Seed Cotton Price Loss Coverage Program Report

Michael Deliberto  |  6/6/2018 1:06:54 PM

The Bipartisan Budget Act of 2018 contained much awaited language and mode of policy action that makes cotton eligible to receive support under the Price Loss Coverage (PLC) or the Agriculture Risk Coverage (ARC) programs of the current farm bill. Another critical point contained in this agricultural provision is the treatment of generic base acres. The operational mechanics of the seed cotton PLC program and the conversion of generic farm acres are discussed in this policy brief.

Seed cotton is defined as unginned upland cotton that includes both lint and seed. Under the new program, cotton will be eligible to receive support beginning with the 2018 crop year. The 2018 crop year also signals the end of generic base acres. Similar to an option made prior to farm bill implementation, landowners will have the option to convert generic acres into seed cotton base acres and/or other covered commodities planted to generic acres based on the farm’s 2009 to 2012 planting history.

Under the seed cotton program, a cotton seed program yield will be established for a farm. That program yield will be equal to the farm’s counter-cyclical payment yield established in the 2008 farm bill or 90% of the farm’s 2008 to 2012 average cotton lint yield multiplied by a factor of 2.40.

Provisions of the PLC program are the same for seed cotton, in that a reference price is established with a PLC program payment being triggered if the actual marketing year average (MYA) price is below the statutorily-established level. The reference price for seed cotton is set at $0.367 cents per pound. The main caveat for the seed cotton PLC program is that this reference price is a weighted average of the lint and the seed price obtained from the USDA. A price floor is established at $0.25 cents per pound for seed cotton as per legislative language.

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