Analyzing the Potential Impact of Cotton Oilseed Subsidies on the Texas Southern High Plains

Thursday, January 5, 2017: 4:00 PM
Reunion E (Hyatt Regency Dallas)
DeDe L. Jones , Texas A&M AgriLife Extension
Agricultural producers often face both financial and production challenges.  Falling prices combined with rising input costs and volatile weather patterns have resulted in substantial losses for many operations.  According to a new study from CoBank, 2016 farm incomes will likely decline for a third consecutive year, leading to rising debt levels and difficulty obtaining operating capital.  While most growers experience economic hardships, cotton producers seem particularly susceptible.  This situation is due in part to unfavorable farm policy provisions.  

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.