WASHINGTON, Jan. 6, 2015 - Agriculture Secretary Tom Vilsack said he would decide “very soon” whether to provide new subsidies to cotton growers, but he suggested that the industry’s proposal may lack legal authority. 

The industry, which is struggling to deal with a sharp decline in cotton prices, is asking USDA to allow cottonseed to qualify as an oilseed under the new Price Loss Coverage and Agriculture Risk Coverage programs that were created by the 2014 farm bill. 

Vilsack told reporters on Wednesday that the prime issue with the proposal is “whether there’s the legal authority to do what has been requested.” 

He noted that Congress, when it authorized the Stacked Income Protection Plan (STAX) insurance policy for cotton in the farm bill lawmakers “specifically took out cotton oil seeds from the program, which I think is a pretty significant piece of information as we look at what was intended at the time.”

A spokeswoman for Vilsack said that he was referring to the fact that cotton wasn’t listed as an eligible commodity for PLC and ARC.

Vilsack also told reporters he also had to consider the cost of the industry proposal and whether subsidies for cottonseed would have to be offset by cuts elsewhere in his department’s budget. 

"All these issues are being looked at. The general counsel’s office is involved. Foreign Ag Service is  involved. Farm Service Agency folks are involved, so that I get a 360-degree review of this issue, so that we can figure what we can do to be as helpful as we can be within the confines of the law,” Vilsack said. 

According to internal USDA estimates obtained by Agri-Pulse, the cottonseed subsidies could total as much as $1 billion a year. Under the 2014 farm bill, USDA oilseeds not specified in the law would receive a PLC price guarantee, or “reference price,” of $20.15 per hundredweight, which is well above recent market prices. 

A congressional aide familiar with the industry’s proposal said “a very plain reading” of the farm bill shows Vilsack has the authority to designate cottonseed as an oilseed eligible for coverage under the commodity programs.

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“If Congress intended to exclude cottonseed from that list, we would have done so,” the aide said in an email. “Instead, Congress is silent on the matter and leaves it to the Secretary’s discretion.”

Cotton growers say China’s manipulation of cotton supplies drove cotton prices to levels that are unsustainable for U.S. producers. Shane Stephens, vice chairman of the National Cotton Council, told a House Agriculture subcommittee in December that U.S. cotton acreage is at its lowest point in 30 years, exports their lowest in 15 years, and prices are seeing lows not witnessed since the 2009 recession.