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Low wheat price triggers farm program not tapped for years

Jolie Green
Kansas Agland

From Kansas Agland:

For the first time nearly 15 years, the price of wheat is so low that government loan programs have once again kicked in.

Farmers, as well as elevator managers, are having to relearn about programs like Loan Deficiency Payments and Marketing Assistance Loans as the cash price of wheat hovers around $3 a bushel.

For producers who have been around a number of years, this isn’t a good thing.

“We’re scraping the bottom of the barrel for a nickel,” said veteran Pawnee County farmer Tom Giessel, who added he had conversations with the local elevator Wednesday just to get back to speed about how these government safety-net programs work.

Relearning the program

After a multi-year drought, Kansas farmers are harvesting a bin-busting wheat crop. Elevators are so full, in fact, that many are piling wheat on the ground.

With the glut of wheat not just domestically but globally, government programs kicked in Tuesday as the posted county price – figured on the lower of 30-day or five-day rolling average – fell below each county’s loan rate, according to Rod Winkler, with Kansas Farm Service Agency.

In Reno County Thursday, the difference was 6 cents below the loan rate of $3.23. For someone harvesting 50,000 bushels of wheat this year, they would get $3,000 through the FSA-administered government program.

The LDP is a subsidy that producers don’t have to give back, said Winkler.

Low prices also are causing farmers to consider the government’s commodity marketing loan program, which is available no matter the market but is often taken advantage of when commodities plunge, according to FSA.

Farmers can receive a nine-month, low-interest loan using their wheat as collateral, according to the Farm Service Agency. Farmers receive funds based on the loan rate. In times of low prices, it gives farmers cash for cutting bills and other needs, while allowing them to hold on to their wheat for better prices.

Farmers can either repay the loan or forfeit their wheat to the Commodity Credit Corporation, the agency states.

Meade Co-op General Manager Randy Ackerman recalled the days when farmers relied more heavily on such programs. Some nights after binning the day’s harvest, he’d stay at the elevator until midnight, faxing farmer’s LDP requests to the local FSA office so they could get the day’s LDP rate.

He remembers an FSA employee telling him, “We just never could stack enough paper in the fax machine – there would be piles of proof of yields.”

Ackerman said he has been fielding calls from producers about the programs. On Tuesday, he started making calls to figure out how to again assist farmers, including for information on how to fill out the needed warehouse receipt for those wanting to take out the marketing assistance loan.

“I had to dig out our warehouse receipt book,” he said, adding “There was only one lady in the (FSA) office who knew how to issue a warehouse receipt for wheat.”

He finally found the book, which showed the last time he filled out such paperwork was for loans in 2004.

“The past five or six years, we haven’t even gotten close to loan values,” Ackerman said. “But this year there is an abundance of everything out there. Commodity prices are eroding to the level now that farmers can take advantage of government assistance.”

So far, he hasn’t had to fill out a warehouse receipt as no one has asked to enroll in the marketing loan program in his territory, yet, he said. He did fax proof of production to the local FSA office for several farmers wanting to take advantage of the day’s LDP rate, which was 7 cents below the loan rate on Wednesday.

Winkler said the price precipitated the agency to have a statewide training on marketing loans and the LDPs Wednesday afternoon.

Credit USDA

Big harvest

Just a few years ago, the price of wheat hit more than $8 a bushel.

Wheat closed at $3.02 on Wednesday, Ackerman said. His territory still has 10 percent of wheat left in the field, but rains have kept combines from rolling.

The cooperative’s biggest crop was in 2003, he said, but his crew will bin more than that this year.

“There is an awful lot of 70-bushel wheat,” he said, adding that is amazing for a dryland crop.

Giessel also saw a good harvest. He said he probably will go ahead and file for an LDP, then sell his wheat and “get out of this thing.”

“I don’t think there will be any upward movement” of the grain markets, he said, adding of the LDP, “It’s a pittance. It takes the focus away from the real issue.”