By using this strategy, U.S. farmers could receive a total return for their soybeans that was above the loan rate. There is some risk associated with this strategy. If prices fell, the sum of the new market price and the LDP would be less than the loan rate. This reduced marketable supplies of soybeans and acted as a price floor for oilseeds worldwide. Under the 1996 FAIR Act, the price floor was removed which allowed world prices to decrease below the loan rate.
Prices then rebound after the majority of producers market their soybeans.
However, the U.S. producers participating in the program are insulated from the price volatility. In general, Canadian production is small relative to total world oilseed production, and is strongly influenced by U.S. soybean prices. Increased soybean production in the U.S. has pressured the prices of oilseeds worldwide, reducing the market price for Canadian soybean growers. On the other hand, Canadian consumers of soybeans and soybean products have benefitted from lower prices. For example, the Canadian livestock sector, has benefitted from the lower price of soymeal.