loan stores the crop and receives a loan from the government. If the market price rises above the loan rate, the farmer can pay off the loan, market the crop, and pocket the difference. If the price does not rise above the loan rate, the farmer can pay off the loan at the posted county price, which is equivalent to receiving an LDP. The farmer must repay the loan within nine months or choose to forfeit the stored crop to the government.

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CARD Briefing Paper 00-BP 31

 Record created 2017-04-01, last modified 2020-10-28

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