Agricultural News
State Ag Secretary Jim Reese Encourages Wheat Farmers to Consider the Use of Nonrecourse Marketing Assistance Loans
Sat, 09 Jul 2016 21:47:16 CDT
Oklahoma's State Secretary of Agriculture, Jim Reese, has released an "open letter" to the wheat producers of the state of Oklahoma- encouraging them to consider a couple of tools available to them to cope with the current low wheat prices that are being posted at local elevators. Here are his comments and his advice:
"With wheat prices at historic lows, farmers are looking at all options. An abundant wheat crop and already high wheat stocks have led to wheat prices that are the lowest they have been in 10 years. Oklahoma farmers have mostly completed their 2016 harvest, but now they have their harvest bills to pay with low crop prices.
"One option rarely used these past 10 years may be USDA/FSA's nonrecourse marketing assistance loans. This nine-month loan gives producers interim financing and allows for wheat to be stored instead of selling when market prices are low. Grain prices and rates vary daily but at the time of this writing, the loan rate is higher than the cash price in much of the state. Marketing Assistance Loans are like all other loans, they have to be paid back. However, you can redeem your loan by forfeiting your commodity. You still have to pay storage, but it does provide a stabilizing force at the bottom of the market. Loan Deficiency Program is also available when prices are below the established loan rate for a particular county, currently around $3.18 across the state.
"Another option is sell what is required to pay bills, stop that storage, stop interest payments and hope to sell higher later in the year. Historically, September, October, and November have higher prices. Historically.
"Finally, there are options within the futures market. Real options on the futures market potentially can protect your loss against lower prices and still be in the market for later year price gains. Professional assistance from a grain broker is highly recommended and many grain companies offer that assistance.
"It is dangerous territory to recommend buying or selling at any price, but it is really important to consider all of your options. At this low price the Marketing Assistance Loan and Loan Deficiency Program will certainly play a bigger role than it has the past 10 years."
While the price has a tendency to dampen our spirits, thankfully the abundant harvest will help us overcome a lower price just like the higher prices helped us through the recent droughts.
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