Grassley Wants National Loan Deficiency Payment Rate

July 6, 2000

Sen. Charles Grassley (R-IA) has asked Secretary of Agriculture Dan Glickman to implement national average loan deficiency payment rate. With "really low grain prices," Grassley says, "we’re in a situation where Iowa (farmers) are receiving $87 million less in loan deficiency payments" than surrounding states.

Grassley says one day South Dakota farmers were getting a 32 cent LDP on corn, some Illinois farmers got 26 cents, northwest Missouri farmers got up to 28 cents but on that same day, most Iowa farmers received 22-24 cents -- "patently unfair."

Last year, Glickman proposed a national LDP rate, an action that can be taken administratively without congressional action. It was not implemented, Grassley says, because "the Secretary ran into some political flak from senators from those states that would have lost some to make up for other states that would have gained some."

Generally, says Grassley, all farmers would gain about $400 million more than the current program offers, "so there’s no zero-sum gain here; there’s a gain for everybody." But some states might lose a little, and "those states were offended, so it didn’t go through last year."

Grassley told Glickman "we just can’t allow this sort of discrepancy to penalize Iowa farmers to the tune of $87 million."

LDPs are related both to loan rates – which vary county by county – and to USDA’s calculations of regional market prices. LDPs will generally increase as basis widens – that is, as the spread between futures prices and actual cash market prices grows wider. However, lawmakers from some states have charged for years that county loan rates should be revised. In addition, observers from different points on the ideological spectrum have long complained about the way USDA calculates market prices, charging manipulation of the calculation for political purposes. The complaints have never resulted in drastic action by Congress, though.