Farmers to repay FSA price supports

SALEM, Ohio – Some area farmers may soon be digging in their pockets to come up with money to repay USDA’s Farm Service Agency.

Farmers who accepted the first advanced Counter-Cyclical Payment (CCP) last fall for the 2003 crop may need to pay it back because of higher corn, soybean and wheat prices.

Wait to see. Glenda Ward, executive director for the Columbiana-Mahoning FSA, said many of the farmers she works with knew there was a chance they would have to repay the support payments.

They waited to see what actual rates were before taking the payments, she said.

“But someone out there will have to refund it. There’s the potential to have to pay it back,” Ward said.

How it works. The farm bill provides two types of price supports for farmers.

Through Direct Payments (DP), farmers are guaranteed a certain payment for their crops for the length of their enrollment in the program.

The secretary of agriculture sets projected crop price rates for the Counter-Cyclical Payment program.

If the 12-month average market price for each crop drops below the target price, the government payments kick in, Ward said.

First advance counter-cyclical payments were issued in October 2003 for wheat and corn.

The CCP advance for corn was 7.7 cents per bushel; for wheat, it was 3.1 cents per bushel.

Prices were high enough for soybeans that there was no advanced CCP made.

Signed contracts. Producers who signed the Direct and Counter-Cyclical Payment contracts agreed to refund any payments they took that exceeded the amount actually earned under the contract.

An April 29 notice from the Farm Service Agency to state and local offices said if market prices continue near current levels, producers may be required to repay all or a portion of that payment.

Overpayment amounts are not known and will be calculated at the end of each crop’s marketing year. For wheat, that date is July 2004; for corn, October 2004.

Producers will then need to make the repayment, if warranted.

Two options. Farmers should have received a letter explaining two repayment options.

Option 1 allows producers to essentially do nothing, and the repayment will be subtracted from their 2004 final Direct Payment and the 2005 crop DP to be made in fall 2004.

The producer will not have to write a check to the Commodity Credit Corporation and there will be no interest charged on the repayment amount.

A repayment statement will be issued showing the producer has satisfied the obligation.

Default. Option 1 is the default option and the producer does not need to take any action for the repayment to be made automatically.

Under Option 1, the producer will have more than enough DP funds to cover the cost of the CCP repayment.

The total DP for corn is 28 cents per bushel; and for wheat the total DP amount is 52 cents per bushel.

The 2004 final DP payment is half that, and the advance DP for 2005 is also half that amount.

To calculate the repayment amount, multiply the DP/CCP contract acres by the DP/CCP yield times .85 times the CCP advance amount.

Option 2. Under Option 2, the producer will receive initial notification of the repayment obligation, followed by a first demand letter 30 days later.

At that time, producers can settle the obligation by simply writing a check to CCC.

If payment is not made within the 30-day period following the first notification, a second demand letter will be sent and at that time interest will begin accruing.

Producers need to notify their local FSA office by June 15, 2004, to select Option 2.

Differences. Glenda Ward said the second option may be best for farmers who want to pay off their debts immediately.

The first option is best for farms who can’t cashflow the repayment or want to stretch their refund out over time, she said. Payments won’t be drawn from farmer funds until March 2005.

“The first option gives farms the ability to use their money through March, and they don’t have to write a check from the farm account,” she said.

Amounts due vary for each farm because of differences in payment acres and yields enrolled in the program, Ward said.

If producers did not elect to take the 2003 crop advanced CCP, they won’t have to make a repayment.

For more information, contact your local FSA office.

(Reporter Andrea Myers welcomes reader feedback by phone at 1-800-837-3419, ext. 22, or by e-mail at amyers@farmanddairy.com.)



Option 1 calculations



*      Direct Payments are 28 cents per bushel for corn and for 52 cents per bushel for wheat.



*      To calculate repayment amounts:

      (Contract acres) x (yield) x (.85 times the CCP advance amount)



* To choose this option, do nothing. To select another repayment option, contact your local FSA office by June 15.