Cotton growers who have been financially affected by the global drop in demand and market prices are now eligible for relief funding through the federal Coronavirus Food Assistance Program.
The U.S. Department of Agriculture recently released additional details regarding the program, through which payments are now available for a number of non-specialty crops, including upland cotton.
Scott Stiles, Extension economist for the University of Arkansas System Division of Agriculture, said non-specialty crops that experienced a 5 percent-or-greater price decline from mid-January to mid-April 2020 as a result of the COVID-19 pandemic are eligible.
“Given the fact that CFAP payments are derived from two different funding sources, payment calculations may seem fairly complicated,” Stiles said. “For upland cotton, the average payment rate is determined to be 9.5 cents per pound.”
The payment rate will be applied to the lesser of either 50 percent of a producer’s 2019 total production or the producer’s 2019 unpriced inventory as of January 15, 2020.
Stiles provided the following calculation example:
CFAP Upland Cotton Payment Formula = Average Payment Rate, multiplied by either 50 percent of 2019 production or 2019 production unsold as of Jan. 15, 2020, whichever is less.
Average Payment Rate = $0.095/lb.
Total 2019 Production = 1000 acres x 1,185 lbs./acre = 1,185,000 lbs.
50 percent of Total 2019 Production = 50 percent x 1,185,000 = 592,500 lbs.
Total 2019 Production unsold as of January 15, 2020 = 600,000 lbs. (for example)
Total CFAP Payment = $0.095/lb. x MINIMUM (592,500 lbs.; 600,000 lbs.)
= $0.095/lb. x 592,500 lbs. = $56,288
Initial CFAP Payment = $56,288 x 80 percent = $45,030
“In the initial payment, producers will receive 80 percent of the expected total payment, with the remaining 20 percent of the payment to be dispersed at a later date, subject to funding availability,” Stiles said.
Estimated $442 million
An estimated $442 million in CFAP payments will go to U.S. upland cotton producers. While the USDA has not provided a state-by-state breakdown of payment estimates, Arkansas did account for approximately 7.8 percent of U.S. upland cotton production in 2019.
“Ignoring payment limitations, Arkansas’ share of cotton CFAP payments could be approximately $35 million,” Stiles said.
Bill Robertson, Extension cotton agronomist for the Division of Agriculture, said the payments are welcome news for a struggling sector of the agricultural economy.
“Even though this is based on the 2019 crop, the assistance is greatly appreciated,” Robertson said. “Cotton exports have not developed the way we had planned and has impacted prices of last year’s crop, as well as contributing significantly towards what we are seeing now. I think things will continue to be depressed in the cotton world for a while.”
To apply for CFAP payments, producers of non-specialty crops must provide their respective county Farm Service Agency office with figures for their total 2019 production, as well as unpriced inventories as of January 15, 2020. “Unpriced inventory” is defined as “any production that is not subject to an agreed-upon price in the future through a forward contract, agreement or similar binding document,” according to the USDA’s Final Rule, released May 21.
Applications for CFAP payments are now being accepted through Aug. 28, 2020.
For more information about the USDA’s Coronavirus Food Assistance Program, as well as a CFAP payment calculator, visit https://www.farmers.gov/cfap.