For the second time, the Agriculture Department will give cotton growers up to $40,000 each to offset low market prices, with payments keyed to the local cost of separating cotton fiber from its seed. The new cotton ginning cost-share payments will cover the 2016 crop. The USDA offered $300 million in aid for 2015 cotton when the Obama administration created the supposed one-time assistance.
Agriculture Secretary Sonny Perdue, who announced the new cost-share payments at a farm show in Memphis, said cotton growers “have faced four years of stress, just like the rest of our major commodities, but with a weaker safety net.” To resolve a WTO ruling against U.S. cotton subsidies, Congress replaced the long-time cotton program in 2014 with a revenue insurance program coupled with a minimum price for cotton. The so-called STAX program was a flop, with low participation and scanty support payments.
Signup for the new payments will run from March 12-May 11. Payments will be based on how many acres of cotton a grower planted in 2016 multiplied by 20 percent of the average ginning cost in the area. Growers with more than $900,000 in adjusted gross income are not eligible. The USDA divided the cotton belt into four regions, with regional ginning costs ranging from a low of $98 a bale in the Southwest to a high of $240 a bale in the West.
The National Cotton Council, an umbrella group for the cotton industry from growers to textile makers, said the cost-share payments will bring “much-needed marketing assistance to our nation’s cotton producers.” Cotton Council chairman Ron Craft said the cost-share payments will fill the gap until a new cotton program takes effect with this year’s crop. Congress voted last month to make “seed cotton” — cotton that has yet to be ginned — eligible for the same subsidies offered to grain and soybean farmers.
The USDA did not estimate how much money would go to growers under the payments announced by Perdue. For the 2015 crop, when payments were based on 40 percent of the cost of ginning, the USDA estimated the average payment per grower would be $8,100. The 2015 crop, at 12.89 million bales, was much smaller than the 17.17 million bales harvest in 2016.
By some estimates, the new seed cotton subsidy could cost as much as $1 billion a year. Lawmakers reduced the likely cost by barring growers from participating in STAX and the new seed cotton support, and by requiring farmers to declare how they will use their “generic” base acres — for cotton or for other crops. Generic base is land that was designated, before the 2014 farm law, as eligible for cotton subsidies. Cotton plantings have declined in the past decade, so growers are likely to switch some of their generic base to other crops eligible for federal supports. Cotton has a higher support rate than grain crops.
A two-page fact sheet on the cotton ginning cost-share program is available here.