CCPS ON 2003 CROP

The current U.S. Farm Program makes qualified corn and soybean producers eligible for Counter-Cyclical Payments (CCPs), when national average grain market prices are low enough to trigger the CCP payments. The CCPs for corn and soybeans are determined based on the 12-month national average corn and soybean price from September 1 in the year of harvest through August 31 the following year. So for 2003 we are almost five months into the marketing year to determine CCPs on the 2003 corn and soybean crop.

CCPs are earned when the 12-month national average price for a given crop is below the CCP trigger price, which is the target price minus the direct payment rate for a particular crop. The maximum CCP rate for a crop is the difference between the trigger price and the national loan rate for that crop. Actual CCP payments for a given crop are paid on 85% of the FSA farm program acres times the established yield for CCP payments. Sounds confusing; however, CCPs are actually not that difficult to understand!

Based on the January 12 USDA Grain Supply and Demand Report, the projected seasonal National average price for corn is in a range of $2.15-2.45/bu., with midpoint forecast of $2.30/bu. The CCP trigger price for corn is $2.32/bu., which would result in an estimated total CCP for 2003 of $.02/bu. Back in October 2003, USDA projected a CCP on the 2003 corn crop of $.22/bu., and an advance payment of $.077/bu. was paid to eligible producers. Based on the current estimates, USDA will likely not make an additional CCP payment on corn in February 2004. Also, if current national corn prices hold through the 12-month marketing year which ends on August 31, producers may have to repay some of the original advance payment for 2003 corn that they have already received.

Based on the most recent USDA Report, the projected seasonal national average price for soybeans is in a range of $6.90-7.60/bu., with a midpoint of $7.25/bu. The projected national average soybean price since September 1, 2003, has remained well above the $5.36/bu. trigger price needed to generate potential CCP payments for soybeans. CCP payments are not likely on the 2003 soybean crop.

DCP PROGRAM SIGN UP FOR 2004

There has been some confusion regarding sign-up for the 2004 DCP Farm Program is now underway at County Farm Service Agency (FSA) Offices. Producers must sign DCP contracts annually at County FSA Offices in order to receive direct payments and potential counter-cyclical payments for a given crop year.

Producers can request an advance payment, equal to half of their total 2004 direct payment, anytime after they have completed enrollment for the 2004 DCP Program at their County FSA Office.

Base acres and proven yields that were established for the new Farm Program at sign-up time last year will remain in effect until the current Farm Bill expires in 2007. The proven yields are only used to calculate potential counter-cyclical payments. Established FSA yields that were carried forward for corn and wheat and were established for soybeans are used to calculate direct payments. These base acres and payment yields cannot be updated annually.

The payment formula for direct payments is base acres times payment yield times .85 times the payment rate. The direct payment rate is $.28/bu. for corn; $.52/bu. for wheat; and $.44/bu. for soybeans.

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.