Cotton Crop Insurance Programs in Louisiana

Beginning with the 2015 crop year, cotton producers will have two new insurance programs that will mitigate income risk.  Those programs are called the stacked income protection plan (STAX) and the supplemental coverage option (SCO). Both programs, administered through the USDA RMA, will act on an area-wide basis with losses being determined at the county (parish) level. Producers are tasked with determining if their underlying policy coverage level coupled with the optional endorsements of STAX or SCO, will provide the desired amount of revenue protection for their cotton enterprises. Examples are provided for irrigated and non-irrigated production units in major cotton-producing parishes of Louisiana in efforts to document the maximum liability per acre expressed as a function of the projected insurance price, expected area yield, and policy premium rate per dollar of coverage. Alternative insurance harvest price, final area yield, and farm yield parameters are also incorporated into the model. By providing varying degrees of underlying policy coverage levels, STAX and SCO can be evaluated as to their effectiveness in protecting against shallow losses in farm revenue.