Location and Marketing under Marketing Assistance Loan and Loan Deficiency Payment Programs

Alexander E. Saak
April 2002  [02-WP 297]

Marketing assistance loan (MAL) and loan deficiency payment (LDP) programs differ in their treatment of basis. This paper analyzes marketing decisions under these programs when producers are differentiated by location with respect to the terminal market. The developed model may help explain the observed lack of an association between the county loan rate and the share of a county's production enrolled in MAL programs. Under certain conditions, multiple equilibria are shown to emerge. The effects of MAL and LDP programs on welfare and policy implications are discussed.

Keywords: commodity prices, grain storage, price support programs.

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