Farm Bill Seed Cotton and Hurricane Program Updates

Farm Bill Seed Cotton and Hurricane Program Updates

Cotton field with open white bolls

On September 7, 2018, courtesy of Clover Leaf and Sowega Cotton Gins, the Jackson County Extension Office hosted a two-hour meeting for cotton growers. Don Shurley Professor Emeritus of the University of Georgia and John VanSickle with the University of Florida shared pertinent information regarding risk management program decisions, and the upcoming deadlines for cotton growers. This meeting was also web broadcast via Zoom to participating Extension Offices across Florida’s Panhandle in order to increase the number of producers reached. The meeting was recorded live and the labelled presentations are available below for viewing along with their PDF versions.

The first hour consisted of Don Shurley giving an overview of the seed cotton program (specifically in terms of how it works and how prices and payments will be calculated) and then discussing the generic base conversion options.  The following was the recorded presentation explaining the Seed Cotton Program provided at this training.

Important date regarding the seed cotton program:
1. December 7, 2018 -enrollment deadline for seed cotton program and make base elections.

Seed Cotton Program Overview Handout used at the meeting
Printer friendly Seed Cotton Presentation
Seed Cotton Program Decision Aid spreadsheet mentioned in the presentation

Dr. Shurely also wrote an article on the Seed Cotton Program: Understanding Your Generic Base Conversion Options with the New Seed Cotton Program

After the farm bill update, Dr. Shurely also briefly covered the Market Facilitation Program (MFP) and what it entails.

Market Facilitation Program (MFP) Handout

During the second hour, John VanSickle discussed the Wildfires and Hurricanes Indemnity Program (WHIP). This program enables the USDA’s Farm Service Agency to make disaster payments to offset losses from hurricanes and wildfires during 2017. WHIP covers both the loss of the crop, tree, bush or vine as well as the loss in production.

Important dates regarding the WHIP program:
1. November 16, 2018- enrollment deadline.

WHIP Program Factsheet
Printer friendly WHIP Presentation

Understanding Your Generic Base Conversion Options with the New Seed Cotton Program

Understanding Your Generic Base Conversion Options with the New Seed Cotton Program

Don Shurley and Adam N. Rabinowitz, Department of Agricultural and Applied Economics, University of Georgia

A Little History

You will recall that under provisions of the 2014 farm bill, landowners were given the opportunity to make a one-time election to keep existing crop bases on the farm as they were, or to update these bases.  This decision applied to “covered commodities” only and excluded cotton.

Bases of covered commodities (corn, peanuts, soybeans, wheat, grain sorghum, oats, sunflowers, canola, etc.) could be “retained” as they were as of September 30, 2013 or these bases could be “reallocated” based on the farm’s planting history for 2009-2012.  Total base acres of covered commodities could not be increased but could be “reshuffled” based on 2009-2012 planting.

If a farm had cotton base, that base was pulled aside and could not be updated or changed.  Cotton was not a covered commodity, and not eligible for Agriculture Risk Coverage (ARC) or Price Loss Coverage (PLC).  Cotton base on a farm became “generic base.”

What Now

Since 2014, the generic base on a farm has just been sitting there.  It has had no value for cotton, and cotton has had no income safety net, since cotton was not eligible for ARC/PLC payments.  The only contribution generic base has had is the provision that says, acres planted to covered commodities on that farm can earn temporary base of the commodity and are eligible for ARC/PLC up to the amount of generic base.  But this did nothing for cotton specifically.

For several years, cotton industry leadership sought ways to improve the safety net for cotton producers, and to get cotton back in Title I and eligible for ARC/PLC.  With the Bipartisan Budget Act of 2018, “seed cotton”—a combination of lint and seed, is now a covered commodity under Title I of the 2014 farm bill.  This becomes effective with the 2018 crop year.

Under the new seed cotton program, generic base on a farm will no longer be in effect starting with the 2018 crop year.  Generic base must be converted to seed cotton base, or other covered commodity bases.

Conversion Options

To convert generic base, landowners will have 2 options to choose from:

Option 1 – The higher of 1-A or 1-B

1-A—80% of generic base

1-B—the average cotton acres planted 2009-2012, but not to exceed the generic base

With 1-A and 1-B, any generic base remaining becomes “unassigned base

Option 2      2—allocate generic base to seed cotton base, and base of other covered commodities based on 2009-2012 acres planted; there would be no “unassigned base

If a farm has generic base (former cotton base under the 2008 farm bill) but no covered commodity (including cotton) has been planted on the farm during 2009-2016, all generic base on that farm will automatically become unassigned base and not eligible for ARC/PLC.  Conversion options would not apply.

Some have asked, why a more current planting history is not allowed? Remember that in the 2014 “retain or reallocate” decision, cotton was excluded.  This new seed cotton program is simply going back to that same window of history given to other covered commodities (2009-2012), and now giving the landowner the opportunity of several alternatives to convert generic base or former cotton base to seed cotton base, or seed cotton base and bases of other covered commodities based on that same window of history.

An Example

Let’s suppose Farm # 4178 has the following 2009-2012 planting history.  With the exception of cotton, this is the exact same history used back in 2014 for the retain or reallocate decision.  The 2009-2012 average includes any years the crop was not planted.  The farm has averaged 19.25 acres of corn, 105.25 acres of cotton, 32.5 acres of peanuts, and 7 acres of soybeans.The farm has 111 acres of generic base (former cotton base under the 2008 farm bill).  This generic base must be converted to seed cotton base (option 1-A or 1-B) or seed cotton base, and base of other commodities (option 2).  Here are how the choices compare for this example:

Option 1-A would result in 88.8 acres of seed cotton base, and 22.2 unassigned base acres.

111 acres generic base x 80% = 88.8 acres seed cotton base

111 – 88.8 = 22.2 acres unassigned base

 

Option 1-B would result in 105.25 acres of seed cotton base, and 5.75 unassigned base acres.  2009-2012 average cotton acres planted = 105.25 acres

Seed cotton base = lesser of generic base acres (111) or average acres planted (105.25) 111 – 105.25 = 5.75 acres unassigned base

1-B results in higher seed cotton base.  So, 1-B can be compared to Option 2

Option 2 would result in 71.24 acres of seed cotton base, 13.03 acres of corn base, 22 acres of peanut base, and 4.74 acres of soybean base.  This allocation is determined based on each crops proportion of the 2009-2012 average acres planted:

Seed cotton base = 105.25/164 = 64.2% x 111 acres generic base = 71.24 acres

Corn base = 19.25/164 = 11.7% x 111 acres generic base = 13.03 acres

Peanut base = 32.5/164 = 19.8% x 111 acres generic base = 22.0 acres

Soybeans base = 7/164 = 4.3% x 111 acres generic base = 4.74 acres

Total bases = 111 acres; Unassigned base = 0 acres

Making the Decision

Potentially, every farm could be different, because of the amount of the generic base and planting history.  It is possible, however, that your farms could be divided up into different “types” based on similar bases, planting history, and seed cotton payment yield and a decision made for choice of conversion option by type.

Obviously, the major factor in the decision will be expected total ARC/PLC payments with each option.  In the hypothetical example shown, Option 1-B gives the highest seed cotton base.  Option 2 has less seed cotton base in exchange for corn, peanuts, and soybean base.  Future ARC and PLC payments, and thus which conversion option may be best, depends on market prices, yields vs historical yields (for crops in ARC), and PLC reference prices.

The University of Georgia Department of Agricultural and Applied Economics and UGA Cooperative Extension are developing a decision aid that will be available to assist producers and landowners to analyze the conversion options.

Answers to a Few Questions

The seed cotton program and conversion of generic base does not in any way impact your current crop bases for other covered commodities.  The conversion will simply add to the other bases you may now have on the farm.  The decision regarding generic base conversion option is a farm-by-farm basis.  You can select one option for one farm, and a different option for another farm.  The treatment of any “unassigned base” in future farm bills is uncertain, and will likely depend on budget availability.


UGA Seed Cotton Fact Sheets

Printer friendly versions of the three fact sheets that were developed to update farmers on the recent changes to the 2014 Farm Bill.

  1. What Farmers and Landowners Need to Know about Cotton and Generic Base
  2. MYA Prices and Calculating Payments with the Seed Cotton PLC


Acknowledgment

Appreciation is expressed to the Georgia Cotton Commission and the Georgia Peanut Commission for funding support.  Appreciation is expressed to the National Cotton Council for review and comment.

 

Prices and Payments from the New Farm Bill Program for Cotton

Prices and Payments from the New Farm Bill Program for Cotton

Don Shurley and Adam Rabinowitz, Department of Agricultural and Applied Economics, University of Georgia

Effective with the 2018 crop, “seed cotton” is now a covered commodity under Title I of the 2014 farm bill and eligible for Price Loss Coverage (PLC) payments.  For purposes of the legislation, “seed cotton” is unginned upland cotton—a combination of both cotton (lint) and cottonseed.

Seed cotton is eligible for both PLC and  Agricultural Risk Coverage (ARC).  This fact sheet discusses the PLC option only1.  This fact sheet is the second in a series of publications that briefly explain the basic workings of this new seed cotton program2.

Reference Price and Payment

The Reference Price for seed cotton (SC) is 36.7 cents per lb.  This is fixed in legislation and does not change.  This is a weighted average “combo price” for lint and seed.  A PLC payment is made if the weighted actual Market Year Average (MYA) price is less than 36.7 cents.  The MYA “floor price” is 25 cents.  This means if the MYA is less than 25 cents, 25 is used.  This effectively caps the PLC payment rate at 11.7 cents.

If the SC MYA price is less than 36.7 cents, SC PLC Payment Rate = 36.7 – (higher of MYA price or 25 cents)

If the SC MYA price is greater than 36.7 cents, SC PLC Payment Rate = 0

MYA Price

The seed cotton (SC) MYA price is a weighted price based on upland cotton production and total (all) cottonseed production.  USDA-NASS publishes these production numbers and MYA prices.  The MYA price is calculated as follows:

Upland cotton production (lbs) = million bales x 480 lbs per bale

All cottonseed production (lbs) = million tons x 2,000

Total Pounds = upland cotton (lbs) + total cottonseed (lbs)

Seed cotton (SC) MYA Price =    (upland cotton lbs/Total lbs) x upland cotton MYA price + (cottonseed lbs/Total Lbs) x cottonseed MYA price

As an example, let’s suppose US upland cotton production were 20 million bales and the MYA price for upland cotton was 70 cents/lb and let’s suppose total or all cottonseed production were 6.53 million tons and the MYA price was $180 per ton or 9 cents/lb:

Upland cotton production = 20 million bales x 480 lbs = 9,600 million or 9.6 billion lbs

All cottonseed production = 6.53 million tons x 2,000 = 13,060 million or 13.06 billion lbs

Total Production = 9.6 + 13.06 = 22.66 billion lbs

SC MYA Price = (9.6/22.66) x $0.70 + (13.06/22.66) x $0.09 = $0.349 or 34.9 cents/lb

If the MYA price is less than the 36.7 cents reference price, a PLC payments is made.  Notice that since this is a “combo price”, the MYA will be impacted by what happens to both prices.  A decrease in the MYA price for lint could be partially offset by an increase in the price of cottonseed and vice versa.

What to Expect

Let’s assume this seed cotton (SC) program had been in effect for the past 10 years (2008-2017 or since beginning of the 2008 farm bill).  The table below shows what the MYA price for seed cotton (SC) would have been each year using the formulas just described.  Upland cotton and cottonseed production for 2017 are the latest USDA projections.  Upland cotton and cottonseed prices for 2017 are MYA estimates by the authors based on data to-date. For these 10 years, the SC MYA price averaged 34.63 cents per lb.  The SC MYA price would have been below the SC PLC Reference Price 6 out of the 10 years.  Over the 10 years, including zero years, the PLC payment rate would have averaged 3.15 cents/lb per year.

Base Acres

This seed cotton program applies only to farms with Generic Base (former cotton base under the 2008 farm bill) and that have planted cotton or a covered commodity during 2009-2016.  If a farm currently has no Generic Base, none is earned under this program.  If a farm has Generic Base but has planted no cotton or covered commodity in 2009-2016, the Generic Base will become “unassigned” base and ineligible for ARC/PLC.

Any PLC payment will be made on seed cotton base acres.  Landowners will be given several options to choose from to convert Generic Base to seed cotton base or base of seed cotton and other covered commodities like peanuts, corn, soybeans, wheat, etc.  This will be based on the farms planting history from 2009-2012.  This is the same window of history that was used in the “retain” or “reallocate” decision for the 2014 farm bill.  Payments are made on base acres, not acres planted.  There is no requirement to plant cotton or any other covered commodity to be eligible for a seed cotton payment.  Payment, if any, is made on 85% of base acres.

Payment Yield

If a farm has Generic Base (former cotton base), that base also has a cotton CCP (countercyclical payment) yield already established for it under the 2008 farm bill.  This was the yield used to make countercyclical payments under the 2008 farm bill.

For purposes of the seed cotton program, landowners will be given the option of keeping this current CCP yield or updating it to 90% of the average yield for 2008-2012.  This is the same window of history that was given for covered commodities to update PLC payment yields for the 2014 farm bill.

The seed cotton payment yield will be the CCP yield times 2.4.

Payment Example

The following is a hypothetical example of how a seed cotton (SC) PLC payment would be calculated assuming a SC MYA price of 33.5 cents/lb.

Base Acres              87 acres

CCP Yield                900 lbs

Seed cotton payment yield          900 x 2.4 = 2,160 lbs

SC MYA Price          33.5 cents

SC PLC Payment Rate = 36.7 – 33.5 = 3.2 cents per lb

SC PLC Payment = $0.032 x 2,160 lbs x 87 acres x 85% = $5,111 for this farm (FSN)

Payment Per Acre of Base = $5,111 / 87 = $58.75

Payments Calculator

The seed cotton MYA price is a weighted price—as illustrated, dependent on upland cotton production and cottonseed production and the MYA price for both.  It is a “combo price”.  The following is a table of estimated SC PLC payments at varying combinations of lint price and cottonseed price.  The table shows the seed cotton (SC) PLC Payment per lb of seedcotton payment yield per acre of base.  This makes it easy and convenient for a producer to estimate what the SC PLC Payment would be for his/her specific situation.

Suppose the MYA price for cotton (lint) is 70 cents/lb and the MYA price for cotton seed is $180/ton or 9 cents/lb.  From the table, the PLC payment rate per lb per acre would be 1.52 cents.  Suppose the farm has 90 acres of seed cotton base and a seed cotton payment yield of 2,160 lbs:

SC PLC Payment = $0.0152 x 2,160 = $32.83 per acre of seed cotton base

Total SC PLC Payment = $32.83 x 90 acres of base = $2,955 for the farm (FSN)

Payment is received on only 85% of base acres but this has already been factored into the payments table.  The payment rate of 1.52 cents allocated over all base acres would be equivalent to 1.79 cents received on 85% of base acres.

  1. There is an ARC option that can be chosen instead of PLC.  ARC is revenue based depending on both yield and price.  Because of relatively low prices, and in some cases county yields in recent years, ARC may not provide as much of a safety net asPLC.
  2. The first publication in this series is “The Bipartisan Budget Act of 2018: What Farmers and Landowners Need to Know About Cotton and Generic Base”, AGECON-18-02, Department of Agricultural and Applied Economics, University of Georgia

Acknowledgment

Appreciation is expressed to the Georgia Cotton Commission and the Georgia Peanut Commission for funding support.  Appreciation is expressed to the National Cotton Council for review.

 

 

Cotton Marketing News:  Changes in the Loan Program and Rate for 2017

Cotton Marketing News: Changes in the Loan Program and Rate for 2017

Don Shurley, UGA Emeritus Cotton Economist

The marketing assistance loan (MAL) is an important tool used by many producers and marketing associations in cotton pricing and risk management.  In addition to research and farmer education, I teach courses in commodity marketing and agricultural policy and I tell my students that the key to basic understanding of the “Loan Program” is to remember that it’s just another way to store the crop and price it later.  The crop is stored in an approved facility, the producer receives the Loan Rate, and the crop is pledged as collateral for the loan.  The crop is eventually sold on the cash/spot market and the loan and any storage and interest charges paid.  So, the Marketing Loan is storage but receiving some money/cash flow (the Loan Rate) up front.

Prior to the 2014 farm bill for as long as I can remember, the Loan Rate has been 52 cents per pound.  Under the 2014 farm bill the Loan Rate is now allowed to “float” between 45 and 52 cents.  The Loan Rate is now the average Adjusted World Price (AWP) for the most recently completed 2 marketing years but not to exceed 52 cents and not less than 45 cents.

For each year of the 2014 farm bill thus far, the average AWP has been above 52 cents so the 52 cent maximum for the Loan Rate has held.  For the 2017 crop, however, the Loan Rate will be 49.49 cents—2.51 cents less than 2016.  This was the average AWP for the 2014-2015 crop years—the Loan Rate has to be announced by October 1 of the year prior to planting and the 2016 marketing year not completed at that time so there is a 1-year lag in the calculation.

What are the implications of this?  First of all, realize that cotton stored in the Loan will eventually be sold on the cash/spot market.  The MAL acts only as a cash flow tool.  The lower Loan Rate means less cash flow up front.  The 49.49 cents is the “Base” rate for Color 41, 4 Leaf, and Staple 34.  There are also adjustments from this amount (differences) for better or less fiber quality.

Loan differences, also referred to as loan premiums and discounts, are determined based on actual cash/spot market prices paid for various cotton quality factors for the prior three years.  Although the Base loan rate may change depending on what the AWP does, that has no direct impact on loan differences.  The following are a few comparisons of loan premiums (+) and discounts (-) for the 2017 crop compared to last year’s crop.

With the lower Loan Rate for the 2017 crop, the question might also be asked how this would impact any LDP (Loan Deficiency Payment) or MLG (Marketing Loan Gain).  An LDP or MLG is available when the AWP is less than the Loan Rate.  Since the Loan Rate is reduced 2.51 cents for the 2017 crop, the AWP will have to be 2.51 cents lower to trigger an LDP/MLG—but this assumes the AWP calculation hasn’t also changed.  In fact though, it has.

The AWP (Adjusted World Price) is derived from the A-Index—a proxy for the “World Price”.  The A-Index is based on prices for cotton delivered to Far Eastern ports or the “FE Price”.  This price is then “adjusted” for transportation costs and fiber quality to arrive at the AWP.  For the 2016 crop year, this adjustment was 17.43 cents.  For the 2017 crop, this adjustment is less at 17.05 cents.

Taking into account both the drop in the Loan Rate and the reduction in the cost and quality adjustment, the FE Price must now be almost 3 cents lower (2.89 cent lower) to trigger and LDP/MLG.  Nearby cotton futures prices are currently about 8 cents below the FE Price.  This means an LDP or MLG is not triggered until futures get to approximately 59 cents or less—almost 3 cents lower than what prices would have to have been previously.

The difference between nearby futures and the FE Price can and will vary during the marketing year.  At 8 to 9 cents currently, this is on the higher side of what this difference can typically be.  If the difference were only 6 cents, for example, there will be an LDP/MLG on the 2017 crop unless futures were below 60 to 61 cents.  Regardless, an FE Price below 66.54 is needed to give an AWP less than the Loan Rate of 49.49 cents.

When cotton is stored under the Loan, the producer will have 2 choices—redemption (repay the loan plus charges or the AWP, whichever is less and sell the cotton on the spot/cash market) or accept a merchant equity offer.  Assuming a 70-cent cash market and the Base loan rate, here’s how a merchant equity pencils out:

A reduction in the Loan Rate for 2017 provides less to the farmer up front.  This is made up by higher equity value and payment.  All other things being equal, a reduction in the Loan Rate does not impact the total received by the grower.

 

 

 

 

How Generic Base Could Be Treated with the Cottonseed Proposal for 2018

How Generic Base Could Be Treated with the Cottonseed Proposal for 2018

Jackson County cotton ready for harvest. Photo – Doug Mayo

Don Shurley, UGA Emeritus Cotton Economist

With the 2014 farm bill, cotton base on a farm became “Generic Base.”  If you’ll recall, cotton base on a farm was frozen (could not be increased or decreased), but all other types of base on a farm (base “covered commodities” like corn, soybeans, peanuts, wheat, etc.) could be retained as ,or reallocated based on acres planted from 2009-2012.

Producers on a farm then had to choose Agriculture Risk Coverage (ARC) or Price Loss Coverage (PLC) for all covered commodities.  However, cotton is not eligible for ARC and PLC.  Cotton’s “safety net” is STAX, but STAX has not been as well utilized and accepted by growers as expected.  From a policy standpoint, cotton has been at an income risk management disadvantage, as compared to other crops.  For this reason, remedies have been sought that would provide income support for cotton production.

One proposal sought by cotton industry leadership has been to make cottonseed a covered commodity and eligible for PLC as an “Other Oilseed” under the current 2014 farm bill.  This attempt was unsuccessful last year when then Secretary of Agriculture Tom Vilsack concluded that he lacked authority to make such a designation, and that other provisions of the farm bill also made such a designation unworkable. In May of this year, efforts that included a cottonseed policy in the FY17 Omnibus spending bill fell short and cottonseed was not included.

Recent developments have been more positive and encouraging. On July 12, the House Appropriations Committee approved its FY18 Ag Appropriations bill which included language encouraging USDA to provide assistance, including a cottonseed program.  On July 20, the Senate Appropriations Committee approved its FY18 Ag Appropriations bill also including language supporting a cottonseed policy beginning with the 2018 crop.

Details of what was in the “legislative language” of the Senate Ag Appropriations bill have been publicly released.  This includes a suggested PLC Reference Price, a suggested PLC Payment Yield for cottonseed, and elections for how the current Generic Base on a farm would be converted to cottonseed base and/or other covered commodity bases.

To have a cottonseed program, this would come from the farm’s Generic Base.  All other bases now on the farm (permanent bases of covered commodities) would not be reduced.  The Senate Ag Appropriations bill language provides the following terms for how the Generic Base on a farm would be treated1:

  • The cottonseed program would apply only to farms with Generic Base acres under the 2014 farm bill—previous cotton base acres under the 2008 farm bill.
  • For farms with Generic Base, but no covered commodity or cotton has been planted for the period 2009 through 2016, the Generic Base would be converted to “Unassigned Base” and this Unassigned Base would be ineligible for ARC/PLC for the remainder of the 2014 farm bill.
  • For farms with Generic Base that have planted covered commodities or cotton during 2009-2016, the landowner will have two choices of what to do with the Generic Base on the farm:

Option 1.  Generic Base would be converted to cottonseed base at the higher of 80% of the Generic Base or the average of 2009-2012 cotton acres planted but not to exceed the amount of Generic Base.  Any remaining Generic Base acres would become Unassigned Base and ineligible for ARC/PLC.

Option 2.  Generic Base would be converted to cottonseed base and other covered commodity bases proportionately, based on acres planted in 2009-2012.  All Generic Base acres on the farm would be reallocated and none would be designated as Unassigned.

To better understand the choice between Option 1 and Option 2, let’s look at a hypothetical situation.  We start with the same 2009-2012 crop history that was used in 2014 to make the decision to retain or reallocate the bases of covered commodities.

Now, let’s add the cotton acreage to this for the same period, 2009-2012.  Including cotton, let’s suppose the acreage history now looks like this:

The average acres planted per year of each covered commodity and cotton for the period 2009-2012, including zero years, is shown.  Let’s now assume the farm has 120 acres of Generic Base (previous cotton base under the 2008 farm bill), Option 2 would reallocate the 120 acres of Generic Base on the farm as follows:

So, in our example farm 1759, the farm has Generic Base and a covered commodity (including cotton/cottonseed) was planted during 2009-2012.  The landowner would have 2 choices:

Option 1-Convert the 120 acres Generic Base to the higher of 80% of Generic Base (96 acres), or the average of 2009-2012cotton acres planted (110.0 acres) to cottonseed base (cottonseed base could not exceed 120 acres).  So, if Option 1 were elected in this example there would be 110 acres of cottonseed base and the remaining 10 acres of what was Generic Base would become Unassigned Base.  OR–

Option 2-Convert the farms 120 acres of Generic Base to the covered commodities bases as shown including cotton/cottonseed.  If option 2 were elected, there would be 66 acres of cottonseed base in this example and the farm would gain permanent base of the other covered commodities as shown.

Summary and Implications

This paper discusses and illustrates how Generic Base acres on a farm might be treated under a proposal to make cottonseed an Other Oilseed and eligible for PLC under Title I of the current 2014 farm bill.  The illustrations and discussion are believed to be accurate, but not guaranteed and could be altered in future legislation or eliminated.

Under provisions contained in the recent Senate Ag Appropriations bill, landowners of a farm with Generic Base and a 2009-2016 history of planting covered commodities or cotton on the farm can choose 1 of 2 alternatives to convert Generic Base to cottonseed base and base of other covered commodities.  Landowners must choose and participation is not optional.  It is believed that the choice of option will be on a farm-by-farm basis.

If a farm (FSN) has Generic Base but no covered commodity or cotton has been planted for the period 2009-2016, the Generic Base will be converted to Unassigned Base, and the Unassigned Base ineligible for ARC/PLC for the remainder of the 2014 farm bill.  What will happen to Unassigned Base in the next farm bill is unknown?

The cottonseed proposal, if adopted, would begin with the 2018 crop year.  Effective with the 2018 crop year, there would no longer be Generic Base on a farm.  Cottonseed base and any additional permanent base gained under Option 2 would be eligible for ARC/PLC, but there would no longer be the provision of acres planted to covered commodities being “assigned” to Generic Base and eligible for ARC/PLC.

The cottonseed proposal and an extension of the Cotton Ginning Cost Share Program (CGCS), if adopted, are seen as a “bridge” to assist cotton producers in the interim until the longer-term can be addressed in the next farm bill, beginning with the 2019 crop year2.  Further, while both House and Senate appropriations bills endorse a cottonseed policy, it remains uncertain if the cottonseed policy will be enacted later this year.  What happens in a new farm bill for cotton/cottonseed may depend on what happens later this year?

The decision between Option 1 and Option 2 is clearly going to depend on 2009-2012 planting history and which resulting base(s) are expected to be more valuable in terms of a safety net and expected payments for the remainder of this farm bill and, more importantly, potentially longer term in future legislation.  So, the decision and best choice for the landowner and producers will depend on the other provisions of the cottonseed policy (Reference Price, Payment Yield, etc.) and also how other covered commodities are expected to fare under a continued ARC/PLC.

It is important to note that permanent bases on the farm (the base of covered commodities the farm now has as a result of the 2014 “retain or reallocate” decision, are not impacted by the cottonseed policy and choices.  All the cottonseed policy is doing is converting the Generic Base on the farm to cottonseed base and, if Option 2 is elected, potentially gaining additional permanent base of other covered commodities.

It is also important to note that planting history under the 2014 farm bill has no bearing.

Acknowledgements

Appreciation is expressed to the National Cotton Council for review of the methodology.  Appreciation is expressed to the Georgia Cotton Commission for funding support.

  1. Overview of Cottonseed Policy in Senate Agriculture Appropriations Bill, National Cotton Council, July 2017.
  2. Shurley, Don. Background and Summary of Recent Cotton Policy Developments, Department of Agricultural and Applied Economics, University of Georgia, http://www.caes.uga.edu/departments/ag-econ/extension.html, “Recent Cotton Policy Developments—Cotton Policy Update”, July 27, 2017.

 

Crop Insurance for Beekeepers

Crop Insurance for Beekeepers

USDA’s Risk Management Agency announced on July 27 that Apiculture Crop Insurance is now available nationwide.  Beekeepers have until November 17 to sign up for 2018 coverage.

Crop insurance for beekeeper operations has been expanded to include 19 additional states and now spans the entire 48 contiguous states. On July 27th,  U.S.Department of Agriculture’s (USDA) Risk Management Agency (RMA) announced changes to the Apiculture Pilot Insurance (API) plan, ensuring greater protection for the producers’ honey, pollen collection, wax, and breeding stock.

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Expanding this coverage so that more producers can participate in the Federal crop insurance program strengthens the rural economy through a broader farm safety net,” said RMA Acting Administrator Heather Manzano. “This provides increased support for beekeepers who play a critical role in agriculture.”Apiculture systems are diverse, with varying types of plant species and climate conditions. API is designed to cover the unique precipitation requirements of different regions across the nation.
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In addition to expanding API coverage, the Federal Crop Insurance Corporation Board of Directors voted to replace the satellite-based Vegetation Index with the precipitation-based Rainfall Index for API policies. Available since 2009, API was developed through the Federal Crop Insurance Act’s 508(h) process, which allows private submitters to develop innovative insurance products to meet the needs of producers.

[important]Producers have until November 15, 2017 to enroll in API coverage for the 2018 crop year.  [/important]

For more specif information on API, use the following links:

Apiculture Pilot Insurance Program Fact Sheet

Apiculture Crop Insurance website

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Crop insurance is sold and delivered solely through private crop insurance agents. A list of agents is available at all USDA Service Centers and online at the RMA Agent Locator.  Learn more about all of the types of federal crop insurance and the modern farm safety net at https://www.rma.usda.gov
.