The Impact of the LDP on Corn and Soybean Basis in Missouri

Abstract

Beginning in the fall of 1998 low corn and soybean prices triggered a government price support mechanism established under the 1996 Farm Bill. This mechanism, the loan deficiency payment (LDP), created minor marketing chaos for some producers. These producers did not understand how the LDP program functioned, and they did not understand how grain marketing strategies might change with the existence of the LDP. As producers, researchers, and politicians began to understand the LDP program, more questions regarding the effectiveness and fairness of the program arose. Furthermore, some producers and Extension marketing economists argued that the LDP affected long-term basis patterns.