Did USDA go too far in making adjustments to the county-by-county loan rates it announced for grains and oilseed crops following the signing of the new farm bill?

That's the question being raised by farmers and farm groups as they begin to compare the new county loan rates with the loan rates available under the 1996 farm bill for wheat and other soon-to-be-harvested crops.

“We are aware the farm bill conference members acknowledged that USDA would likely utilize the change in loan rates mandated in the bill as an opportunity to make local adjustments within the parameters of the national average rates for the eligible crops,” said Dave Frederickson, president of the National Farmers Union.

“In our view, this presented an opportunity for USDA to correct the many discrepancies and inequities between county loan rates for wheat and feed grains that existed under the old farm law which could distort producer production and storage decisions.”

But the new loan rates appear to have worsened those inequities, Frederickson said in a letter to the chairmen and ranking members of the House and Senate Agriculture Committees.

“We are concerned that the announced loan rates for these crops not only have failed to correct existing problems but may, in fact, exacerbate the distortions in some regions of the country,” the letter stated.

Others were questioning why USDA made the adjustments and issued the new loan rates without requesting public comments on the changes.

When it announced the new rates, USDA said it did so because the new farm bill required it to make changes in county loan rates for all of the 2002 crops. But USDA personnel have been reviewing the loan rate and terminal structure for more than three years.

“The new county loan rate structure, which provides upward changes in most areas, reflects the most comprehensive adjustments in more than 15 years,” the USDA's Farm Service Agency (FSA) said in a press release.

“The changes are intended to reduce cumulative market distortions and loan deficiency payment disparities that have emerged over the years. Some of the existing county loan rates trace to 1985 and no longer reflect the geographic patterns of market prices.”

FSA said it did not make many changes in county soybean loan rates, which generally have been adjusted annually.

Some winter wheat farmers have complained that reductions in their county loan rates could cost them several thousands of dollars, and they question the legality of USDA changing those rates after they planted their 2002 crops last fall.

Frederickson said NFU has received reports that some inequities in corn loan rates occurring across county lines do not reflect reasonable market differentials. “And, the difference between the highest and lowest county loan rates for wheat is $2.64 per bushel,” he noted.

“Some producers will receive a $1.69-per-bushel increase in their loan rate compared to the 2001 level; others will experience a 45-cent-per-bushel reduction even though the national average loan rate increased by 22 cents per bushel,” he said.

USDA's announcing changes to the marketing loan rate program, after most producers had completed planting and some producers had completed harvest, only added to the blow for some producers, according to the NFU.

In his letter to the House and Senate committee leaders, Frederickson requested a hearing on the rationale behind USDA's county loan rate implementation and on the impacts these decisions have had on farming operations. A copy of the letter also was sent to Agriculture Secretary Ann M. Veneman.