Counter-Cyclical Payment Update

Based on the Feb. 9 USDA supply and use estimates, which include estimated national average prices for corn and soybeans in the current marketing year, it does not appear that much has changed from previous USDA Reports. USDA estimated the national average corn price at $1.90/bu. for the 2005 marketing year, which runs from Sept. 1, 2005 through August 31, 2006. This will likely result in USDA projecting the maximum total counter-cyclical payment (CCP) of $.40/bu. for the 2005 corn crop. An advance payment of 35 percent of the estimated amount, or $.14/bu., was available to eligible corn producers in late October 2005. Before the end of February, USDA will likely be announcing their updated national average price estimates for the 2005 corn crop. Based on the latest USDA report and price estimates, it appears that the estimate will be near the $1.90/bu. projected national average corn price, and $.40 estimated total CCP payment for the 2005 corn crop. If this occurs, there would likely be another advance CCP for corn of $.14/bu., or another 35 percent of the estimated total, available to producers in late February. This would bring the total advance CCP for the 2005 corn crop to $.28/bu. The remaining $.12/bu. could be available in October 2006.

There was no advance CCP payment in October 2005, on soybeans produced in 2005. This was based on a projected national average soybean price for soybeans, which was very near the $5.36/bu. threshold, where no CCP is earned. The maximum total CCP is $.36/bu. Based on the latest USDA report, the estimated national average soybean price for the 2005 marketing year is at $5.50/bu., which is still well above the $5.36/bu. CCP threshold, and would mean no advance CCP payment for 2005 soybeans in late February 2006. Any potential CCP on 2005 soybeans would not be paid until the final CCP payment in October 2006, which is not likely unless prices drop.

Final CCP payments for both 2005 corn and soybeans could be made in October 2006, and will be based on the final national average market price that is calculated after the marketing year ends on August 31, 2006. However, if the final national average price for corn is significantly higher than USDA estimates, it’s possible that producers could have to repay part of the advance CCP payments they’ve received during the marketing year. This occurred with the 2004 soybean crop, when producers received advance CCP payments totaling $.182/bu. in October 2004 and February 2005, and had to refund the entire amount in October 2005, because of a significant increase in average soybean prices. It should be noted that estimated average corn price for the first five months of the 2005 marketing year (Sept.-Jan.) is $1.87/bu., with 55 percent of the 2005 bushels sold. The estimated 5 month national average 2005 soybean price through Jan. 31, 2006, is $5.65/bu.

Check Grain Bins
The wide fluctuation in outside temperatures this winter could lead to problems with corn and soybeans stored in on-farm grain storage. This is especially a concern for grain stored in flat storage. Most grain was placed in storage during relatively warm temperatures last fall, followed by fairly cold temperatures in December, then above-normal temperatures in January and now colder temperatures in February. This fluctuation in temperatures causes moisture movement in grain that can lead to crusting and even more serious grain deterioration, if the situation is not corrected. The best advice is to check grain-stored bins and flat storage every 1-2 weeks to observe any changes or problems. Also, it’s a good idea to run aeration fans after extreme temperatures to equalize the temperature of the stored grain. It is best to maintain grain at about 30-35 degrees Fahrenheit through the winter months, and to start slowly increasing the grain temperature after March 1 through the use of aeration fans.

Editors 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.