The Agricultural Act of 2014 made substantial legislative changes, most notably eliminating Direct Payments in favor of Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs. Under ARC, payments are issued for a covered commodity when individual or county crop revenues fall below an established guarantee. PLC offers payments when the marketing year average price of a covered commodity is less than an established reference price. Both programs compensate primarily on historical base acres and are designed to provide income support during times of weak market conditions.
While many farmers benefit under these new policies, cotton producers typically do not. Due in part to a World Trade Organization dispute, cotton was not listed as a covered commodity in the Agricultural Act of 2014 and is therefore ineligible to receive PLC or ARC payments. In response to this issue, cotton industry representatives advocate designating cottonseed as an “other oilseed” similar to soybeans and canola, thus allowing inclusion in the Farm Bill. This study analyzes the financial impact of cottonseed becoming a covered commodity and participating in the Price Loss Coverage program. A case study is conducted on five Texas Southern High Plains farming operations with a total of 2,900 acres of generic cotton base that could potentially be eligible for seed payments.