Subcommittee Reviews Posted County Prices

Dec 14, 2005

WASHINGTON, D.C. – Subcommittee on General Farm Commodities and Risk Management Chairman Jerry Moran today chaired a hearing to review the technical procedures associated with the U.S. Department of Agriculture’s (USDA) establishment of Posted County Prices (PCPs). USDA monitors and sets over 88,000 PCPs each day. Recent producer feedback has indicated some slight regional discrepancies in PCPs.

“It has been brought to my attention by Kansas farmers that in the last couple of months that in certain areas the PCP does not accurately reflect the local cash market price. In the instances they have pointed out, the PCP is considerably higher than the local cash price. At the same time, I fully understand there are instances in which the PCP is lower than the local cash price. The question is not whether it should be lower or higher, but whether or not the PCP accurately reflects the local market?” said Chairman Moran.

PCPs are used to determine county level loan rates and Marketing Assistance Loan program benefits for commodities. Marketing Assistance Loans provide farmers with short-term funds to cover expenses until their commodities are marketed. In the event that local market prices dip below the established loan rate, producers can choose put the crop under loan or forgo the loan and opt for a Loan Deficiency Payment (LDP). The LDP is the difference between the loan rate and the PCP.

Deputy Under Secretary Gaibler noted that establishing a PCP to reflect local cash prices while minimizing the inadvertent discrepancies in marketing loan benefits between localities is a challenging task. “If PCPs in each county are reflective of local cash prices, differences in marketing loan benefits may naturally widen between state and county boundaries, contrary to statutory provisions. Conversely, if PCPs are established to ensure that differences in marketing loan benefits are held to a minimum, the PCPs will not reflect local cash prices,” testified Deputy Under Secretary Gaibler.

Recent events such as Hurricanes Rita and Katrina, disruptions on the railways due to the hurricanes and low water levels on the Mississippi River, higher input costs and above average crop yields in 2005 also contribute to the challenge of establishing PCPs.

“This year, farmers are already feeling the affects of higher input costs due to fuel and fertilizer costs and various natural disasters, and I fear that any inaccuracy with PCPs may exacerbate the strain on our farmer’s pockets. Our Federal farm policies do not account for the input costs that our producers are experiencing now and I want to ensure that the programs we have in place to help our farmers do not inadvertently cause loss of revenue,” said Chairman Moran.

Witness testimony is available on the Committee website. A full transcript of the hearing will be available on the Committee website 4-6 weeks following the hearing.

Witness List

Panel I
Mr. Floyd Gaibler, Deputy Under Secretary for Farm and Foreign Agricultural Services, United States Department of Agriculture, Washington, D.C.

Accompanied by:
Mr. Mike Yost, Associate Administrator for Programs, United States Department of Agriculture, Washington, D.C.

Mr. Bert Farrish, Deputy Administrator for Commodity Operations, United States Department of Agriculture, Washington, D.C.

Panel II
Mr. Sherman J. Reese, President, National Association of Wheat Growers, Echo, Oregon

Mr. Greg Shelor, Vice President for Legislation, National Grain Sorghum Producers, Minneola, Kansas Mr. Dean Sonnenberg, President, National Sunflower Association, Fleming, Colorado

Mr. John Fletcher, General Manager, Central Missouri AGRIService Inc., Marshall, Missouri, on behalf of the National Grain and Feed Association

Mr. Michael O'Connor, Member, National Farmers Union, Alcester, South Dakota