USDA Creates Cotton Program

Cotton Producers Would Receive Payments Based on Acreage, Ginning Costs

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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Under a new USDA program to offset the costs of cotton ginning, cotton farmers will receive a one-time payment based on their 2015 cotton acres reported to the Farm Service Agency. (Photo by Shutterstock)

OMAHA (DTN) -- USDA will provide up to $300 million in aid to cotton producers under a new Cotton Ginning Cost-Share program, the department announced Monday.

Groups representing cotton producers have been calling on Agriculture Secretary Tom Vilsack to provide some type of commodity safety net to cotton farmers since last year.

Under the program, cotton farmers will receive a one-time payment based on their 2015 cotton acres reported to the Farm Service Agency. The acreage would be multiplied by 40% of the average ginning costs for each production region. Roughly 13 million bales of cotton were ginned in 2015 from 9 million planted acres.

According to FSA, the average payment rate for farmers would be:

$47.44 per acre in the Southeast -- Alabama, Florida, Georgia, North Carolina, South Carolina and Virginia;

$56.26 per acre in the Midsouth -- Arkansas, Illinois, Kentucky, Louisiana, Missouri, Mississippi and Tennessee;

$36.97 per acre in the Southwest -- Kansas, Oklahoma and Texas;

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$97.41 per acre in the West -- Arizona, California and New Mexico.

The average cotton producer would collect roughly $8,100, according to FSA. That means payments will be 60% higher on average than they were for farmers under the 2014 Cotton Transition Assistance Program, which was created in the 2014 farm bill to help ease the shift from direct payments to being dropped from commodity programs.

USDA stated the payments would help not only cotton farmers, but cotton gins, cooperatives and cotton markets would also indirectly benefit as well.

"Today's announcement shows USDA continues to stand with America's cotton producers and our rural communities," Vilsack said. "The Cotton Ginning Cost Share program will offer meaningful, timely and targeted assistance to cotton growers to help with their anticipated ginning costs and to facilitate marketing."

Plains Cotton Growers, Inc., President Johnie Reed, a cottn producer from Kress, Texas, commended USDA's action. "We greatly appreciate U.S. Secretary of Agriculture Tom Vilsack and the USDA for listening to the concerns of cotton producers and coming up with a viable short-term solution that will help us face some of our challenges," he said in a news release.

The cotton industry had agreed to forego commodity payments in the 2014 farm bill, but reversed course after cotton prices fell sharply. Industry leaders had specifically asked for USDA to consider cottonseed as an "other oilseed" that would allow cotton producers to sign up for the Price Loss Coverage program for cottonseed payments. Vilsack rejected that request, stating that he did not have authority under the 2014 farm bill to designate cottonseed eligible for PLC.

The announcement comes as cotton prices have been ticking up in recent weeks. The December cotton futures contract finished Monday at 65.54 cents a pound.

Zippy Duvall, president of the American Farm Bureau Federation and a Georgia farmer, said the payments would help cotton farmers dealing with some of their toughest market conditions in a decade.

"We are especially appreciative that Secretary Vilsack took the time to work with us, the National Cotton Council and others to arrive at this special, one-time arrangement without requiring legislative action," Duvall said. "This is a clear example of what we can accomplish when we work together. Our cotton farmers and the rural businesses they partner with will be better off because USDA took action to address a serious market downturn in their industry."

USDA has announced a sign-up beginning June 20 until Aug. 5 at local FSA offices.

USDA also stated in the sign-up that the program will face the same $40,000 payment limitation used for the Cotton Transition Assistance Program. Farmers will have to meet actively-engaged requirements, conservation compliance and a $900,000 limit on adjusted gross income to qualify.

More information and rules on the program can be found at http://www.fsa.usda.gov/…

Chris Clayton can be reached at Chris.Clayton@dtn.com.

Follow him on Twitter @ChrisClaytonDTN.

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Chris Clayton