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NSA Seeking Sun Loan Fix

Monday, September 2, 2002
filed under: Marketing/Risk Management

NSA Seeking Sun Loan Fix

Change needed before 2003, or acreage and markets will be distorted, say sunflower industry leaders and federal lawmakers

Much to the chagrin of the National Sunflower Association and most other minor oilseed groups, the U.S. Department of Agriculture has established separate loan rates for oil-type and confection sunflower, which is referred to administratively as “other” sunflower. The change was made despite congressional language advising UDSA to combine the sunflower loan rate. Congress mandated a $9.60 per hundredweight minor oilseed loan rate in the new Farm Bill.

USDA raised the national average loan rates of safflower, “other” sunflower and mustard seed well above the average $9.60 and lowered flax, oil-type sunflower and canola. The national average loan rate for “other” sunflower was changed to $12.10 per hundredweight, while oil-type sunflower is $9.15. Safflower, for example, is now set at $12.53.

How did it happen?

Capitol Hill lobbyist Daryn McBeth explains that economists within the administration looked at prices over a five-year period, and production over a different five-year period, and arrived at different weighted price averages for minor oilseed crops. On the surface, the loan rate differences might make sense—after all, confection sunflower is a higher value crop than oil sunflower. But the change was made without thought of future market ramifications— despite the lesson that should have been provided by soybeans, whose higher loan rate compared to other program crops skewed acreage and plantings over the life of the 1996 Farm Bill.

“The minor oilseed loan rate change was made in a vacuum, with no input from the industry or understanding of market conditions or ramifications,” says McBeth.

Federal lawmakers representing sunflower states agree.

“The Department of Agriculture’s interpretation took nearly everyone by surprise,” says Sen. Byron Dorgan (D-ND). “During Congress’ extensive debate on the farm bill, we never once discussed splitting minor oilseed loan rates.” “Flaxseed now has a loan rate that’s $.06 less than safflower. Price support discrepancies like that fly in the face of what Congress intended.”

Says Sen. Pat Roberts (R-KS): “I believe that it was not the intention of Congress to provide separate loan rates for oil-type and confectionery-type sunflowers. A higher loan rate for confectionery sunflowers has the potential to price U.S. producers and processors out of the world market, in addition to favoring planted acreage of confectionery over oil-type sunflowers.”

Dorgan and Roberts have introduced legislation in the Senate to clarify the intent of Congress to establish an identical loan rate for all oilseeds. The legislation would amend the new Farm Bill to specify each oilseed individually, and set the loan rate at $9.60 per hundredweight.

The NSA is also working to fix the problem administratively, urging USDA Secretary Ann Veneman to place all minor oilseeds at the $9.60 loan level as intended by Congress, or risk severely distorted minor oilseed planting decisions beginning next year.

The NSA estimates that if a change is not made, oil-type sunflower acreage could decline by 20% next spring and confection acres would increase significantly. The NSA points out that a large expansion in confection acreage would result in significant forfeitures of low quality production to the USDA's Commodity Credit Corporation.

“The sunflower industry is urging that the loan rate problem be fixed before the next crop year,” says McBeth, formerly with Gordley & Associates based in Washington, D.C., now working independently in legislative affairs, based in Minneapolis. “It’s a change that just makes sense.”—Tracy Sayler

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