'I bet the government will do whatever it can to rally soybean prices this fall, especially since the first $1.50 increase in prices will save them a lot in loan deficiency payments (LDPs), but not do me any good."

That comment was from a northwestern Iowa farmer at a seminar in late June. It's true that, with cash soybeans trading as much as $1.50/bu below loan in the western Corn Belt, the first $1.50 rally won't help most farmers. They'll get more from the elevator and less from government LDPs.

Also, if corn and soybean prices stay low into fall, many 800- to 1,000-acre growers could run up against the $75,000 payment limit.

With recent changes in the LDP program and the current low prices, finding the lows is just as important as finding the top price. You can also enhance your LDP profits by making the right merchandising decisions.

Using long-term price-cycle analysis, we can project some of the best times to lock in the lowest posted county price (PCP) and the largest LDP. Current analysis suggests a low in cash soybeans (and consequently the largest LDP) during the week of Aug. 27 or Sept. 17. The latest we could see a major low in the soybean market and change of trend is the week ending Nov. 5.

Which crop to sell and when to sell it becomes a little more complicated if you want to maximize LDP profits and receive the highest possible total income. The current reality is that, once new-crop soybeans drop below your county loan level, you face no additional financial risk from lower prices. That's because as your elevator price drops your LDP payment goes up.

Many of our customers are ready to buy call options or vertical call spreads late this summer to lock in big LDPs if it appears that prices are bottoming before the soybean harvest.

Corn prices have been higher, so we suggest a different marketing and merchandising strategy. For most of the spring and summer, even in the worst-basis areas of the western Corn Belt, new-crop corn bids have been 10-20 cents above the county loan levels. Bids for March 2000 delivery have been as much as 30-40 cents over the county loan.

It makes sense to sell corn ahead for March 2000 delivery. And if prices fall to a September, October or November bottom, be ready to lock in the largest LDP you can. Then deliver on the contracts in March. Some producers using this strategy last year netted up to $3/bu on cash corn.

In summary, make sure you take time now to write out your LDP plan and alternatives.

It's interesting to note that in the last nine months the lowest PCPs and largest LDPs have consistently occurred on the last day of the month or first day of the new month. Just as good market planning suggests that you would never sell your entire crop in one sale, consider locking in your LDPs three or four times.

We've written a special four-page report on how to maximize LDPs. For your free copy, write to NorthStar Commodity, P.O. Box 15086, Minneapolis, MN 55415-0086. You can also fax your request to 612-333-1520 or email us at aginvestor@north-star-commodity.com