Smith: Back in 2014, cotton was removed as a covered commodity in the farm bill. Since then, industry stakeholders like the American Farm Bureau have been working to develop and introduce a new safety net program for cotton producers. AFBF Chief Economist John Newton says the Bipartisan Budget Act of 2018 did that by making seed cotton a covered commodity once again. Producers can now participate in either the Agriculture Risk Coverage or Price Loss Coverage programs, which is good news for producers who’ve been struggling.
Newton: Cotton farmers did not have a Title 1 farm bill risk management program like ARC or PLC available to them. Cotton producers had traditional crop insurance policies. They also had the STAX program, but participation in the STAX program wasn’t that great. It didn’t function as the industry had anticipated, so there was a real need to get a risk management program included under the farm bill for cotton producers.
Smith: Newton says participants will need to make several decisions before they sign up.
Newton: Farmers who have generic base acres will have an opportunity to reallocate those generic base acres into seed cotton base acres. And then, they’ll also have to make a decision on updating their program yields under the PLC program, and then what program to participate in.
Smith: The PLC is a price-based safety net program, while ARC is a revenue-based program. Newton says the program farmers should choose depends on historical yields in their areas, as well as anticipated 2018/2019 crop yields. For example, based on current crop conditions, Newton anticipates that large parts of the western Cotton Belt will take a long look at the ARC program. No matter which program farmers choose, it’s great news they have a safety net program in place.
Newton: Texas is the largest cotton-producing state and only 21 percent of that crop is in good to excellent condition right now. Nearly 50 percent of it is in poor to very poor condition, so you’ve got some yield losses potentially on the horizon. You also have some price uncertainty on the horizon. When it comes to tariffs and things of that nature, cotton is one of the commodities that’s wrapped up in the Chinese retaliation. So, there’s a lot of uncertainty and growers need to take all of that into consideration when making an ARC or PLC decision this year.
Smith: Chad Smith, Washington.
For more on seed cotton's reintroduction in the farm bill, check out AFBF's Market Intel report.