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Articles from 2003 In August


Defoliate by weather, not calendar

That may mean adapting your tried and true cotton defoliation strategies to the crop conditions in each of your fields, according to Extension and research specialists around the Delta.

Charles Snipes, the Delta Research and Extension Center’s cotton specialist, says that because of crop variability this year he suggests growers take an average boll opening across the field. “Your average should preferably be 60 percent open bolls across the field, with at least 40 percent open bolls minimum in greener areas of the field.”

According to LSU AgCenter weed scientist Donnie Miller, research in that state has shown that maximum yields are possible when defoliants are applied anywhere from 42 to 81 percent open bolls, depending on crop maturity and fruit distribution.

“Depending on fruit distribution on the plant, maximum yield can be obtained when defoliation occurs prior to 60 percent open bolls,” he says. “In cases where a large fruiting gap occurs, and a large percentage of bolls are less mature and set in the uppermost region of the plant, optimum defoliation timing may occur later than 70 percent open bolls.”

Deciding which harvest aid products to use can seem tricky, but the Stoneville-based Snipes suggests using whatever approach has historically worked best on your farm, tailored to the given situation.

Miller agrees saying, “There is no one-size-fits-all recommendation for cotton defoliation.”

Each different harvest-aid treatment has its merits and limitations, with proper timing critical no matter which product is used to do the job. Make your harvest-aid application too early and you could end up with reduced efficacy and yield. Delay your defoliation treatment too long, and you could see decreased lint quality, high micronaire values, and reduced efficacy because of cooler temperatures.

“In 2002, 51 percent of the Louisiana crop was discounted for high micronaire. Some of these discounts can rightfully be blamed on delayed defoliation, and growers should pay close attention to defoliation timing with high micronaire varieties,” Miller says.

“Dropp or FreeFall certainly is a good choice if the hot, dry weather conditions we’re experiencing continue. At a rate of one to eight, Dropp/FreeFall in combination with crop oil concentrate and ammonium sulfate is a cheap $10 treatment that works really well under present conditions,” says Snipes. “If you get good coverage, it does a nice job.”

Snipes recommends tank-mixing Dropp or FreeFall with another defoliant if the situation warrants or conditions become less favorable for Dropp activity. Good choices for tank-mix partners with Dropp or FreeFall include Def, ethephon (Finish or other ethephon containing products), ET, Harvade and Aim. “Tailored to the appropriate situation, these partners do a number of desirable things to assist growers in a successful harvest,” he says.

Cotton producer Will Pitts of Indianola, Miss., says, “In this day, when you are putting 10,000 acres on a picker, we can’t afford to scrap. At one to eight Dropp held pretty well for us last year, even through two hurricanes.”

For those growers faced with removing plant regrowth, Snipes says, “Ginstar at a rate of 1 to 30 is the preferred treatment, but paraquat, ET and Aim do a good job as well.”

“Crop and weather conditions drive how much time is needed between making a harvest aid application and driving your cotton picker into the field to begin harvest. They always have and they always will,” says Snipes. “Don’t let anyone tell you that you can put a product out and count on harvesting 10 days later.”

e-mail: dmuzzi@primediabusiness.com

Soybean stem borer sometime pest

After splitting leaf petioles and stems, small larvae were found that resemble the sugarcane borer except that they have no spots. They turned out to be not borers but beetle larvae, called soybean stem borers. Unlike the Lepidoptera species that includes the sugarcane, southwestern and European borers, this beetle is officially taxed as Dectes texanus. So far, Rapides and Avoyelles are the only parishes where I have them.

The beetles are about three-eights-inch long as adults and lay their eggs on the petioles on the leaves of soybean plants. Once hatched, the larvae bore into the petioles and eventually get into the main stem of the soybean plant. As they bore into the petiole headed to the main stem, a reddish residue is left behind. Once in the main stem, they will bore down to the soil line and cause the soybean plant to lodge, especially if the soybean has good yield potential.

As to chemical control, producers have few options for controlling this borer. Scouting is difficult because of a number of factors. The adult phase is short, and the flight pattern coincides with early August when the crop is growing rapidly. The key symptomology for the detection of this borer is a pale or off-type single trifoliate. This is an external symptom indicative of what the borer is doing inside the petiole.

Dr. Matt Baur and Dr. Jack Baldwin, both LSU AgCenter entomologists, both told me they have seen these borers before and that they are usually not really detrimental to overall yield. They emphasized that this borer is an occasional pest of soybeans, and you really should not expect to see them every year especially if you practice crop rotation.

Dr. Baldwin mentioned that “if populations are severe enough, there could be yield loss but usually the numbers really do not get high enough. From a scouting standpoint, the off-color trifoliate is the best bet to find the larvae, but they cannot be controlled at that stage.” Dr. Baur mentioned that “the distribution of the borers is widespread but definitely more common in the mid-part of the state. Also, economic impact depends on when the insect attacks. If later in the season, there should be little to no damage; earlier heavier infestations could cause some slight loss.”

It seems as if good cultural practices, including disking fields after harvest then allowing them to sit over the fall and winter, will be the most effective methods to combat these insects. Crop rotation in addition to practicing good weed control during the fall and early spring will help to combat this insect. Weed control is important because cocklebur and ragweed can serve as alternate hosts.

David Lanclos is Extension corn and soybean specialist with the LSU AgCenter.

e-mail: dlanclos@agctr.lsu.edu

More to melon than the juice

LANE, Okla. – Watermelon. It isn’t just a fun treat anymore.

“Folks used to think that watermelon had no nutritional value,” says Sam Pair, research leader at the Lane Ag Center, a joint USDA-ARS and Oklahoma State University research and education facility near Lane, Okla.

But recent research indicates watermelon contains disease-fighting lycopene, in amounts similar to tomatoes.

“It’s the red pigment,” says Penny Perkins-Veazie, a USDA post-harvest physiologist stationed at the Lane Center. “It’s an important finding,” she said.

Some consumers may find watermelon more to their liking than tomatoes and they get the lycopene benefit in the raw product. “Tomatoes have to be processed to fully access the lycopene," Perkins-Veazie says.

A consumer would need to eat about two cups of watermelon a day to get the maximum benefit. That compares with 11 to 12 grams of lycopene in a can of tomato juice.

“Now, with ready-to-eat packages, watermelon is available year-round.”

She says new varieties also make the sweet melons more attractive to consumers. “New mini-melons, slightly bigger than a softball, add convenience,” she said. “These could be good for patio gardens and also for commercial growers. Consumers will find them easy to take home and store.”

Three seed companies, Seminis, Syngenta and Hazera, have mini-melon varieties available.

Perkins-Veazie says the discovery that watermelon has a heightened level of lycopene has increased sales, especially of melons in the 15-pound range.

“With demand for smaller melons, we’ve seen acreage decrease but an increases in pounds produced per acre,” she says.

Perkins-Veazie says lycopene has been shown to decrease risk for certain cancers and says watermelons also may promote cardiovascular health. Some evidence suggests that the lycopene can prevent cholesterol from clogging arteries and may increase HDL, the good cholesterol. The HDL work was done using tomatoes, Perkins-Veazie says. “Perhaps watermelon can also play a role in lowering blood pressure.”

In addition to watermelons, Perkins-Veazie also works with berries.

“Blueberries are probably the most researched berry, followed by raspberries,” she says. “Little has been done on blackberries.”

She says berries provide health benefits either raw or cooked.

Genetics, she says, plays an important role in nutritional value of melons and berries. She’s working with scientists in Beltsville, Md., and Oxford, Miss., to quantify the nutritional benefits of watermelons and berries.

The research is important to the Lane Center and to the Southeast corner of Oklahoma, as well as areas deep into Texas, says Sam Pair, USDA research leader. “We grow about 12,000 acres of watermelons annually in Oklahoma and with Texas acreage, the number tops 100,000.

He says farmers in southeast Oklahoma historically have depended on beef cattle. “But they need to diversify and watermelons offer a good opportunity. Peanuts have been gradually phased out so we try to determine what will grow here.”

Watermelon seems like a good fit. “It’s a high value crop and can be very successful in this area. Farmers can use existing equipment to get started.”

He says the center also works with other fruit and vegetable crops. “If we determine enough grower interest exists, we’ll get involved in research for a specific crop. We also work with researchers at the Stephenville, Texas, station. ”

In addition to post harvest physiology, researchers also look into the economics of crop production, disease control, weed management and pest control tactics.

e-mail: rsmith@primediabusiness.com

Cool season forage sought for stockers

“They need a perennial cool-season forage grass,” said Andy Hopkins, a forage grass breeder with the Noble Foundation in Ardmore, Okla.

Hopkins says current options, which include wheat, ryegrass or hay, are expensive and labor intensive.

“Stocker cattle provide an important contribution to our farm economy,” Hopkins said. “Operators can buy calves relatively cheaply in late summer and can make a fairly good profit with an inexpensive forage.” But they need a more affordable forage system.

He said the problem with cool-season forage has been persistence. Producers can’t keep stands viable under the harsh conditions of the Southwest. “Heat and drought produce more stress than our cool-season grasses can endure,” he said. “So we’re looking for perennials that can tolerate heat and drought stress and still provide good nutrition for cattle. The right cool-season forage would benefit cow/calf producers as well.

Hopkins says he and colleagues “are looking at a broad range of germplasm, including tall fescues, hardinggrass, western wheatgrass, Texas bluegrass, Russian wildrye and tall wheatgrass. We’re probably looking at 10 to 15 different species. We’ll narrow the field significantly in a few years.”

Hopkins and other team members establish forage selections and then graze them heavily. “We overgraze to make certain we stress the stand,” he said. “We don’t give the animals a choice; they have to eat what’s there.

“Also, within a two-year period we usually encounter heat and drought stress, so we evaluate how well certain selections withstand those conditions. Irrigating forages usually is not feasible, so we are trying to identify strains with the best recovery and test them further.”

In addition to evaluating grazing stress tolerance, researchers also determine forage quality.

Hopkins says testing includes numerous locations. “We also test for persistence and seed production. After we identify superior germplasm, we’ll spend several years testing. It takes a lot of time because we have to make certain that we develop something that’s better than anything farmers already have.”

He says the final step before releasing a new variety is to evaluate animal performance. “That’s the ultimate test. We have to see if the forage produces the average weight gains necessary for profit.”

Hopkins says the effort is “about half way to a cultivar.”

Much of the work has been old-fashioned applied breeding. “Breeders did little with forages before 1930,” he said. “The Dustbowl was the catalyst to get started.

“Our team works together on projects and we take advantage of genetic engineering where appropriate.”

Lignin, he says, is one area where genetic engineering could benefit forage breeding. “Lignin, an essential part of the plant’s structure, interferes with digestion. Lignin also provides some disease and insect resistance. So, we’re looking at changing the amount of lignin in the plant or changing how it acts.”

They’re also looking at endophytes, a fungus inside the plant that helps with stress tolerance but can cause health problems for animals that eat it. “We’re trying to take out the bad endophytes and keep the good ones,” he said. “This is an indirect approach to drought stress tolerance.”

He said molecular markers may help breeders identify potential cultivars and improve research efficiency.

Hopkins said forage breeding is complex work. “We’re looking at some complex scientific problems that are not easily solved,” he said. “We’re using a lot of technology to develop a better product for farmers.”

e-mail: rsmith@primediabusiness.com

Veneman names Peanut Standards Board

"We are pleased that these individuals have agreed to serve on the Peanut Standards Board," said Veneman.

Newly appointed to serve 3 year terms of office ending June 30, 2006 are:

-- Southeast Region (Alabama, Georgia and Florida) producer: Walter L. Corcoran of Eufaula, Ala.; industry representative: Charles Ivy of Albany, Ga.

-- Southwest Region (Texas, Oklahoma, and New Mexico) producer: John Clay of Carnegie, Okla.; industry representative: Jimmie Shearer of Portales, N.M.

-- Virginia Carolina Region (North Carolina and Virginia) producer: George McGee of Severn, N.C.; industry representative: Daniel J. Boone of Chesapeake, Va.

The 2002 farm bill established the board to provide consultation to USDA on quality and handling standards for domestically produced and imported peanuts. The Secretary annually appoints a producer and an industry representative from each of the three peanut producing regions. USDA's Agricultural Marketing Service administers the program and issues quality and handling standards for all peanuts marketed in the United States.

More information is at http://www.ams.usda.gov/fv/peanut-farmbill.htm

e-mail: flaws@primediabusiness.com

WTO not so far away

The United States has tried to convince the rest of the world to adopt a new set of trading rules for agriculture that would eliminate export subsidies, significantly reduce trade-distorting domestic agricultural support, and significantly increase market access for U.S. agricultural exports. The U.S. wanted these changes to be on a fair and equitable basis - equally applicable to all countries - with reasonable preferences granted to developing countries. There have not been many takers.

Developing countries of the world countered with proposals that strongly suggested the United States and the European Union should eliminate their agricultural programs and all developed countries should eliminate all trade barriers for developing countries, while receiving little, if any, trade concessions in return. Several African countries called for an immediate end to the U.S. cotton program and a $3 billion compensation payment for damage the program supposedly caused their economies.

The European Union has traditionally been the main target for the United States and other countries wanting to force a reduction in agricultural subsidies. It is the height of understatement to say that the U.S. and the EU are on opposite sides of the WTO fence when it comes to agricultural trade. However, these two major agricultural economies told the rest of the world recently they had managed to forge a "framework" by which they could reach agreement. Their proposal would significantly cut domestic agricultural subsidies and it would cut export subsidies and phase them out on some products. However, it also demands significant increases in market access for all agricultural exports in exchange for these very meaningful reforms.

While the framework agreement does not include specific numbers, it does have enough detail to enable us to speculate on its impact on the U.S. On export subsidies, the European Union would reduce them all and phase some out. The United States would greatly curtail its export credit guarantee program - a program that has been valuable in assisting U.S. exports of cotton and grains. With respect to domestic subsidies, the framework calls for significant cuts below the ceilings established under the 1994 Uruguay Round Agreement. For the U.S. the most important ceiling under the 1994 agreement was established at $19 billion per year. Speculating on what "significant" means is dangerous, but if one assumes cuts in the range of $5-$10 billion, then U.S. domestic commodity programs would probably have to shift back to a more decoupled approach - similar to that under the 1996 farm bill. The United States has come close to its ceiling recently, spending as much as $18 billion in 2001 on programs that count toward its limit. Decoupled programs don't count toward the ceiling.

In exchange, the U.S. and the European Union asked for meaningful increases in worldwide market access. They also suggested that some countries, like Brazil, like India, like China, are not the economic equivalent of, say, a Liberia, and should not be getting excessive breaks under the WTO because they claim to be "developing" countries. It seems like common sense. The world is asking the U.S. and the EU to reduce programs that make their agricultural products more competitive in world markets. In return, the U.S. and EU ask to face less trade barriers so they will have a better chance to sell their exports without subsidies.

It seems like common sense, but this is not a normal environment. A British organization, Oxfam International, explained the other day that it was the moral duty of the U.S. to reduce agricultural subsidies and expect no increase in market access for its products. Four African countries renewed their demand for an end to the U.S. cotton program and $3 billion in compensation and their belief they should be exempt from true market liberalization. Many more developing countries have banned together to repeat their general position - the developed countries should make trade concessions in order to create a "fair and equitable" trading environment, but developing countries (no matter how developed or how competitive) should continue to be granted preferences and should not be asked to provide meaningful increases in market access.

If this negotiation were just about agriculture, one would think U.S. negotiators could easily determine they were not getting fair value. The negotiation, however, encompasses industrial products, international services, intellectual property rights, government procurement, health and safety regulation, to name a few. These issues are of major interest to other parts of the U.S. economy, and they will pressure agriculture to keep the ball rolling.

The agricultural programs of the United States and the European Union are being blamed for the ills of the world right now, and cotton is getting the most direct focus. There is no exaggeration in stating that the Cancun ministerial is the second most significant trade meeting ever faced by the U.S. cotton industry. The most significant occurred in December 1994, when the United States agreed with the rest of the world to phase out its textile import quotas. With the U.S. textile and apparel industries losing almost 300,000 textile jobs since 2001 due to textile imports, it is clear these agreements can have long term ramifications on specific sectors of the U.S. economy.

It seems like it would be easy to just say no - to say no to a bad deal; to say no to the targeting of a specific U.S. commodity for an "early harvest" (an early concession provided before the overall agreement is concluded). But the dynamic of international trade negotiations makes it difficult for negotiators to walk away from unreasonable demands. It is difficult for them not to view these negotiations as crucial to economic prosperity as a whole and as part of a greater good. Only the best negotiators know how to walk away and how to make that decision pay dividends.

The participants in the Doha Round established a Jan. 1, 2005, deadline for the negotiations to be completed. However, crucial milestones have not been met during 2003. If the Round is to have a chance of meeting its 2005 deadline, the participating countries must leave Cancun with the major areas of negotiation on track.

The pressure to leave Cancun with an "agreement" will be immense. U.S. agriculture can only hope that its negotiators have the right yardstick available to evaluate any possible deal. Dividing up the U.S. agricultural economy in an international forum is without precedent. It would be the kind of deal that could not be good for U.S. agriculture.

William Gillon is an attorney with Butler Snow O'Mara Stevens & Canada and has 20 years experience in agricultural law and policy.

e-mail: flaws@primediabusiness.com

Salts can cause problems: Check quality of irrigation water

Irrigation water of poor quality can cause soil-related problems with negative effects on crop performance. The problems are usually related to saline (salty) or alkaline (high pH) conditions in the soil and/or water. Fortunately, studies to date have shown only isolated cases where pesticide levels in irrigation water have been a concern.

Irrigation water that contains salts can cause saline soil conditions when more salt is added than is removed by the natural processes of runoff and deep percolation into the soil. This salt is in addition to what is added to the soil by fertilizers and manures.

The problem occurs when the plant roots take up the salts and move them into the plant. If the salt level is high enough it can cause plant burning and stunting and in some cases stand loss in areas of the field.

Plants are more susceptible to salt damage when they are small and in the seedling stage.

Salt damage is worse on high spots and areas that dry out because the salt accumulates near the surface as the water moves up and evaporates. This wicking effect typically causes salinity damage to be worse on the levees in a rice field. The soil surface in these saline areas often appears to be oily.

Irrigation water that has high chloride salt levels can damage crops.

Researchers breed and screen soybean varieties to determine which ones can exclude chloride from entering the plant. If chloride salt is a problem, select a soybean variety that is a chloride excluder.

Sodium salt is usually associated with particular soils, but irrigation water with excessive sodium can cause the soil to have poor physical conditions that interfere with stand establishment.

Arkansas counties that have experienced the most problems with salty irrigation water are Monroe, Cross, White, Desha, Chicot, Poinsett and Ashley. Producers planning new wells in these counties should check to see if they are in a potentially high salt area. If high salt is suspected in the groundwater, it would probably be better to do a test hole before drilling a well and then finding that the water is too salty to use for crop irrigation.

Salt is usually more of a problem in well water, but in some cases the salt concentration in surface water can be high. This may occur in tail-water recovery systems when the salts that drain off a field increase due to the water evaporating and causing the salt concentration to increase.

Alkaline (high pH) problems are almost always associated with well water and have been noted in about every Arkansas county. The high pH irrigation water contributes to increased soil pH and can lead to zinc and phosphorus deficiencies in the crop. This is part of what is described as “cold water” effect in rice fields.

The colder water temperature of the well water does affect the crop in the top of the field, but the increased soil pH in this area of the field is also part of the problem. It appears that using the Multiple Inlet Irrigation approach to rice irrigation has reduced this effect in some fields.

Soil tests and irrigation water tests are needed to determine if any of these water quality problems are contributing to problems experienced in certain fields. Both of these testing services are available through county Extension offices. There is a charge for the water analysis, but the results include some recommendations. The results are needed before anyone can properly evaluate what may be happening in the field.

If water quality is suspected to be a problem and the irrigation water has not been tested in the last five years, it would be advisable to get an analysis.


This is one of several articles on drainage and irrigation water management. If you have questions or suggestions on topics please contact me: Phil Tacker, 501-671-2267 (office), 501-671-2303 (fax), 501-944-0708 (cell), or ptacker@uaex.edu (e-mail).

Phil Tacker is an Arkansas Extension ag engineer.

Growers improve irrigation efficiency

If rice growers don't find new ways to reduce their water use, then state regulators could step in with some suggestions of their own. That take-home message was drilled to growers attending a recent field day at Dulaney Seed near Clarksdale, Miss.

Irrigation is intense in the Mississippi Delta, and it's putting great demand on the alluvial aquifer here,” says Cade Smith, weed scientist at Mississippi State University in Starkville, Miss. “The crisis that has developed in Arkansas has caught the attention of regulators in Mississippi. It's more important than ever before for producers to show that we are taking proactive steps in Mississippi to avoid such a crisis happening here, and avoid unnecessary regulations.”

While water tables in the Mississippi Delta have lowered somewhat during times of high water use, the region is not yet facing an immediate water availability problem. That doesn't mean, however, that the region is immune to experiencing the water shortage crisis being faced by other areas of the country.

“We have a tremendous potential opportunity to implement irrigation practices that could result in great water savings, and insure that a water crisis situation doesn't develop here,” says Smith.

One way rice producers can reduce their water use, Smith says, is to adopt side-inlet irrigation or multiple inlet irrigation systems on their farms.

On average, the Mississippi Delta receives 9.5 inches of rainfall during the months of June, July and August. Side-inlet irrigation greatly increases growers' ability to capture that water, Smith says.

In a side-inlet irrigation system, flexible plastic pipe is run down the side of the field, watering the field from side to side instead of from end to end. The system, which is slowly finding fans among Delta rice growers, provides water to each cut in the field at the same time through holes in the plastic pipe. Proponents of the system say it waters a field more quickly, saves water and labor, reduces energy costs, improves weed control, and eliminates cold water areas in the field.

“With the multiple inlet system and intermittent flooding it is not necessary for rice water to continually be running through levee gates for adequate irrigation. It also allows us to flood up a field earlier than we would using conventional irrigation methods,” Smith says.

He says, “Our goal is to make the Mississippi Delta the sustainable center of rice production for years to come. That means shifting our mindset from watering rice to managing irrigation for optimum efficiency.”

On average in Mississippi it costs $50 per acre to irrigate rice. With a stationary re-lift pump, that cost is reduced to $20 to $30 per acre, according to Smith.

Terry Dulaney of Clarksdale, Miss., says, “Two years ago we were irrigating rice through levee gates. We tried side-inlet irrigation on one full field last year, and this year every rice field on our farm is either side-inlet or multiple inlet irrigation.”

These alternative irrigation systems allow the Dulaneys to reduce their water use. “We're able to spread the water out, and we're seeing the benefits with easier watering, less labor and water savings,” he says.

His nephew, Wayne Dulaney, agrees, calling side-inlet irrigation a “very conservation friendly practice.”

“We've seen a huge efficiency increase, and a huge decrease in both our water use and the labor needed to irrigate our farm,” he says. “We've also been able to reduce our herbicide costs because we are distributing the water on the fields quicker.”

Mississippi Extension rice specialist Joe Street says, “This water issue is for real. DEQ has said that we are not going to let our grandchildren inherit a water problem, and we're going to reduce our water use in the Delta. That means we will all reduce our water use, either voluntarily or through regulations, whether that be permitting, monitoring, and other regulations. We all need to begin thinking about how we're going to conserve water.”


e-mail: dmuzzi@primediabusiness.com

Research questions blanket hedging recommendation

If you are a cotton grower, you've likely heard commodity brokers and marketing advisors recommend that you hedge your counter-cyclical payments with futures options. A recent study by economists at Mississippi State University is questioning that blanket recommendation.

“One way to think about the cotton counter-cyclical payment is that it's like a free put option with a strike price at 66 cents, but its value does not continue to increase as prices fall below the loan rate,” says Keith Coble, an agricultural economist at Mississippi State University in Starkville, Miss.

Under the 2002 Farm Security and Rural Investment Act, counter-cyclical payments are decoupled from production, but are still dependent on price. Because they are directly tied to the market year average price, counter-cyclical payments are not guaranteed.

Put more simply, counter-cyclical payments are equal to the target price for a crop minus the direct payment minus the maximum of either the loan rate or market year average price.

For example, your cotton counter-cyclical payment is 13.73 cents when the market year average price is equal to or less than 52 cents, and your payment is zero when the market year average price is equal to or greater than 65.73 cents.

Coble calls counter-cyclical payments “a natural hedge.” That assumes, of course, that whatever crop you are receiving a counter-cyclical payment for is actually being grown on your farm.

Coble and his fellow economists, John Anderson, and Corey Miller at Mississippi State University, recently developed economic models to determine whether it is worthwhile for growers to buy call options during the growing season to offset the chance they could lose their counter-cyclical payments if cotton prices increase. They repeated their analysis for various potential price levels.

A key issue they found in their analysis was that it mattered if you have planted cotton on the base acres or another crop. “If you have a growing program crop on the base there is relatively little value to hedging the counter-cyclical payment because of the natural hedge,” Coble says. “On the other hand, if you have planted the base to another crop, there is more likely value in hedging the counter cyclical payment.”

For example, if soybeans are planted on cotton base, then a cotton price increase that causes a decline in the counter-cyclical payment may not be offset by gains in the soybean market.

What they also found, Coble says, is that the usefulness of hedging the counter-cyclical payment is highly dependent on expected price, with hedging percentages highest when expected price is slightly below the loan rate for that crop. If prices are well below the loan rate, then the crop price has to move significantly to reach a level where the counter-cyclical payment declines. On the other hand, if cotton prices are near or above 65.73 cents, the expected counter-cyclical payment will be relatively small.

Estimating the counter-cyclical payment is complicated by the fact that the total value of the payment remains unknown until after the end of the marketing year, well over a year after planting. The marketing year for cotton is August through July, with the peak marketing season occurring from November through January. The prices during this peak marketing period have the most influence on the marketing year average price, and therefore factor heavily in hedging strategies. On average, about half of the market year cotton marketings are completed between harvest and the end of December.

“Growers need to keep in mind that these results hold prior to marketing the crop. Once, the cotton crop is sold there is no longer a gain in the market to offset declines in the counter-cyclical payment,” says Coble.


e-mail: dmuzzi@primediabusiness.com