Agriculture Secretary Tom Vilsack announced that the U.S. Department of Agriculture's Farm Service Agency (FSA) will provide an estimated $300 million in cost-share assistance payments to cotton producers through the new Cotton Ginning Cost-Share program in order to expand and maintain the domestic marketing of cotton.
"The Cotton Ginning Cost-Share program will offer meaningful, timely and targeted assistance to cotton growers to help with their anticipated ginning costs and to facilitate marketing. The program will provide, on average, approximately 60% more assistance per farm and per producer than the 2014 program that provided cotton transition assistance," Vilsack said.
Through the Cotton Ginning Cost-Share program, eligible producers can receive a one-time cost-share payment, which is based on the 2015 cotton acres producers reported to FSA, multiplied by 40% of the average ginning cost for each production region.
With the pressing need to provide assistance ahead of the 2016 ginning season this fall, USDA said it will ensure that the application process is straightforward and efficient. Since the program estimates the costs based on planting of cotton in 2015, the local FSA offices already have this information for the vast majority of eligible producers, and the applications will be pre-populated with existing data. Signup for the program will run from June 20 through Aug. 5, 2016, at the producer's local FSA office. Payments will be processed as applications are received and are expected to begin in July.
Since 2011, cotton fiber markets have experienced dramatic changes. As a result of low cotton prices and global oversupply, cotton producers are facing economic uncertainty that has led to lost equity for many producers, who have been forced to liquidate equipment and land to satisfy loans. The ginning of cotton is necessary prior to marketing the lint for fiber or the seed for oil or feed. While the Cotton Ginning Cost-Share program makes payments to cotton producers for cotton ginning costs, the benefits of the program will be felt by the broader marketing chain associated with cotton and cottonseed, including cotton gins, cooperatives, marketers and cottonseed crushers and the rural communities that depend on them.
The program has the same eligibility requirements as were used for the 2014 Cotton Transition Assistance Program, including a $40,000 per producer payment limit, the requirement to be actively engaged in farming and to meet conservation compliance and a $900,000 adjusted gross income limit.
“The U.S. cotton industry commends Secretary Vilsack for his efforts on making possible a program that will provide much-needed marketing assistance for our nation’s cotton producers,” National Cotton Council chairman Shane Stephens said.
The Mississippi cotton warehouseman said although this program will provide direct marketing assistance to producers, it also will help stabilize a seven-sector industry that provides employment for some 125,000 Americans and generates more than $75 billion in annual economic activity.
American Cotton Producers chairman Mike Tate of Alabama said, “Our producers appreciate Secretary’s Vilsack’s efforts in providing marketing assistance to a commodity that is suffering a serious decline in market revenue partly due to heavily subsidized foreign competition, with no signs of the commodity prices reaching the level needed to offset their production costs. The industry will continue to work with Congress and USDA to seek long-term policy solutions that will provide stability for the cotton industry.”
Payments will be calculated as following: Certified acres times regional payment rate times a producer’s share of the crop. Regional payment rates (to reflect regional costs of ginning) are as follows: Southeast (AL, FL, GA, NC, SC, VA), $47.44 per acre; mid-South (AR, LA, MO, MS, TN), $56.26 per acre; Southwest (KS, OK, TX), $36.97 per acre, and West (AZ, CA, NM), $97.41 per acre.
Rep. Randy Neugebauer (R., Texas) welcomed the announcement but said it wasn’t producers’ first choice for how USDA could have addressed the downturn in cotton markets. “I agree that more could have been done by designating cottonseed as an eligible oilseed. The economic challenges facing cotton producers in our area are significant, and when farmers are in trouble, the whole community is affected,” he said.
Zippy Duvall, president of the American Farm Bureau Federation, said this special, one-time arrangement, without requiring legislative action, “is a clear example of what we can accomplish when we work together.”