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Corn Growers Commodity Plan: Replace Non-Recourse Marketing Loan & LDPs

Corn Growers Commodity Plan: Replace Non-Recourse Marketing Loan & LDPs
House Agriculture Committee hearings move toward conclusion next week

(April 25, 2001)

Corn producers from Battle Creek, Michigan; the Texas Panhandle; and Central Ohio detailed for House Agriculture Committee Members a farm income proposal that replaces the non-recourse Marketing Loan Program and Loan Deficiency Payment with a 9-month recourse loan. The National Corn Growers Association farm proposal maintains Production Flexibility Contract payments, and sets a National Target Income, producer payment units, and an income shortfall calculation, establishing income shortfall-based producer payments to help America's farmers remain globally competitive, market responsive and environmentally responsible, with access to world markets, capital, and advances in technology and risk management.

"We are moving toward conclusion after what will be four months of hearings by May," said House Agriculture Committee Chairman Larry Combest (R-Texas). "Producers have voiced their views in an unprecedented series of field hearings in their communities last year with this Committee, and have spoken through testimony by their commodity and farmer groups that has earned reviews as some of the more effective testimony seen by veteran observers of this process."

The specifics of the corn growers' proposed commodity income support plan include:

· Replace non-recourse Marketing Loan Program and Loan Deficiency Payment –

The non-recourse MLP and LDP would be replaced with a 9-month recourse loan, whereby the producer would repay both principal and interest.

· National Target Income –

Annual target income for corn and other loan-eligible commodities would be based on the average crop value during the base period, and incorporates producer benefits from the marketing loan program and the market loss assistance payments. This base period average income is adjusted for each year of the farm bill by a factor that reflects projected production increases. This adjustment is necessary to ensure that producers have adequate income protection as crop yields increase. In addition to a counter-cyclical program, the corn growers' proposal assumes the continuation of Production Flexibility Contract (PFC) payments at 2002 levels for the life of the new farm bill. Consequently, the PFC payments are not included in target income.

· Producer Eligible Payment Units –

Producers would sign up by providing acreage data and yield data for their operation during the base period; suggesting the 1996 through 2000 crop years reflect the experience of the first five years of the current farm program. Production would need to be adjusted for producers who suffered major crop losses during one or more of those years by allowing producers in declared disaster areas to substitute crop insurance transition yields (T-yields) for purposes of calculating eligible payment units.

· Income Shortfall Calculation –

Each year, crop income will be calculated using USDA production estimates and the average price during the first 3 months of each commodity's marketing year. For corn and other commodities with a marketing year that begins on September 1, the third month price will be the preliminary estimate as determined by the National Agricultural Statistics Service. A 3-month price allows payments to be calculated and made when they are most needed by farmers. The expectation is that farmers would have the option of receiving these payments either prior to or after December 31 or each year for optimal tax management. Whenever the national crop income is less than the target income, producers would receive a payment based on their eligible bushels.

· Producer Payment –

For each loan-eligible commodity, the total counter-cyclical income shortfall would be divided by the sum of all producers' base units, then multiplied by the individual producer's base units to equal the producer's counter-cyclical crop payment.

In addition, the National Corn Growers Association called for renewable fuels such as ethanol and bio-diesel to play a significant role in the nation's comprehensive energy strategy with assessed tax rates that promote market acceptance.