COUNTER - CYCLICAL PAYMENT UPDATE
The continued strength in the soybean market during most of the spring and summer months has made it certain that the advance counter-cyclical payment (CCP) that producers received last fall and winter on the 2004 soybean crop will be required to be repaid after October 1, 2005. Soybean producers were eligible to receive an advance CCP of $0.091 per bushel in October, 2004, and another $0.091 per bushel in February 2005, on soybeans produced in 2004. This was based on a projected national average soybean price of $5.10 per bushel on the 2004 soybean crop at both times, and an estimated total CCP of $.26 per bushel. The maximum total CCP is $0.36 per bushel. The preliminary estimated “national average soybean price” through August for the 2004-2005 crop marketing year was estimated at $5.74 per bushel. This means that no CCP would be earned on the 2004 soybean crop, and any advance payments that were disbursed would need to be refunded. The 2004-2005 crop marketing year ended on Aug. 31, 2005.
The scenario for earned CCP payments on the 2004 corn crop is considerably different than was just described for 2004 soybeans. In October 2004, and again in February 2005, USDA estimated the “national average corn price” at $1.95 per bushel for the 2004 marketing year. This resulted in USDA projecting the maximum total counter-cyclical payment (CCP) for the 2004 corn crop of $0.40 per bushel. An advance payment of 35 percent of the estimated amount, or $0.14/ bushel, was available to eligible corn producers in late October 2004, and another $0.14/bushel in February 2005. Some producers have chose not to receive the advance CCP payment on the 2004 corn crop, but rather to take the entire earned CCP as a final payment in October 2005. The preliminary estimated 2004 “national average corn price” through August for the current marketing year (ended August 31, 2005) was estimated at $2.06 per bushel. If the final “national average corn price” announced by USDA stays at $ 2.06 per bushel, the result will be a final CCP of $0.29 per bushel earned on the 2004 corn crop. If that occurs, the entire advance CCP ($0.28 per bushel) can be retained by producers that received it as an advance CCP payment, plus they will receive an additional one cent per bushel final CCP payment. Producers that chose not to take the advance CCP payments will receive the entire 2004 corn CCP payment of $0.29 per bushel in October, 2005. USDA will announce final “national average prices” for 2004 corn and soybeans, and final 2004 CCP payments after Oct. 1, 2005.
An advance CCP payment similar to 2004 (up to 14 cents per bushel) is likely on the 2005 corn crop, given current National average corn price projections. This payment would likely occur in late October. Any advance CCP payments in February 2005 will depend on the National average corn price projections in late January 2005. Remember, it is optional whether or not to accept the 2005 advance CCP payment in October 2005, or to delay receiving the CCP payment until February 2006, or October 2006. Some producers do not like to take the advance CCP payments until later for income tax reasons, or to eliminate the need for possible repayment of advance CCP’s later.
No advance CCP payment on the 2005 soybean crop is likely this Fall, given current National average soybean price projections. As with corn, any future advance CCP payment in February, 2005, will depend on late January price projections.
For more information on final 2004 CCP payments for corn, repayment of 2004 CCP advance payments, or regarding potential advance 2005 CCP payments for corn or soybeans, producers should contact their County 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 [email protected].