Washington Post Farm Policy Stories: A Case Study in Urban Legend: Part 3 by Jeff Harrison, of Combest-Sell and Associates AgWeb.com The Post's Problem with LDPs Is in Conflict with Its Views on Direct Payments and Boils Down to Nothing More Than Opposition to Any U.S. Farm Policy. Unlike direct payments, loan deficiency payments (LDPs) are linked to both price and production. The LDP, and the marketing loan generally, are critically important components of the farm safety net precisely because they do relate directly to price and production and therefore the farmers' risks. The LDP cannot be criticized by the Post for being paid to those who do not plant a crop simply because LDPs are only paid to producers that not only plant but also harvest a crop. Judging by the first Post story, the LDP should be just the kind of policy the Post likes - but, of course, it is not. The story had no quotes from shoulder shrugging residents in the sprawling Houston exurbs saying they had never heard of an LDP, much less gotten one - maybe followed up by a concerned inquiry from the resident as to whether LDP vaccines or a quarantine of the neighborhood will be required. Rather, says the Post, the LDP is flawed, too. Why? Because it does not suffer from the same flaw as direct payments. As if to anticipate that people might just take notice of the total contradiction between the two stories, the Post manages to find another perceived flaw to hang its hat on. In a nutshell, the national average LDP was larger in 2005 than the average difference between the national loan rate and the national season average price, which the Post maintains ought never to happen because the farmer should receive no more than the loan rate. The Post never bothers to explore the administrative complexities of accomplishing this simply because one doesn't spend time fixing what they wish to throw away. It would be difficult to pay producers an LDP all at once some period after harvest not only because harvest can drag on for months but because the season average price cannot be known and collecting overages would be a nightmare. Paying producers at the time of sale would be administratively impossible because a producer could simply sell the crop and buy it back for a small transaction fee. Paying producers at the end of the marketing year misses the point because the safety net of the LDP may be required much earlier to pay off production bills. Assuming that the same criticism would be leveled against the marketing loan program (which apparently can be expected in the July 9 edition of the Post), the alternative would be increased forfeitures to the federal government, which experience indicates would be far more costly to the U.S. Treasury, with storage costs and the long term overhang of heavy volumes in storage further depressing prices and thus increasing forfeitures yet again. The absence of LDPs and repayment rates under the marketing loan program are also believed to be problematic relative to keeping crops at market clearing levels. But more fundamentally than all of this, what the Post misses most is common sense. Focusing strictly one whether the price the producer ultimately receives on the market is higher than the loan rate is the equivalent of focusing on the length of a horse's legs instead of his speed when betting at the tracks! The purpose of the LDP and the marketing loan, coupled with other components of U.S. farm policy, is to provide a comprehensive safety net that effectively addresses a multitude of price and production risks over the long haul. An LDP overage in 2005 might be critically important to offsetting production losses sustained on another tract in the same year, or production losses in the year before or after, where he was or will be unable to collect a price on the market, much less an LDP, and where crop loss assistance came up or will come up short. The same 2005 overage might have been used to partially offset record high energy prices that hit an energy intensive farming industry especially hard and right in the middle of harvest. As for the concern about LDPs causing overproduction, President Bush was correct when he predicted at the bill signing ceremony that the 2002 Farm Bill would not cause overproduction. It has not, according to USDA statistics. Printed With Permission.