If the basis is normal, then the best strategy is to sell the cash grain once the loan is repaid at the lower locked-in PCP price. If for some reason growers think the market will continue to increase then they can reown their grain as a call option. This would allow growers to participate in any continued price rallies but at the same time limit their downside price risk to the premium costs for the call option. The premium cost for a call option may be covered from interest and storage costs savings. Growers also do not have any storage risk, such as grain going out of condition.
Growers can also take out multiple lock-in dates by locking in PCPs on a portion of their grain.
Large growers will want to utilize the loan program that allows growers to repay loans at the PCP price with generic certificates and effectively exceed the payment limitation. Larger growers will also want to save their LDP payments and apply those funds to commodities that are not eligible for the loan program, such as silage. In addition to silage, the other major commodities that would not qualify for loans are damaged crops and the resulting low quality. The best example of a poor quality crop for many growers is this year s soybean crop. Larger growers will want to use their available LDP payment limitation for their damaged soybean crop, while using the loan program for their corn crop.