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The New Farm Bill Offers Many Options Requiring Careful Decisions

Congratulations, cotton growers! You now have a shiny, new farm bill, forged over nearly three years of debate, deliberation and a dash of partisan politics.

In essence, there’s something new for everyone and for every crop. Direct payments, counter-cyclical payments and the ACRE program are history. There’s a greater emphasis on risk management and crop insurance. And there’s a whole new list of programs that growers need to examine closely to determine the best fit for their farming operation.

 

The National Cotton Council recently completed 49 Farm Bill education sessions to help give growers a better understanding of the legislation and the decisions they’ll need to make. Click here to find out more.

 

Wading Through the Options

“This bill is very detailed and there are a lot of complicated decisions to make,” said Dr. Joe Outlaw, professor and Extension economist with Texas A&M University and co-director of the Agricultural and Food Policy Center (AFPC). “The information we have today is based on initial interpretations of the bill, plus discussions and indications on how USDA will implement it.”

For most crops but cotton, producers will choose between the Agricultural Risk Coverage (ARC) program or Price Loss Coverage (PLC). Both programs will cover income losses based on program guidelines, and both allow growers the option of a one-time reallocation of base acres to crops that were planted on their farm between the 2009 and 2012 crop years – with the exception of cotton.

“When sign-up opens at FSA offices, growers need to decide if they want to reallocate their base acres or not, and if they want their non-cotton acres to be protected through ARC or PLC,” explained Outlaw.

“With ARC, they have a choice between a county program based on the experience an entire county has had or an individual program based on individual farm results.”

Growers will need to make decisions on a crop-by-crop basis for each farm, unless they choose the individual ARC option which covers all crops on that farm. If no decisions are made for the 2014 crop, the farm would automatically be enrolled in PLC for the 2015 crop and beyond.

ARC payments will be based on benchmarks calculated by the five-year average of market prices and average county yields, with different calculations used for irrigated and non-irrigated crops. PLC pays on 85 percent of base acres. Payments, however, will be limited to a total of $125,000 per person for all programs combined.

What About Cotton?

The new farm bill removes cotton from all Title I programs and establishes a new crop insurance safety net for cotton growers. It maintains and/or modifies several existing programs like the Upland cotton marketing loan, the ELS cotton loan and competitiveness programs and the Economic Adjustment Assistance Program (EEAP) for the domestic textile industry. And, it designates all cotton base acres as of September 30, 2013, as generic base for planning purposes.

The Stacked Income Protection Plan – or STAX – becomes the centerpiece of the new cotton program. It’s a new revenue insurance product available for purchase on all Upland cotton acres beginning in 2015.

“With cotton moving to more reliance on insurance and, because of the late passage of the Farm Bill and the implementation timeline for crop insurance products, the 2014 crop becomes a transition year for cotton,” said Dr. Gary Adams, vice president, Economics and Policy Analysis with the National Cotton Council. “This year, growers can receive a payment equivalent to 5.4 cents per pound on all 2013 base acres and the direct payment yield.

“There is also a provision to extend this transition into 2015, at a reduced rate, for growers in a county where STAX will not be available.”

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