Loan deficiency payments or the loan program?
Hayes, D.J.; Babcock, B.A.
CARD Briefing Paper ( 98-BP19): 4 pp.
1998
Document Number: 214743
Low market prices for maize and soyabeans in the USA have triggered two federal support programmes: the Loan Deficiency Payment (LDP) and a traditional loan programme where the producer puts grain in storage and uses the grain as collateral on a loan. Because the farmer cannot enrol in both programmes, he must decide between them. Three scenarios are considered for a hypothetical Iowa maize producer: sell at harvest and take the LDP or use the loan programme; use the loan programme or take the LDP and store at own risk; or use the loan programme or take the LDP, store, and lock in a futures price.