Comments to USDA on Agriculture Improvement Act of 2018 (Farm Bill) Implementation
National Cotton Council (March 2019)
The National Cotton Council (NCC) looks forward to continuing to work with USDA on implementation of the Agriculture Improvement Act of 2018. While several of the most significant changes to cotton policy were included in the Bipartisan Budget Act of 2018 by adding ‘seed cotton’ as a covered commodity for ARC/PLC, there are other important changes in the new farm bill that we are very focused on for timely implementation in accordance with Congressional intent.
ARC/PLC and STAX
Since the ARC/PLC program for cotton is only available for those farms with seed cotton base acres (formerly generic base/upland cotton base), there will be situations where producers may choose to purchase STAX crop insurance on their planted cotton acres, because either 1) there are no seed cotton base acres on the farm; or 2) STAX may offer better revenue protection than ARC/PLC under certain price expectations. Therefore, we are very appreciative to RMA and FSA for the ‘Frequently Asked Questions’ document recently issued providing guidance to producers and crop insurance agents on the risk management options available for cotton. It was critically important that FSA and RMA worked together to clearly outline the choices that producers have between ARC/PLC for seed cotton and STAX crop insurance. Producers, their crop insurance agents, and county FSA office personnel need this information, so producers can make fully informed decisions for their risk management options.
We strongly urge FSA and NASS to work with the cotton industry to ensure the necessary marketing year average (MYA) price data is compiled in time for USDA to issue the ARC/PLC payments as soon as possible after October 1 following the completion of each marketing year. NCC and our industry members look forward to working closely with FSA and NASS to determine the necessary timeline that will allow producers to receive any ARC/PLC support they are due in a timely manner.
Seed Cotton Base Acres and CRP
Related to the generic base conversion required under the Bipartisan Budget Act, there are Conservation Reserve Program (CRP) contracts that expired after September 30, 2018 and in future years on farms with generic base acres (previously upland cotton base). While a majority of generic base acres have already been converted to seed cotton and/or other covered commodity bases or unassigned base in 2018, there will be generic base acres to convert in 2019 and beyond due to expiring CRP contracts. We are very grateful for the recent FSA notice that USDA would continue to utilize its authority to restore and make adjustments to base acres on farms with an expiring CRP contract. This notice specifically states that USDA will establish upland cotton base/generic base coming out of CRP as seed cotton base with a corresponding seed cotton payment yield by converting the upland lint yield history on those base acres to a seed cotton payment yield.
In addition to the above situation, for farms with upland cotton/generic base acres that had a CRP contract expire sometime during the period of 2009 and 2016 – the timeframe used for determining unplanted base under the Bipartisan Budget Act – we strongly urge USDA to consider base acres enrolled in CRP as ‘considered planted’. This would ensure these acres meet the planting requirement and allow those upland cotton/generic base acres to convert to seed cotton base rather than becoming unassigned base.
The farm bill modified the definition of ‘family member’ for purposes of the ‘actively engaged in farming’ requirements to now include nieces, nephews, and first cousins as family members for purposes of determining if the farming operation is solely comprised of family members. This adjustment to the definition should remove some of the unwarranted and burdensome recordkeeping and time-keeping requirements within the actively engaged regulations that are only meant to be applied to those farms that are not solely family operations. This change should provide significant regulatory relief for what are, by all other standards, family farms. We urge that this change be implemented in time for the 2019 program year and in advance of the status date for farming operations to provide their information to USDA for determining program eligibility.
Cotton Loan Programs
The marketing loan program is a central component of the safety net for cotton producers and utilized by producers and marketers for cash flow purposes. The farm bill includes a change to the marketing loan rate calculation for upland cotton to avoid sharp declines in the loan rate from one year to the next. In addition, the loan rate for Extra Long Staple (ELS) cotton was increased to better reflect the current market value for ELS. Because of this loan rate increase, a corresponding change is required to the formula used to calculate if the ELS Competitiveness Payment Program will be triggered. In addition to this change, there is a strong and time-sensitive need to incorporate price quotes for comparable quality cotton of other origins that compete with U.S. ELS cotton in the export market. Specifically, Egypt has increased production of the Giza-94 variety of cotton, and Egyptian exporters are aggressively marketing that cotton in direct competition with U.S. ELS cotton. We strongly urge USDA to work with the industry stakeholders to make the necessary adjustments to the ELS Competitiveness Program, so it operates as intended when legislated by Congress in previous farm bills.
Cotton Report Language
The Agriculture Improvement Act of 2018 includes specific report language directing USDA on several discretionary policy changes of key importance to the U.S. cotton industry. First, the conferees expect USDA to make changes to the Cotton Storage Agreement and provider agreements for warehouse receipts to modernize the requirements that will improve the timely shipment of cotton to end users. The timely flow of cotton to the marketplace is a key component to ensuring the U.S. maintains and grows market share in the export market. All segments of the U.S. cotton industry have reached consensus on the necessary changes to these agreements and we strongly urge USDA to make the regulatory and policy changes to be in effect for the 2019 crop.
Second, the conferees urge USDA to modify the foreign price quotes used in determining the adjusted world price (AWP) for upland cotton by utilizing the three lowest foreign price quotes rather than the current five lowest quotes. This change will allow the AWP to more closely reflect the actual prices of other growths of cotton that U.S. cotton is competing with in our major export markets.
Third, the conferees expect USDA to continue with its recent practice in determining the annual ‘costs to market’ adjustment to the AWP by fully accounting for all costs related to the movement of cotton from a warehouse to major export market. In addition, the notice and timing of the annual change should continue to be communicated to the U.S. cotton industry stakeholders in advance of the adjustment taking effect.
Pima Cotton Trust Fund
This farm bill made modifications to the eligibility criteria for textile mills that can qualify for the Pima Cotton Trust Fund. Under the new provisions, a textile mill that spins Pima cotton to the program’s quality specifications in one calendar year, can then qualify for the program based on the amount of Pima cotton spun in the following calendar year, subject to limitations outlined by the updated statute. USDA should move to quickly update the application for textile mills to reflect this change in policy effective for 2019.
Thank you again for the opportunity to provide these comments on farm bill implementation. We look forward to working closely with USDA to ensure a smooth and timely implementation of these provisions. Please contact us with any questions or for any information that we can provide to assist in this regard.