In 1981, U.S. cotton producers harvested their biggest crop in 28 years--15.6 million bales. Even though supplies were larger, the recession caused cotton use to remain at 1980/87 levels in the early months of the 1981/82 season. It was clear that stocks could build to 6 million bales or more on August 1, 1982. Reflecting this prospect, farm prices in early 1982 averaged about 50 cents a pound, down from 78 cents a year earlier.

To bring supply into better balance with demand, the USDA announced a 15 percent acreage reduction program for upland cotton. Although the program was voluntary, producers had to participate to be eligible for deficiency payments on 1982-crop cotton, and for CCC nonrecourse loans. Deficiency payments were to be made if the average farm price during calendar 1982 was below 71 cents a pound--the target price. By law, the payment rate cannot exceed the difference between the target price and the national average loan rate--57.08 cents a pound in 1982/83 for SLM T-1/16 inch cotton, 3.5-4.9 micronaire. At this writing, it appears that the deficiency payment rate will be the maximum 13.92 cents a pound.