|
Mohawk Indiana | The '83 PIK program and the PIK program that resulted with the 85 farm bill were different critters.
It's been a long time and I was just starting but this is what I remember.
1982 corn crop was huge. Loan rate was around $2.50 . 1982 crop was allowed to go straight into the Farmer owned reserve, so farmers sealed the corn, got the $2.50 then started drawing the storage payment for the Reserve. I think it paid 26 cents per year. If the price reached $3.26 the storage payments stopped and you could sell it without penalty.
When it came time to sign up for the 1983 program the set aside was set at 20% once you met that requirement they decided to let you bid a percentage of your bushels under loan in exchange for leaving an additional 30 percent set aside. So if you bid 20% then you only had to repay 80% of your loan.
If you didn't put corn under loan the you were paid in kind (PIK) with bushels that the Government was holding from corn that had been forfeited. The reason loan grain was forfiteted was because the cash price was under the $2.50 loan rate so farmers just let the government have it back.
The payments in 83 were then just made to producers by using Warehouse receipts. So if you lived in Ohio you could get a Warehouse receipt from Wisconsin. I think.
1983 was a drought year and prices soared hurting livestock producers.
The additional set aside made prices go even higher
After the 85 farm bill the Ag Secretary had the discretion to lower the loan rates by a percent.
When he did prices crashed. Program payments then were I think paid half in cash and half in PIK certificates. There was a posted county price in each county that changed each day based on the previous days market. On an up day you could go in after the market close and still use the previous days rate to,repay your loan.
Certs were a secondary market all their own. Grain companies would sell them to you so you could redeem your loan at less than loan rate but you might have to pay the 110% of the face value.
There were grain reserves for the '86 and '87 crops also, if you were holding this grain when the '88 drought hit and prices went up you had a chance to cash in.
The 88 drought no doubt hurt livestock guys but cutting the loan rate in '86 helped them a lot.
How the program was supposed to help was it guaranteed US farmers at least loan rate for their prices and any surplus would be moved on out at the lower world prices.
It was crazy I suppose, but I don't think any more crazy than some of the Crop Insurance thing that go on today.
That's how I remember some of it and I'm probably off on some of it, but that is the general jist of it | |
|
Can anybody tell me about the PIK program in the 1980's?
