Are Loan Deficiency Payments Too Low In Iowa?

Bruce A. Babcock, Dermot J. Hayes, Phillip Kaus
December 1998  [98-BP 20]

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Babcock, B.A., D.J. Hayes, and P. Kaus. 1998. "Are Loan Deficiency Payments Too Low In Iowa?" Briefing paper 98-BP 20. Center for Agricultural and Rural Development, Iowa State University.


As part of the Loan Deficiency Payment (LDP) program, when a county's posted county price (PCP) falls below the county's loan rate, the U.S. Department of Agriculture agrees to pay the producer the difference between the two. Because 1998 corn and soybean prices have fallen below the loan rate for the first time, grain farmers will now rely on LDPs for a significant proportion of their income. The authors examine the differences between loan rates for Iowa and surrounding states, and conclude that Iowa farmers would obtain significant income increases by using other states' LDP rates (with the exception of Wisconsin).