Government Loan Program Last Hope for Grain Farmers
CHICAGO (AP) _ Grain farmers across the Corn Belt will be reaping bountiful harvests of corn and soybeans this year, and more than ever before are expected to turn to the government as the last resort for a price that they can live with.
With corn, wheat and soybean prices hovering at or near their lowest levels in the past seven or eight years, the only alternative for many farmers will be government price support programs.
Eligibility for loans from the Commodity Credit Corp., an arm of the Department of Agriculture that was set up to provide such supports, is historically high. Farmers become eligible for loans by agreeing to leave a portion of their crop land idle.
The credit agency is expected to wind up owning billions of dollars worth of surplus commodities in a year when Congress is trying to devise a new farm bill that will reduce government’s agricultural expenses.
″From a policy management standpoint, this crop could not have come at a worse time,″ said Ross Korves, an economist with the American Farm Bureau Federation.
The USDA estimated this past Monday that U.S. farmers will produce 8.26 billion bushels of corn, 1.96 billion bushels of soybeans and 2.37 billion bushels of wheat. That will result in surpluses of 2.36 billion bushels of corn, 465 million bushels of soybeans and 1.49 billion bushels of wheat, the agency predicted.
Commodity analysts pointed out that the estimates were based on conditions as of Aug. 1 and excellent growing weather since then portended even better crops.
Commodity prices at the Chicago Board of Trade reflect the situation, having fallen sharply as the crops have improved.
The Commodity Credit Corp. provides a last resort for farmers.
Instead of selling corn at the current price of $2.32 a bushel, a farmer can get $2.55 from the agency. The wheat contract sells for $2.96 a bushel, while the agency will give $3.30.
Farmers can get a credit agency loan by agreeing to keep the crop off the market. The farmer can sell the grain later if the price increases sufficiently to let him repay the loan plus interest.
If prices stay low, however, the farmer can keep the loan and forfeit the grain to the agency.
As of Aug. 1, the agency already owned 410 million bushels of wheat, 227.5 million bushels of corn and 120,000 bushels of soybeans.
″Certainly we are going to end up owning more than we’d like to,″ said Everett Rank, administrator of the credit agency.
″But this is a tool they (farmers) need to take advantage of,″ he said.
″If we don’t do anything, by 1987 we’ll have enough for another PIK, or a similar program,″ said Korves, referring to the 1983 program under which farmers who agreed to reduce their acreage were given grain from the Commodity Credit Corp.’s inventory.
Here are some price trends on major commodity markets this past week:
Grain and soybeans were mostly higher on the Chicago Board of Trade.
Wheat for delivery in September settled Friday at $2.931/2 a bushel, which compared with $2.853/4 the previous Friday; September corn settled at $2.32 a bushel, up from $2.281/4 ; September oats advanced to $1.213/4 a bushel from $1.18; and August soybeans settled at $5.21 a bushel, up from $5.191/2 . New crop contracts were mixed, with December corn settling at $2.251/4 a bushel, up from $2.223/4 , and November soybeans falling to $5.131/2 a bushel from $5.143/4 .
Livestock and meat prices were mixed on the Chicago Mercantile Exchange.
Live cattle for delivery n August settled Friday at 54.90 cents a pound, down from 55.35 cents the previous Friday; August feeder cattle were unchanged at 65.45 cents a pound; August live hogs were 44.70 cents a pound, up from 43.27 cents; and August frozen pork bellies fell to 48.65 cents a pound from 49.37 cents.
Precious metals prices were higher on the Commodity Exchange in New York.
Gold for delivery in August settled Friday at $337.90 a troy ounce, up from $328.50 a week earlier; August silver climbed to $6.403 a troy ounce from $6.289; and August copper advanced to 61.30 cents a pound from 60.55 cents.
Petroleum futures were higher on the New York Mercantile Exchange.
Crude oil for delivery in September settled Friday at $28.03 a barrel, up from $27.37 a week earlier; heating oil settled at 74.02 cents a gallon, up from 73.11 cents.