With the markets already under harvest time pressure, some analysts are predicting a precipitous fall in cash prices for corn. There also likely will be a storage problem, as farmers look to warehouse both the old and new corn crops.
Under the loan program, producers are provided so-called nonrecourse loans by the government, with the farmer's crop used as collateral. Producers can settle the loans at maturity by forfeiting the crop to the government or by repaying the loan with interest. Either way, the expiration of the loans is sure to put vast amounts of corn on an already weak market come fall.
With 676 million bushels of 2002 corn under loan, the appearance of vast amounts of old and new crop supplies on the market easily could push cash prices well below the current loan rate.