Beware Of Payment Limit On LDP

Farmers who took the USDA loan deficiency payment for corn this fall, on a large number of bushels, need to heed this warning. Compiled by staff

Published on: Nov 14, 2005

Farmers who did a great job of taking the USDA's corn loan deficiency payment this fall and who operate large row crop acreage might want to heed a warning.

"Monitor the total dollar amount of LDPs taken to date and be aware of the $75,000 payment limit per entity," advises Steven Johnson, ISU Extension farm management specialist in central Iowa. "The record high corn LDP available this fall in combination with a near record yield for many Midwest farms allowed for this payment limit to be reached very quickly."

If a farm that operates as a single entity owns or cash rents 900 acres of corn, averages 180 bushel per acre and averages a 47 cent per bushel corn LDP this fall, they'll likely be over limit. This amount could include the marketing loan gain should bushels taken under loan be repaid at low posted county prices this fall. 

If the LDP payment limit is met, no additional LDPs or marketing loan gains will be provided this marketing year, says Johnson. This scenario likely does not take into consideration the soybean LDP, which was only available for five days this fall and never exceeded 5 cents per bushel in Iowa.

Keep an eye on the total dollars

Johnson encourages farmers to monitor the total dollars they expect to be taken from all LDPs or marketing loan gains since harvest. This includes the LDPs claimed, but which haven't yet been paid by their local USDA-FSA office.

"With many FSA offices behind 10 days or more in processing LDP requests, their computers will not issue a warning about a farm being over this $75,000 payment limit," he says.  "Eventually a producer will be notified by FSA, but if beneficial interest in LDP bushels is lost in the mean time, that producer could forfeit their LDP if they are over this payment limit." 

The strategy most producers "over their limit" will deploy is to simply apply for a marketing loan on the balance of their bushels. These bushels can then be repaid using a commodity certificate at the posted county price for the day the loan repayment if made.  This transaction can take place the same day the loan proceeds are issued, as no lien search or lien waiver will likely be required.

Should a producer choose to pay off the loan at a later period of time over the 9-month life of the loan with commodity certificates, they will not be able to use the 60 day lock-in of the posted county price provision.

For questions you have regarding LDP payment limits, marketing loans and commodity certificates, Johnson encourages you to contact your local FSA office.