COUNTER – CYCLICAL PAYMENTS FOR 2004

USDA has already made an advance counter-cyclical payment (CCP) of 14¢/bu. on the 2004 corn crop. This was based on a projected 12-month national average price for corn of $1.95/bu., and a maximum total estimated CCP of 40¢/bu. for the 2004 corn crop, which was made by USDA in mid-October. If the 12-month national average price for 2004 corn is below $2.35/bu., a CCP is earned. The maximum CCP on the 2004 corn crop is $.40/ bu. For the 2005 corn crop, the maximum CCP will again be 40¢/bu., and the payments will be initiated at a 12-month national average price for corn of $2.35/bu.

USDA also made an advance counter-cyclical payment of 9.1¢/bu. in October on the 2004 soybean crop. This was based on a projected 12 month “National” average price” for soybeans of $5.10/bu., and an estimated total CCP of 26¢/bu. for the 2004 soybean crop. The maximum CCP for soybeans is 36¢/bu. The 12-month national average price threshold of $5.36/bu. and the maximum CCP of 36¢/bu. will remain the same for 2005.

The next scheduled potential advance counter-cyclical payment on the 2004 corn and soybean crop would be in February, 2005, with any remaining 2004 CCP to be made in Oct. 2005. Through December, the estimated national average price for corn since Sept. 1 is $2.10/bu., which if it held true would result in a total CCP of 25¢/bu., or an additional 11¢/bu., for the 2004 corn. Through December, the estimated national average soybean price since Sept. 1 is $5.54/bu., which is well above the $5.36/bu. threshold to earn a CCP on the 2004 soybean crop. If the current price level holds up through August 31, 2005, the entire 9.1¢/bu. advance soybean CCP will need to be refunded in October 2005.

Counter-Cyclical payments for corn and soybeans are based on the national average price for that commodity from Sept. 1 in the year of harvest through Aug. 31the following year (“Crop Marketing Year”). The crop marketing year for wheat and other small grains is June 1 in the year of harvest through May 31 the following year. The monthly average grain prices for each commodity are “weighted” for the volume sold each month to determine the final 12-month national average price for a commodity.

If the 12-month national average price for a commodity is lower than the “target price” for that commodity minus the direct payment rate for that commodity, a CCP is earned. The maximum counter-cyclical payment is earned once the national average price for that commodity is at the National Loan Rate or lower for the commodity. If an advance CCP is made, and prices rise significantly by the end of the 12-month marketing period, repayment of all or part of the advance CCP may be necessary in October the following year. This is the exact situation that occurred with the 2003 corn crop, when an advance CCP of 7.7¢/bu. was made in Oct. 2003. However, the entire 7.7¢ needed to be refunded in Oct. 2004, due to much higher corn prices during the first half of 2004. The refunded amount was deducted from advance CCPs for 2004, but may also be deducted from other DCP or CCC payments by the FSA Office.

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.