With a worldwide glut pulling down cotton prices to their lowest level in eight years, Agriculture Secretary Tom Vilsack announced $300 million in one-time assistance to growers, based on ginning costs. The cost-share program is far smaller than the $1-billion-a-year cottonseed subsidy that the industry wanted and that Vilsack said was beyond his power to create.
Vilsack said the new Cotton Ginning Cost-Share Program “will offer meaningful, timely and targeted assistance to cotton producers.” USDA estimated growers would receive an average of $8,100. Payments will be based on a grower’s cotton plantings in 2015 and 40 percent of the cost of ginning, the separation of cotton fiber and seed. Ginning costs around $800 million a year.
“This is a clear example of what we can accomplish when we work together,” said the 5.9-million-member American Farm Bureau Federation. Cotton Belt lawmakers encouraged the USDA to create a cottonseed subsidy but were wary of introducing legislation that might be used as a vehicle by fiscal conservatives to cut farm programs. The Farm Bureau said it appreciated that the cotton ginning payments did not require congressional action.
“The industry will continue to work with Congress and USDA to seek long-term policy solutions that will provide stability for the cotton industry,” said Mike Tate, chairman of American Cotton Producers, an organization speaking for growers. Tate said growers were “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 National Farmers Union, the second-largest U.S. farm group, said, “Cotton growers, like many farmers, have been overwhelmed by several years of low crop prices.”
USDA estimates this year’s crop will sell for 57 cents per pound, down 1 cent from the farm-gate price for the 2015 crop now on the market. It would be the lowest season-average price since 47.8 cents for the 2008 crop.
Cotton Belt lawmakers, such as House Agriculture chairman Michael Conaway issued fiery calls for the cottonseed subsidy last winter and insisted Vilsack should go ahead with it despite advice from USDA lawyers against action. The industry argued that the USDA could declare cottonseed eligible for the crop subsidies offered to grains and soybeans as an “other oilseed.” It would have been the first time a crop was eligible for payments under two different subsidies.
The 2014 farm law created a separate subsidy program for cotton, the Stacked Income Protection Plan (STAX), to resolve a WTO ruling that found U.S. cotton subsidies distorted world trade. STAX combined revenue insurance coverage with a floor price for cotton. It attracted little participation. Some cotton leaders faulted STAX because it did not include a reference price for triggering payments when revenue fell below a target level.
USDA said growers can apply for assistance from June 20-Aug. 5 with payments expected to begin in July. Payment rates range from $36.97 in the Southwest, including top producer Texas, to $97.41 in the West. USDA said payments are capped at a maximum of $40,000 and people with adjusted gross income over $900,000 a year are ineligible. In a Federal Register notice, USDA said the payments “will be made to help the domestic cotton industry find new and improved ways to market cotton.”