The cotton industry request for USDA to make cottonseed eligible for subsidy as an oilseed raises several policy questions including where to find the $1 billion a year that the program would cost, say four economists. Market prices are so low that payments are certain if Agriculture Secretary Tom Vilsack approves the request to declare cottonseed an “other oilseed” covered by the subsidies offered to grain and soybean growers.
“The large potential cost … raises issues of how to pay for it and what share should cotton bear,” write the economists, Carl Zulauf of Ohio State University and Gary Schnitkey, Jonathan Coppess and Nick Paulson of U-Illinois at farmdoc daily.
Vilsack told reporters that USDA continues to review the request and has not reached a conclusion. If the request, made late last year, is approved, cotton would be unique in having different parts of the crop covered by different supports. Congress rewrote cotton fiber subsidies as part of the 2014 farm law so its main components are a revenue insurance policy and a marketing loan to set a minimum price for cotton. Only a fraction of growers purchased the insurance coverage.
The new cotton insurance policy, called STAX, provides a much larger federal subsidy on the premium – 80 percent – and provides a higher level of coverage than are offered to other crops, say the four economists. “Is it fair that cotton should have access to STAX,” they ask, while over crops are not offered as favorable terms. “Changes to STAX would likely require action by Congress.”
“Last and potentially most importantly, it is not clear how other countries will respond if cottonseed is added to “other oilseeds,” especially when spending by the U.S. on farm programs is increasing and already viewed as high by many countries,” say Zulauf, Schnitkey, Coppess and Paulson. A WTO challenge could attack the major U.S. crop subsidies, not just cotton.