WASHINGTON, Oct. 21, 2015 - With their federal price support programs gutted in the 2014 farm bill, cotton growers had to settle on their new Stacked Income Protection Program (STAX) and other crop insurance policies as their only forms of risk protection. Not a problem when prices were relatively high, growers argued.
But that was before countries like China built up their own supplies and dramatically cut both mill use and cotton imports by about 75 percent in recent years. Market conditions tanked, and as one source noted, “crop insurance can’t fight a foreign market.”
Now, growers across the Cotton Belt are singing the blues and so are their lenders – especially in areas that have lost significant equity after coping with multiple years of drought.
“If conditions don’t improve, we may lose 25 percent of our cotton growers this year and another 25 percent next year,” said Jeff Pate, extension program specialist for Texas AgriLife Extension, during a tour of West Texas last week.
With prices hovering around 62 cents a pound, it wouldn’t take much to help struggling cotton growers break even, says Monty Teeter, vice president of Happy State Bank in Lochney, Texas. With a healthy crop, “most guys can easily survive at 70 cents (per pound).” But in the flat, wind-swept fields of West Texas, where Teeter lends money to row-crop farmers, a few extra pennies in the marketplace don’t appear to be dropping from heaven anytime soon.
So now cotton growers are working on “Plan B” to see if they can protect themselves through the Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) programs.
The National Cotton Council (NCC) says a program to support cottonseed is “one possible option to help address the current financial pressures.” Current market revenue for cotton and cottonseed is down 25 percent compared to the average market returns in 2010-2013, and U.S. acreage is at its lowest level in over three decades, noted NCC.
“The effects of the difficult market conditions have been compounded by adverse weather conditions affecting many of the cotton-producing states. The industry’s infrastructure will continue to shrink and crop diversity diminish in many parts of the Cotton Belt in the absence of a stabilizing policy for the industry,” NCC said in a statement.
Speaking to growers and local officials at a cotton classing facility in Lamesa, Texas, last week, House Agriculture Committee Chairman Mike Conaway, R-Texas, said it’s “too dangerous to open up the farm bill to address the wreck that’s cotton right now.”
But Conaway says cotton growers could qualify for PLC or ARC payments if USDA were to classify cottonseed as an oilseed for the 2015 crop year. Growers would get their first payments a year from now. He acknowledged the need to investigate the financial and acreage impacts of this type of decision, but says it “could be a pretty meaningful per pound impact if it comes to be.
“I’ve gotten a commitment from (Agriculture Secretary Tom) Vilsack that he’ll give us a fair look. We need to allow his team, our team, to ferret out the facts ….before a decision is made,” Conaway said. But he says the secretary clearly has the authority to decide which oilseeds are in and which aren’t.
Speaking at the Southwest Council of Agribusiness meeting later that day, Farm Service Agency Administrator Val Dolcini confirmed that his agency is willing to look at the potential change -- but acknowledged serious legal and other obstacles.
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