Farmers Sock Away Huge Corn Harvest : Agriculture: Federal loan program allows a portion of the record crop to be withheld from the market.

The government has loaned out almost a billion dollars to corn farmers this fall to enable them to sock away massive amounts of corn and avoid selling their record crop at low prices.

American corn farmers--who are finishing up the harvest of a huge 10-billion-bushel crop--have put close to half a billion bushels of corn into a low-interest government loan program that enables them to keep their crop off the market until higher prices come along.

“The program is a good way to get some cash flow at a very reasonable rate, and it gives farmers a lot of marketing flexibility later on,” a U.S. Department of Agriculture specialist said.

Corn prices have been on a downward slide for months as the nation’s largest crop just kept getting bigger, thanks to perfect weather in the Corn Belt. At $2.12 a bushel on the Chicago Board of Trade, prices are now about 20% below year-ago levels, and analysts say they could go even lower.

According to government statistics released this week, farmers have put 448 million bushels of corn into the department’s nine-month loan program, a jump of more than 100 million bushels from the previous week.

Farmers are taking advantage of the loan program at a pace that’s more than twice the level for this time in 1992, the last big corn crop year.

Iowa farmers--who are projected to lead the nation with a 2-billion-bushel crop--have already put close to 200 million bushels of corn under loan, well above the total 110 million bushels put into the program last year, when Iowa’s crop was cut by devastating floods.

Under the nine-month loan program, farmers can put a certain amount of corn up as collateral, then collect a certain price per bushel for that corn. The national corn loan rate is $1.89 per bushel, but it varies slightly among counties.

The farmer puts the corn in storage and pays back the loan any time during the next nine months at about 6% interest, well below the current prime lending rate of 8.5%.

Using the example of a farmer in Iowa with 500 acres of corn and a 150 bushel-per-acre average yield, a farmer would give a total crop of 75,000 bushels.

If the farmer wanted to get cash now but didn’t want to sell the crop in the middle of a harvest glut, he or she could take out a loan on half the crop, collecting a total of $70,875, assuming the national corn loan rate. If prices rise, the crop can be sold and the loan repaid, leaving a profit.