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Farm program, MFP payments provide lifeline for cotton producers

NCC Chairman addresses the crowd, discusses markets, weather and industry successes.

Forrest Laws

March 12, 2020

The past two years have been difficult ones for cotton producers and ginners, but they could have been much worse if not for farm program and market facilitation payments, the chairman of the National Cotton Council said.

After trading above 80 cents a pound early in 2018, ICE cotton futures have fallen to the low 70s and upper 60s, which is below the cost of production for many growers. Weather conditions have also dealt producers a bad hand.

“I don’t have to remind this audience about the turbulent markets and catastrophic weather events of the past few years,” said Kent D. Fountain, a ginner from Surrency, Ga. “As a result, many producers would not have survived if it had not been for the improved safety net provided by various government programs.”

Fountain spoke at the Friday Ag Update Session at the Mid-South Farm and Gin Show in Memphis, Tenn. The Gin Show traditionally is the first speaking engagement for the new chairman after his election at the NCC’s annual meeting.

Government payments

Since the spring of 2018, he said, cotton growers have received between $225 and $325 per acre from government programs, including:

• Gin Cost Share payment of $23 per planted acre;

• 2018 MFP payment ranging between $40 and $55 per acre;

• 2019 MFP payment ranging between $70 and $150 per acre;

• 2018 crop PLC payment of $30 to $35 per base acre; and

• An estimated PLC payment for the 2019 crop of $70 to $80 per base acre. (Agricultural Risk Coverage or ARC and Price Loss Coverage or PLC payments are made in the year after they are earned.)

“Those numbers do not include the benefits from individual crop insurance coverage, STAX policies or the WHIP disaster programs,” Fountain noted, referring to the Stacked Income Protection Program for upland cotton and the Wildfires and Hurricanes Indemnity Programs.

The ARC and PLC payments became possible after the Cotton Council worked for years to have a Seed Cotton ARC/PLC program included in the 2018 farm bill. Cotton had been left out of ARC/PLC in the 2014 farm bill at the cotton industry’s request due to the WTO case brought by Brazil against the U.S. program.

Industry successes

“As you know, last year was highlighted by a number of industry successes,” Fountain said. “I’ll start with the 2018 farm law, which continues the Seed Cotton ARC/PLC program for the 2019 through 2023 crops; full access to the marketing loan program; effective crop insurance products; and critical assistance for the U.S. textile industry.”

The WHIP and WHIP Plus Programs were a “much-needed disaster assistance package” sought by the Cotton Council and other farm organizations after wildfires and a series of hurricanes devastated several agricultural regions.

Program signup for WHIP Plus, which covers losses in 2018 and 2019, began last Sept. 11 at local USDA Farm Service Agency offices.

“While the structure of WHIP Plus is very similar to the initial WHIP implemented for the 2017 disaster losses, there were some key changes,” Fountain said. “On the downside, there was a lower payment limitation relative to the first WHIP, but the program also provides assistance for counties that suffered severe droughts in 2018 and 2019.

“The National Cotton Council will also be providing feedback to USDA on their implementation of WHIP Plus assistance for quality losses.”

Growers should be aware that USDA’s Risk Management Agency recently issued clarification on the interaction of STAX and ARC/PLC enrollment beginning with the 2020 crop.

“Producers who purchase STAX must annually report any acres that have been or will be enrolled in ARC/PLC on their acreage report,” he said. “Producers will be ineligible for STAX coverage on seed cotton base acres enrolled in ARC/PLC, and no STAX indemnity will be paid on these acres.”

Trade dispute

The NCC is closely monitoring developments in the ongoing trade dispute between the United States and the People’s Republic of China, which until mid-2018 was a major buyer of U.S. cotton.

“Unfortunately, cotton prices remain well below pre-dispute levels due to the imposition by China of a 25-percent retaliatory tariff on U.S. cotton,” Fountain noted. “The announcement of a $16 billion tariff mitigation package through the Market Facilitation Program was most timely as U.S. cotton’s economic health was deteriorating.”

The first 50 percent of the 2019 MFP came in August, the next 25 percent in November, and USDA is now delivering the third and final tranche of 25 percent.

Other good news regarding the China situation came when a Phase 1 trade deal with China was signed by President Trump and high-level officials from China.

“The Phase 1 agreement, which took effect on Feb. 14, includes a chapter on agriculture with Chinese purchases of agricultural products intended to average $40 billion per year in 2020 and 2021,” he said.

“While cotton purchases are included in the agreement, there are no specific details regarding the quantities to be purchased, and currently, we do not expect that level of detail to be publicly available.”

While the NCC welcomes the Phase 1 trade deal and the potential for increased sales to China, “enforcement of the purchase commitments will be critical to ensure the success of the agreement,” he said. “Also, increased concerns about the impacts of the coronavirus may ultimately threaten the success of the Phase I agreement.”

About the Author(s)

Forrest Laws

Forrest Laws spent 10 years with The Memphis Press-Scimitar before joining Delta Farm Press in 1980. He has written extensively on farm production practices, crop marketing, farm legislation, environmental regulations and alternative energy. He resides in Memphis, Tenn. He served as a missile launch officer in the U.S. Air Force before resuming his career in journalism with The Press-Scimitar.

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