Iowa Public Television


Price Concerns Ride on End of Loan Program

posted on July 11, 2003

The big news in the markets this week was the Friday release of the USDA crop report, which showed the potential for a whopping 10.3-billion bushel corn crop. But it's not just new crop corn that could have a price-depressing impact on the markets. This fall, with the end of the government loan program, old crop corn also will be a factor.


Price Concerns Ride on End of Loan Program

The sheer volume of corn coming out of the loan program this fall, especially in the Western Corn Belt, is staggering. USDA forecasts that in Iowa alone, some 184 million bushels of corn will be released.

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.


Tags: corn crops markets news