WASHINGTON, March 4, 2015 – The strict $125,000-per-person payment limit for commodity subsidies in the 2014 farm bill has created both short- and long-term problems for the cotton industry. In the short term, cotton growers who also want to collect subsidies on corn and other crops through the Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) programs say they’re at risk of inadvertently exceeding the payment cap because USDA doesn’t have a good way yet of tracking cotton subsidies through cooperatives to their farmer members.
At issue is the money that farmers receive via the federal marketing loan program when market prices fall below the loan rate, which is 52 cents per pound for cotton.
By the time they find out what they’ve received in marketing loan benefits for cotton they harvested last year they may have already reached the $125,000 limit under the new ARC or PLC program for corn, soybeans and other crops, Georgia grower Ronnie Lee told the Senate Agriculture Committee recently. In many counties, producers are expected to receive $60 an acre in ARC payments for their 2014 crop according to one forecast. The payments will be made later this year.
“Many producers could find themselves with either no limit for the (cotton) payments or only eligible to receive a portion of the payments,” Lee said. “In the worst case, a producer receives payments in excess of the limit and is required to repay a portion of the payment to USDA.”
USDA’s Farm Service Agency is working on improving the tracking of marketing loan benefits so that growers find out sooner how much they’ve received. But the agency hasn’t made the progress growers want, and the payment limit also poses a long-term problem. Faced with the $125,000 payment limit, some growers may keep cotton under USDA loan for the full nine months rather than sell it, a delay that will disrupt markets, according to Lee, testifying for the National Cotton Council.
Lee said USDA should take steps to encourage loan redemptions and minimize forfeitures.
It’s worth noting that before the 2014 farm bill, none of this was really an issue. That’s because cotton growers could easily bypass the old payment limits through the use of what were known as certificates. That’s no longer the case.
“Our hope is that prices move up” to levels where producers won’t receive any marketing loan benefits, said an industry source. Then, “this problem largely goes away.”
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