With a new farm bill being crafted by Congress, what is the outlook for cotton growers?
At the 2018 Southern Cotton Ginners Association meeting held July 10 in Biloxi, Miss., Gary Adams, president and CEO, National Cotton Council of America, tackled some of the back-and-forth happening in Washington, D.C.
“Around early February, Congress approved a bipartisan budget,” said Adams. “That set the stage, or foundation, for what we anticipate seeing in the (new) farm bill for cotton policy.”
Effective for the 2018 growing season is the seed cotton program. “Seed cotton is a covered commodity and is eligible for the ARC and PLC programs.”
- Seed cotton refers to unginned upland cotton that includes both lint and cottonseed.
- The reference price is set at $0.367 per pound.
- The price floor is at $0.250 per pound.
“The price floor only serves for the function of determining what the maximum payment rate will be under PLC,” said Adams. “It isn’t a loan rate, per se, that you’d typically think back in the day when you had a counter-cyclical payment program.
“The USDA will take a weighted average of lint prices — the same used in the target price program — with a weighted average with cottonseed. That weighted average will be based on how much lint we produced and how much seed was produced.”
Adams provided the following “seed cotton marketing year average” price example:
- U.S. upland cotton lint marketing year average price ($/pound) = $0.690.
- U.S. cottonseed marketing year average price ($/pound) = $0.075 (or $150/ton).
- U.S. upland cotton lint production (pounds).
This equals 20,570,000 bales … 480 pounds/per bale = 9,873,600,000 pounds.
- U.S. cottonseed production (pounds).
This equals 6,725,000 tons … 2,000 pounds/ton = 13,450,000,000 pounds.
- Total U.S. cotton lint and cottonseed production (pounds).
This equals 9,873,600,000 plus 13,450,000,000 = 23,323,600,000 pounds.
What about seed cotton base acres?
“For all other farms with generic base, producers shall choose one of the following options to convert generic base acres to seed cotton and other covered commodity base acres:
- Option 1: Seed cotton base equals higher of 2009-12 average seed cotton plants or 80 percent of generic base, not to exceed total generic base.
Any unconverted generic base becomes unassigned crop base and is ineligible for PLC/ARC.
- Option 2: All generic base converted proportionally based on 2009-12 average plantings of seed cotton and other covered commodities.
“The reason this goes back to 2009-12 is that’s the time period used in the reallocation decision of the 2014 farm bill,” said Adams. “Different farms will look at these options differently.”
What about progress towards a new farm bill?
“The second time proved a charm and the House approved their version of the farm bill around June 21. … It passed 213-211 and continues the basic (ARC/PLC) structure of the 2014 farm bill.”
It would also maintain current references prices (RP).
For seed cotton that means $0.367/pound.
“There is an RP escalator provision: 85 percent of five-year Olympic average of MYA prices not to exceed 115 percent of reference price.”
Current loan rates would be maintained.
Upland cotton, said Adams “establishes a 2 percent limit on annual decline based on a two-year moving average of AWP. The range remains $0.45 to $0.52/pound.”
“The House did some things on unplanted provisions. Some of the provisions in place under the bipartisan budget act said if you didn’t plant you’re not eligible. It expanded that to uncovered commodities.”
- Unplanted base acres provision.
–Similar to generic base unplanted policy.
–No covered commodities (includes cotton) planted/prevented planting between 2009 and 2017.
–Converts to unassigned base and ineligible for ARC/PLC.
- Payment yield update.
–Drought triggered yield update.
- Economic Adjustment Assistance Program (textile mills) — increases payment rate from $0.03/pound to $0.0315/pound.
Senate farm bill
Meanwhile, the Senate farm bill “continues the status quo with commodity and crop insurance. It did put in place a lower AGI — it went from $900,000 to $700,000.
“In committee markup there were two important amendments offered — one by Minnesota Sen. Klobuchar and one by Sen. Bennett of Colorado. One amendment would eliminate the Economic Adjustment Assistance Program for textile mills — a $470 million loss. The other amendment would eliminate cotton storage credits — a $14 million loss.”
Both of those amendments passed by voice “and that’s very concerning. Unfortunately, there are 21 members on the (Senate) ag committee and four of them are from the Cotton Belt. We’re severely outnumbered.”
Through phone calls and contacts with senators from the South, “we were able to restore the textile mill (funds) for three years. We lost it all in the committee but were able to get it back for three years. We were able to get the cotton storage credits restored for all years of the Senate farm bill.”
Even so, Iowa Sen. Charles Grassley “has an amendment in the Senate bill (passed on June 28 by a vote of 86-11). It’s a significant problem and essentially makes it much tougher for a family farming operation to qualify for program benefits. Right now, you have the ability to have three people qualify for management contributions. (The amendment) would essentially take that down to one. And if you want that one person to qualify with a management contribution, all the other people involved collectively can’t get more than one payment limit.
“We’ll be working to get that removed in conference.”