Sign-up for the Direct and Counter-Cyclical Program (DCP) for 2009 is now underway at county Farm Service Agency (FSA) offices, and will continue until June 1, 2009. The DCP was initiated as part of the 2002 Farm Bill, and will continue as part of the Food, Conservation and Energy Act of 2008 (the new farm bill). There are actually five different farm program payments that are part of the new bill. They include:
Direct Payments
Direct payments were continued in the new farm bill in a similar manner to the 2002 Farm Bill. The direct payment rates will remain at the 2008 payment rates for 2009-2012, which are: 28¢/bu. for corn, 44¢/bu. for soybeans and 52¢/bu. for wheat. Crop base aces and payment yields will also be continued at 2008 levels for 2009-2012, except for changes due to land additions or subtractions from year to year. However, the payment percentage will be reduced from the 2008 level of 85% of crop base acres to 83.3% of base acres in 2009, 2010 and 2011. There will continue to be a 22% advance payment in 2008-2011, but no advance payment in 2012. Advance payments can be made anytime after Dec. 1, and final direct payments will be made after Oct. 1 of the following year. There is a 20% reduction in direct payments on farm units that enroll in the new ACRE program in 2009 and beyond. Direct payments are limited to $40,000/individual/year, which is reduced to $32,000/year with enrollment in the ACRE program.
Counter-Cyclical Payments
CCPs, which were initiated in the 2002 Farm Bill, will be continued as an option for 2009-2012 farm programs. CCPs are based on an established target price for each eligible program crop, minus the direct payment rate for that crop, to reach a CCP trigger price. They are calculated using the 12-month national average price, which is from Sept. 1 in the year of harvest through Aug. 30 the following year for corn and soybeans, and June 1 to May 31 for wheat and other small-grain crops. If the 12-month national average price drops below the CCP trigger price for a given crop, a CCP is earned. The maximum CCP for a crop is the difference between the CCP trigger price and the national loan rate for a given crop. The 2009 target prices are $2.63/bu. for corn, $5.80/bu. for soybeans and $3.92/bu. for wheat. The CCP trigger prices for 2009 are $2.35/bu. for corn, $5.36/bu. for soybeans and $3.40/bu. for wheat. The maximum CCP for 2009 is 40¢/bu. for corn, 36¢/bu. for soybeans and 65¢/bu. for wheat.
If a CCP is projected for a given crop, producers may request up to 40% of the projected CCP at the midpoint of the marketing year, which is March 1 for corn and soybeans and Dec. 1 for wheat and small grains. Final CCPs will be made after Oct. 1 in any given year. Producers must refund any advance CCPs after Oct. 1 that are received as advance payments, but are not fully earned by the end of the 12-month marketing period. This situation occurs when very low commodity prices exist early in the marketing year, but prices rise significantly later during the year.
The formula for CCPs is base acres times program yield, times .85, times the payment rate. CCPs are paid on historical crop base acres and program yields that were established in the last farm bill, and not on planted acres or actual production yields. There is no opportunity to update either CCP base acres or program yields in the new farm bill. The payment limit for CCPs is $65,000/individual, which is increased to $73,000 with enrollment in the ACRE program. Producers who choose to enroll in the ACRE program will give up any opportunity to earn CCPs for 2009-2012.
CCC Marketing Loans and Loan Deficiency Payments
The CCC marketing loan program for 2009-2012 will remain essentially the same as in recent years. Producers may place all production bushels of eligible crops in a given year under a nine-month CCC loan at county loan rates. The deadline to apply for a CCC loan is May 31 in the year following production for corn and soybeans, and March 1 for wheat and small grains. CCC loans may be paid back at the original loan rate plus interest when commodity prices are above the loan rates, or at the posted county price (PCP), when commodity prices are below loan rates. The grain under CCC loan can also be forfeited to the CCC, though that is usually not in the best interest of a producer. The use of commodity certificates to release CCC loans was eliminated with the new farm bill.
When commodity prices are below CCC loan rates, producers may choose to collect a LDP as an alternative to placing the grain under a CCC loan. The difference between the county loan rate and the PCP on any given day is the amount of the LDP. For example, if the county loan rate for corn is $1.85/bu., and the PCP on a given day is $1.65/bu., the LDP is 20¢/bu. The PCP is based on a 30-day moving average commodity price for crops, and differentials in each county are the same as for county loan rates, so LDP rates will be the same in all counties in a state each day. A producer can only claim an LDP once on each bushel of grain, and once a producer claims an LDP, those bushels are no longer eligible to be placed under a CCC loan. There are no payment limits for LDPs and gains from CCC marketing loans for 2009-2012.
The national CCC loan rates for corn, soybeans and wheat will stay at the 2008 loan rates for 2009: $1.95/bu. for corn, $5/bu. for soybeans and $2.75/bu. for wheat. The corn and soybean national loan rates will remain the same for 2010-2012, while the wheat loan rate will increase to $2.94/bu. for 2010-1012. CCC loan rates can be found at: www.fsa.usda.gov.
Bottom Line
Producers may enroll in the 2009 DCP farm program at county FSA offices at any time between now and June 1, 2009. Once they enroll in the farm program, they will be eligible to receive 22% of their 2009 direct payments. Producers will be able to consider enrollment in the new ACRE program at a later date, as ACRE sign-up will not begin until the spring 2009. For more information on DCP farm program sign-up, producers should contact their county FSA office.
Editor’s note: Kent Thiesse is a former University of Minnesota Extension educator and now is Vice President of MinnStar Bank, Lake Crystal, MN. You can contact him at 507-726-2137 or via e-mail at kent.thiesse@minnstarbank.com.