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Corn+Soybean Digest

Thiesse's Thoughts

DCP Program Sign-Up For 2007

Sign-up for the 2007 DCP Farm Program began Oct. 1, 2006, at county Farm Service Agency (FSA) offices. Producers must sign DCP Program contracts annually in order to receive Direct payments, and to receive potential Counter-Cyclical payments, on DCP Program commodities for the 2007 crop year. The first portion of the 2007 Direct payments, which are scheduled to begin after Dec. 1, 2006, can’t be made until after producers have completed enrollment for the 2007 DCP Program at their county FSA office.

Base acres and proven yields that were established for the current Farm Program will remain in effect until the current Farm Bill expires in 2007. These base acres and yields can’t be updated annually. Producers should be sure to add or deduct any acres for the 2007 crop year that resulted from land purchases or sales, and changes in land rental acres, when signing up for the 2007 DCP Program. Those farm operational changes, resulting from land sales or land rental agreements, are much easier to make prior to the DCP sign-up for the next year than after sign-up has occurred. Producers should contact their FSA office for more details on sign-up procedures for the 2007 DCP Program.

DCP Advance Payments Change

Eligible producers that are properly enrolled in the 2007 DCP Program will be eligible to receive their 2007 advance payment for the 2007 Direct payment after Dec. 1, 2006. Because of income tax and cash flow reasons, some producers will choose to delay receiving the advance DCP direct payment until after Jan. 1, 2007. This is a choice that producers can make at their FSA office. Advance payment amount for the 2007 Direct payment will be only 22% of the total 2007 Direct payment amount. The balance of the 2007 Direct payment will be paid in October, 2007.

The amount of the advance payment for Direct payments was 50% until January, 2006, was adjusted to 40% for 2006, and now will be 22% for 2007 and beyond. Direct payment rates and yields have not changed for 2007, and remain at $.28/eligible bushel for corn, $.44/eligible bushel for soybeans and $.52/eligible bushel for wheat. The only adjustment in the total Direct payment would be if crop acres have either been added or reduced through land purchases or sales, and due to additions or reductions in land rental acres from 2006 to 2007.

New for 2006: Up to 40% of the projected Counter-Cyclical payment (CCP) for a given crop marketing year (Sept. 1-August 31 for corn and soybeans) is available after Oct. 1, 2006, with no potential for an additional advance CCP in February, 2007. No advance CCP was made for 2006 corn, soybeans or wheat. Previously, an advance CCP of 35% was available in October during the year of harvest, and another 35% advance CCP in the following February, depending on USDA commodity price projections at the time. The final CCP payment in any given year is made after Oct. 1, in the year following harvest and is based on final 12-month national average price for a commodity. If USDA projects high enough commodity prices, such as with 2006 corn, soybeans and wheat, no advance CCP is issued, and if these commodity prices hold true, no final CCP will be made in 2007.

The adjustments in the DCP advance payments potential for both Direct and CCP payments were made as part of the Federal Budget Reduction legislation enacted by Congress in January, 2006. The reduced level of DCP Direct advance payments could have an impact is 2007 cash flow planning for crop producers. It should be noted that there is no outlay of Federal dollars by USDA for CCPs when commodity prices are above the target price thresholds, minus the direct payment amounts. Based on current price projections, this appears to be the situation for the 2006 corn, soybean and wheat crops.

Corn Storage Issues

Just as in 2005, one of the biggest challenges with the 2006 corn harvest has been finding adequate storage space for the later harvested corn. The combination of a fairly large amount of carry-over 2005 corn in many areas, along with greater than expected 2006 corn yields, has filled both on-farm and grain elevator storage to capacity.

We are already seeing large amounts of corn piled on the ground in many communities, though not as extensive as in 2005. Some grain elevators have closed their market to taking in and storing corn, other than from producers that are selling the corn on a cash sale to that elevator. As a result, many producers are relying on temporary grain storage in machine sheds older grain bins, outdoor cement slabs, etc. to temporarily store grain. The nice weather pattern, with 50-60 degree temperatures, is not very conducive to good grain storage conditions, without proper aeration for the grain. Producers need to plan for proper aeration of any corn on the farm that will be placed in temporary storage for more than a couple of weeks to avoid significant storage losses. The dollar loss from corn storage problems can be significant, if the storage problems are not properly addressed in a timely fashion.

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].

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