Congress has been debating the 2012 farm bill so long that some may have have forgotten they will have to know how the new programs work once they become law. Of particular interest for cotton farmers will be how the new STAX program operates.
“So as far as the program goes, as long as the insurance program works the way it is supposed to, there will be some safety net for producers," said Joe Outlaw, professor and Extension economist and co-director of the Agricultural and Food Policy Center at Texas A& M University.
Dr. Outlaw acknowledged the farm bill debate isn’t officially over until the president signs the bill, but he believes it is “close enough to being finished that we can start worrying about how it works rather than whether it will be completed.” (If Congress fails to act soon, it will basically have to start over with a new set of baseline assumptions in February.)
He walked the audience through the new STAX program for cotton during the Economic Outlook Symposium at the Beltwide Cotton Conferences. Outlaw said it is highly unlikely the new STAX program will be available in 2014 and cotton producers, instead, will receive some form of a direct payment.
“Essentially, once you figure out what your expected is, whether of the two yields, which is the higher of the expected insurance price or the harvest price, and then you talk about the rates and coverage you’re going to get,” he noted. “I selected 70 percent, but the match will be in the 30 percent range total.
“There’s a multiplier in here that basically comes from the GRIP plan. That multiplier is such so that if you’re a farmer, and you have a lot better yields than the county average, which is what this program uses, then you can use the multiplier. You come up with a maximum and you determine if there is a loss.”
In Outlaw’s example, the grower would go through a few more calculations and determine that there is a loss triggered, resulting in a payment of $54 per acre.
The Agricultural and Food Policy Center is working on a program calculator that will help producers explore their options under the new program. The calculator should be available soon after the farm bill is passed and signed by the president.
To read more about Outlaw’s Beltwide presentation, click on http://southwestfarmpress.com/cotton/expect-farm-bill-end-january