Better to Sell or Store your Crop this Year? New Web-Based Decision Aid Available
September 16, 1999
AMES, IOWA -- The Center for Agricultural and Rural Development (CARD) has launched an interactive Web site (www.card.iastate.edu/tools/ag-risk/ldp/) to help farmers understand the risks and rewards associated with alternative marketing strategies for corn and soybeans.Producers in the contiguous 48 states can access the site, input their county name and crop information, and receive county and crop loan rates, posted county prices, and per-bushel loan deficiency payment (LDP) figures. In addition, the site will provide information that can help producers decide whether it is better to store or sell their crops at harvest.The CARD Web site uses sophisticated numerical procedures to calculate average returns and the riskiness of returns for three different strategies that involve crop storage. The strategies are (1) take the LDP now and store until summer, (2) put the crop under loan and store until summer, and (3) take the LDP now, store until summer, and hedge on the futures market."Last year many farmers did not fully understand how to incorporate the LDP and the government's loan program into their fall marketing strategies," explains Bruce Babcock, director of CARD. "Many producers ended up taking the LDP in the fall and storing their crop, instead of selling it at harvest. These producers then watched the value of their stored crop decline as prices plummeted in the late spring and early summer. Our new Web-based decision aid is designed to inform producers of the potential risks and rewards associated with common marketing strategies that involve storage. They can then be in a better position to decide if the potential rewards from storing the crop are high enough to compensate them for the increased risk."CARD is a policy research and teaching center within Iowa State University's College of Agriculture that studies trade and agricultural policy, resource and environmental policy, food and nutrition policy, and agricultural risk management policy.