COUNTER – CYCLICAL REPAYMENT
The continued strength in the grain markets has almost made it almost certain that the advance 2003 counter-cyclical payments (CCP) of 7.7 cents per bushel for corn and 3.1 cents per bushel for wheat that producers received last fall will be required to be repaid after October 1. Counter-cyclical payments for corn and soybeans are based on the national average price for that commodity during the crop marketing year, which is from September 1 in the year of harvest through August 31 the following year. The crop marketing year for wheat and other small grains is June 1 in the year of harvest through May 31 the following year. The monthly average grain prices for each commodity are “weighted” for the volume sold each month to determine the final 12-month national average price for that commodity. For example, 75 percent, of the corn and 86 percent of the soybeans are typically marketed nationwide by the end of May.
The 7.7 cents per bushel advance counter-cyclical payment on the 2003 corn crop, which was made by USDA to producers last October, was based on a projected 12-month national average price for corn of $2.10 per bushel, and a total estimated counter-cyclical payment of 22 cents per bushel for the 2003 corn crop. Now, based on the most recent USDA projections, through April, 2004, USDA is estimating a 12-month national average price of $2.55 per bushel for corn, and a total 2003 counter-cyclical payment of zero. If the 12-month national average price for 2003 corn is above $2.32 per bushel, repayment will be required of the entire 7.7 cents per bushel advance counter-cyclical payment that was paid last fall.
No advance CCP payments on the 2003 crop were made for soybeans, barley, or oats, or other oilseeds. The USDA target price for soybeans for both the 2003 and 2004 crop years is $5.80 per bushel, and the direct payment rate is $.44 per bushel, meaning that a CCP payment is earned if the12-month national average soybean price drops below $5.36 per bushel. The National Loan Rate for soybeans is $5 per bushel, which means there is a maximum potential CCP payment of $.36 per bushel for soybeans. At the end of April, USDA projected a 12-month national average price for the 2003 soybean crop of $7.60 per bushel.
CCP REPAYMENT OPTIONS
Producers should have received a notice from their County Farm Service Agency (FSA) Office with details for a possible refund or repayment of the advance counter-cyclical payments for corn, wheat, and other crops for the 2003 crop year. USDA will determine final CCP payment refund amounts in July, 2004 for wheat, and in October, 2004 for corn. Again, it is likely that the entire amount of advance payment for both crops will need to be repaid to the CCC. USDA has given producers two options for the refund of 2003 advance counter-cyclical payments that may be due in 2004:
Option #1 ---
The Commodity Credit Corporation (CCC) through County FSA Offices will automatically reduce any DCP direct or counter-cyclical payments between October, 2004 and March, 2005 to satisfy the amount of the refund for the 2003 advance CCP payments. Producers will receive a statement of the CCP payment refund amount to use for tax purposes and their farm records. If a producer wants to use Option #1 for the CCP refund, they DO NOT have to contact the County FSA Office, or take any other action. Option #1 is the “default option” that will be used by County FSA Offices, if no other Option is selected.
Option #2 ---
Producers can repay the amount of the refund for the unearned advance CCP payments by personal or business check, etc. at their County FSA Office, according to the guidelines of the Debt Collection Improvement Act (DCIA) of 1996. Producers choosing this Option will receive a demand letter for the amount of the CCP refund about 30 days after the end of the crop marketing year, which is August 31, 2004 for corn, and May 31, 2004 for wheat. Producers will then have 30 days to make payment of the full refund amount to County FSA Offices. After 30 days, interest accrues on the unpaid balance of the refund. There are no interest charges with Option #1 through March, 2005. If producers want to use Option #2, they must notify their County FSA Office by June 15, 2004.
BOTTOM LINE ON CCP REPAYMENT
Corn and wheat producers should remember to adjust their estimated 2004 cash flow projections and farm income projections to reflect the amount of the 2003 CCP payment refunds if they chose to receive the advance CCP payment last fall. For most corn producers the CCP payment refund is probably between $7 and $10 per corn base acre that was enrolled in the DCP farm program in 2003. For more information on the CCP repayment, 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].