Loan Deficiency Payments or the Loan Program?

Dermot J. Hayes, Bruce A. Babcock
September 1998  [98-BP 19]

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Suggested citation:

Hayes, D.J. and B.A. Babcock. 1998. "Loan Deficiency Payments or the Loan Program?" Briefing paper 98-BP 19. Center for Agricultural and Rural Development, Iowa State University.


Low marked prices for corn and soybeans have triggered two federal price support programs: (1) a Loan Deficiency Payment (LDP) that pays producers the difference between county-level prices and that county's loan rate on a date chosen by the producer and (2) a traditional loan program whereby the producer puts grain in storage and uses the grain as collateral on a loan. Producers may enroll in either program, but not in both. Therefore, the authors discuss three choices using existing information to suggest which choice is likely to be the best response.