Most growers weren’t bargaining for prices in the 60s when they planted cotton last spring.
But the daily price quotes don’t lie, and cotton producers seem to be looking at 65-cent cotton basis New York December futures at least in the near-term. That’s where the Cotton Transition Assistance Payments in the Agricultural Act of 2014 will be important.
USDA county Farm Service Agency offices began signing growers up for the payments in August. Signup will continue until Oct. 7, but FSA officials are encouraging you not to wait until October to begin the process of enrolling in the CTAP program.
“This will be quite an effort for county FSA employees,” says Michael Sullivan, state executive director for the Farm Service Agency in Mississippi. “You’re aware that we’ve had lots of cuts in personnel. We will also begin training for signup for the new farm bill in the next few weeks.”
The Cotton Transition Assistance Program was included in the 2014 farm bill after congressional leaders realized the new farm bill’s Stacked Income Protection Plan or STAX could not be implemented in time for the 2014 production year and may not be available in all cotton-producing counties for 2015.
“There are a lot of differences that farmers are going to have to deal with in the new farm bill,” said Sullivan, who operated a 2,000-acre row crop, poultry, cattle and timber business in Okolona, Miss., before being appointed state executive director. “The Cotton Transition Assistance Program can help them adjust to the new risk management tools in the 2014 law.”
'Earlier the better'
Sullivan says the earlier growers can enroll in CTAP the better. “If they come in and they have a question, we can get answers for them without coming up against the Oct. 7 deadline.
Under the program, growers will be eligible for a payment on 60 percent of their cotton base, according to the University of Tennessee’s Chuck Danehower. (See accompanying video). Danehower discussed the new farm bill provisions at the 2014 Cotton Tour at the West Tennessee Research and Education Center in Jackson.
“The payment rate is 9 cents per pound, but it’s on 60 percent of a cotton base,” said Danehower, Extension farm management specialist for several west Tennessee counties. “That works out to 5.4 cents per pound.”
Because of sequestration, the payment will be reduced by 7.2 percent for growers who sign up before Oct. 1. After the new federal fiscal year begins Oct. 1, payments will be reduced by 7.3 percent.
“What that means is you’re going to get about a nickel a pound on your payment yield,” says Danehower. “It has nothing to do with whether you planted cotton or not. It depends on your FSA cotton base, which from now on will be referred to as your generic base. If you have a 600-pound yield average, for example, you will receive about $30 per acre.”
Under the new farm bill, a grower’s cotton base will now become a generic base because cotton is no longer a covered commodity for Agricultural Act of 2014 purposes.”
Letter on base acres
“Growers should have received a letter from the Farm Service Agency, indicating the information we have on their base acres,” said Sullivan. “They will have an opportunity to correct that information if anything has changed since the last time they signed up for farm programs.”
Cotton Transition Assistance Program payments for the 2014 crop year will be issued to producers satisfying all the program and payment eligibility requirements on or after Oct. 1. CTAP payments for crop year 2015 will be issued on or after Oct. 1, 2015, according to Sullivan.
For crop year 2015, in counties where STAX is not available, CTAP payments will be calculated by multiplying 36.5 percent of the farm’s upland cotton base or generic base acres times the farm’s direct yield for upland cotton times 9 cents times the producer’s share on the approved application. Signup for CTAP for crop year 2015 will begin after Oct. 1, 2014 and end July 31, 2015.
CTAP payments are limited to $40,000 per person or entity, Sullivan says. Persons or legal entities whose average adjusted gross income exceeds $900,000 are not eligible for CTAP payments. The years used to calculate AGI for 2014 CTAP are the 2010, 2011 and 2012 tax years. For 2015 CTAP, the years used to calculate AGI are the 2011, 2012 and 2013 tax years.
For more information on CTAP or other farm bill provisions, check the FSA website at www.fsa.usda.gov.