As a result of low cotton prices and global oversupply, cotton producers are facing economic uncertainty that has led to many producers having lost equity and having been forced to liquidate equipment and land to satisfy loans. The ginning of cotton is necessary prior to marketing the lint for fiber, or the seed for oil or feed.
Understanding the difficulty that cotton producers are going through, Agriculture Secretary Tom Vilsack announced that the U.S. Department of Agriculture (USDA) Farm Service Agency (FSA) will provide an estimated $300 million in cost-share assistance payments to cotton producers through the new Cotton Ginning Cost-Share program, in order to expand and maintain the domestic marketing of cotton.
Although the Cotton Ginning Cost-Share program makes payments to cotton producers for cotton ginning costs, the benefits of the program will be felt by the broader marketing chain associated with cotton and cottonseed, including cotton gins, cooperatives, marketers and cottonseed crushers and the rural communities that depend on them.
"Today's announcement shows USDA continues to stand with America's cotton producers and our rural communities," said Vilsack. "The Cotton Ginning Cost Share program will offer meaningful, timely and targeted assistance to cotton growers to help with their anticipated ginning costs and to facilitate marketing. The program will provide, on average, approximately 60 percent more assistance per farm and per producer than the 2014 program that provided cotton transition assistance."
Through the Cotton Ginning Cost-Share program, eligible producers can receive a one-time cost share payment, which is based on a producer's 2015 cotton acres reported to FSA, multiplied by 40 percent of the average ginning cost for each production region. With the pressing need to provide assistance ahead of the 2016 ginning season this fall, USDA will ensure the application process is straight-forward and efficient. The program estimates the costs based on planting of cotton in 2015, and therefore the local FSA offices already have this information for the vast majority of eligible producers and the applications will be pre-populated with existing data. Sign-up for the program will begin June 20 and run through Aug. 5, 2016 at the producer's local FSA office. Payments will be processed as applications are received, and are expected to begin in July.
The program has the same eligibility requirements as were used for the 2014 Cotton Transition Assistance Program, including a $40,000 per producer payment limit, requirement to be actively engaged in farming, meet conservation compliance and a $900,000 adjusted gross income limit.
The announcement was met with praise by both the National Cotton Council and the American Farm Bureau Federation.
The National Cotton Council expressed sincere gratitude to Secretary of Agriculture Tom Vilsack for providing a one-time $300 million program that offsets a portion of a cotton producer's 2015 crop season ginning costs.
American Cotton Producers Chairman Mike Tate of Alabama said, "Our producers appreciate Secretary's Vilsack's efforts in providing marketing assistance to a commodity that is suffering a serious decline in market revenue partly due to heavily-subsidized foreign competition, with no signs of the commodity prices reaching the level needed to offset their production costs. The industry will continue to work with Congress and USDA to seek long-term policy solutions that will provide stability for the cotton industry."
Payments will be calculated as following: Certified acres times regional payment rate times a producer's share of the crop. Regional payment rates (to reflect regional costs of ginning) are as follows:
- Southeast (AL, FL, GA, NC, SC, VA) - $47.44/acre;
- Mid-South (AR, LA, MO, MS, TN) - $56.26/acre;
- Southwest (KS, OK, TX) - $36.97/acre; and
- West (AZ, CA, NM) - $97.41/acre.
Cost share payments are capped at $40,000 per individual or entity. Cost share program payments do not count against the 2014 Farm Bill payment limitations.