Hopes are high that seed cotton, unginned upland cotton that includes both lint and seed, will be moved into Title I farm program protection through a disaster bill recently passed the House and awaiting Senate action.
“If that happens, then cotton will be back in as a Title I covered commodity without farm bill action,” says Dr. Joe Outlaw, co-director of the Agricultural and Food Policy Center at Texas A&M University and Texas A&M AgriLife Extension Service economist at College Station. “In my mind, that would be the best situation we could get — this would be the easiest approach. What I keep telling people is you just need to have the coverage, have the line in the budget, and then you can argue for tweaks here and there.”
Is this the ideal plan? Outlaw says, “No. My answer has always been, get cotton back in before the farm bill and you’ve solved most of the problems because when they go back they will not have to find money for it in that process. Right now, this is a no-cost bill to the government,” says Outlaw, who spoke at the Beltwide Cotton Conferences at San Antonio, January 4, 2018.
“Is it the perfect plan? Not exactly. But it is going to get your nose under the tent — it will get you back in and you can fix it later in the bill.”
If the disaster bill passes, it will go into effect in 2018 with the reference price of 36 cents a pound. “Before you know how everything is calculated, you don’t know if this is a good reference price or a bad reference price,” says Outlaw. “The fact of the matter is that it’s been worked on a lot, and it’s a good reference price for the people in this room [at Beltwide].”
Payment yield would be 2.4 times the payment yield for cotton established in the 2008 farm bill, he says. “You have to establish yield somehow, and they’re going to use the old counter-cyclical payment yield. If this goes through, farmers will have one opportunity to update payment yield just like every other covered commodity in the 2014 bill.”
Payment acres would have to be established within 90 days by the farm owner by allocating all generic base acres on the farm. “In the case where no covered commodity, including seed cotton, was planted at any time from 2009-2016, the owner will allocate generic base acres on the farm to the unassigned crop base for which no payments may be made under Section 1116 or 1117 of the 2014 farm bill,” says Outlaw.
Under this new bill, producers would also be allowed a one-time opportunity to select either agriculture risk coverage (ARC) or price loss coverage (PLC) for seed cotton. As in the Agriculture Act of 2014, growers who fail to select one or the other will automatically be enrolled in PLC, explains Outlaw.
Stacked Income Protection Plan (STAX), is another crop insurance product that will be available again for those who are not enrolled in either PLC or ARC in a crop year. In the past, Outlaw has not recommended STAX, but, “If these prices hold true like they’re talking about, it’s worth looking at a lot harder. You wouldn’t necessarily jump to the other programs,” says Outlaw. “But because the projected insurance prices are going up, STAX would be more attractive in the future. So keep that in the back of your mind.”
STAX provides coverage for up to 20 percent of the expected area revenue in increments of 5, 10, 15 or 20 percent. Loss payments begin when area revenue falls below 90 percent of its expected level – although a lower loss trigger may be selected. Loss payments reach their maximum when area revenue falls to 70 percent of its expected level – unless your companion policy has a coverage level above 70 percent in which case payments end sooner. Like other area plans of insurance, the amount of coverage may also be increased or decreased by selection of a protection factor so that growers may better tailor their coverage to their risks, according to a USDA Risk Management Task Fact Sheet.
In the process
For quite some time, the House and Senate have held numerous hearings in Washington, D.C. and regional listening sessions about the upcoming farm bill, allowing each commodity group to say what they want or need in the next farm bill, says Outlaw.
“The problem I think Congress is going to have is that the groups were invited to testify as to what they want, so they asked for everything. They weren’t forced to prioritize, leaving Congress to try to figure out how to get the needs and wants met.
“The people in Washington don’t really want to set out to tell people they can’t have some new change that they think will be better for their commodity or industry,” says Outlaw. “So, they’re kind of waiting on that process to see how much money there is. There’s always this amount that’s given that says, ‘here’s this baseline that you can spend’ and they’re trying to figure out what changes can be made, which ones would cost a lot, which ones would cost a little and what they can do for all of the interest groups that come in and ask for things. So, we’re in that process.
“We’ve got two strong chairmen and I think they’re going to do their level best to get this thing done,” says Outlaw of House Ag Committee Chairman Mike Conaway and Senate Ag Committee Chairman Pat Roberts.
As a whole, under farm bill spending, categories such as crop insurance, conservation and Commodity Title, the U.S. spends $20 billion. “If you put that relative to our national budget, fiscal year 2018, the sum total of $20 billion a year is one-half of one percent of that budget,” Outlaw points out. “So we talk about this money like it’s billions of dollars. It is a lot of money, but relative to what we spend on other things, it’s nothing. I’d like to have it, but it’s nothing. It’s only one-half of one percent.”