US Loan Rates to wreck Durum and Peas

[TOM4CWB]

Charlie,

I was reading http://www.grandforks.com/mld/agweek/3531800.htm;

Even US farm leaders know that what is happening is bound to distort Canadian markets!

[TOM4CWB]

Here is the article:

Posted on Mon, Jun. 24, 2002

USDA rate scheme could backfire
By Mikkel Pates
Agweek Staff Writer

An unexpected U.S. Department of Agriculture plan to “differentiate” between loan rates among some classes of crops under the new farm law will drive acreage increases for specialty crops such as durum, confection sunflower and field pea plantings, a North Dakota farm leader says.

Allen Skogen, president of the North Dakota Grain Growers, was credited with thinking through some of the basics of what became the Farm Security and Rural Investment Act of 2002.

“One of our primary goals all along in the farm bill was to see that loan levels don't distort production,” Skogen says. “Now we have a situation where there is going to be much more distortion than there was in Freedom to Farm.”

Skogen says he was “blind-sided” by USDA's plan to differentiate loan rates between things such as durum wheat and other wheat and between confection sunflower and oil-type sunflower. The farm bill, as passed by Congress, didn't include the differences.

Differentiation will “put a lid” on prices for those crops because the relatively high loan rates will cause overproduction. Durum wheat received an 85-cent-per-bushel differentiation in Skogen's Barnes County, N.D., over other spring wheat and winter wheat, the larger crop typically grown for use in bread products.

“Years ago, when we raised a lot of durum, we shifted a lot of land into durum for 25 cents a bushel,” Skogen says. “There's no question there'll be a lot more durum raised in North Dakota. We're one of the most diversified crop production states there is, so this is where you'll see the majority of the shift.”

Planting decisions for the 2002 crop are largely set, but the rates surely will affect plantings in 2003 and beyond if the rate structure stays in place. Unchecked, the increased production will eliminate the possibility of premium markets for high-quality durum.

Skogen learned of the differentiation the week of June 9 and says before that he had “almost no indication” of the price differentiations. The only clue he had was talking to a USDA worker who was building a database to compare wheat price by class.

“The wheat industry basically was taken by surprise,” Skogen says.

USDA officials have indicated there would be “no changes” and that Congress isn't anxious to tinker with a bill that already is under fire in national media for being too expensive.

North Dakota Agriculture Commissioner Roger Johnson criticized USDA for a surprise 25 percent reduction in the flax loan rate, while other minor oilseed crops received loan rate increases. Barley loan rates remain relatively low in the United States.

“You could see Canada backing away from peas and durum in a big way,” Skogen says. “Meanwhile, we're probably going to give them the barley industry.”

[charliep]

I agree with the comments. Durum is the worst given the struggle to find additional markets already (note our discussion on CWB not taking all the durum offered this year). Durum has to find new markets.

Comments on peas and lentils would be similar with the additional thoughts of more pressure to put peas into domestic rations. Chickpeas (I assume N. Dakota would be desis) are an unknown).

US is likely to move to a net importer of flaxseed after being an exporter last couple of years.

I am not comfortable enough with sunflowers to comment on changes here.