Southwest Agribusiness Consulting, Inc.

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FARM PROGRAM IMPLEMENATION

Given that commodity price support and loan provisions of the USDA represent an important part of any pricing strategy, our marketing plans are designed to incorporate the full use of these farm program tools. Any time a program crop is sold, it is important to consider eligibility for program benefits. Our staff tracks this eligibility and communicates to the customer any steps needed to qualify. Some of the more common USDA programs facilitated by our staff include:

Loan Deficiency Payments: Commonly referred to as LDP, this price support feature of the farm program protects the producer in times of when prices are trading below the loan rate. To use this program effectively, however, producers must be aware of the daily change that occurs in the LDP respective to the futures and basis markets. It is also important to consider the risk protection that this price support is providing when applying to receive these payments.

Commodity Loans: There are times when the decision to store a commodity will be influenced by the potential benefits of utilizing the commodity loan program. The nine-months of use of the commodity loan can be used very effectively to manage futures, basis, and the posted county price. For each customer that stores grain at either a commercial warehouse or farm facility, we incorporate these issues into our marketing plans.

60-Day Posted County Price Lock: An additional feature of using the commodity loan program is the 60-day lock on the posted county price that is available during the first seven months of the loan. By coordinating this program with hedging and delivery terms, it allows producers to lock in a favorable posted county price, and still maintain the ability to use a lower posted county price after 60 days should the market move lower. Our staff incorporates this possible use of this feature on all farm stored commodities in loan, and in some cases commercially stored commodities.