RMA Releases Crop Insurance Tool

Last week we discussed using computer based decision aids to help a producer make farm bill decisions. This week we will discuss another recently released tool by USDA-RMA that helps a producer make a better informed decision about using the two new crop insurance programs, SCO and STAX. The tool can be found on our homepage by clicking the RMA link on the right-hand side.

Below are a few screenshots I took using the tool, they are a little blurry so I’ll explain each example below.  All of the examples are for educational purposes and may not reflect the yields or prices experienced on a actual farm. Area selected is Houston County, Georgia. Crop is irrigated cotton. Program is STAX with no underlying insurance policy (not a requirement for STAX but an underlying policy is a requirement for SCO).

Example 1 has an APH of 800lbs, project price of $0.70, expected county yield of 800lbs, STAX protection factor of 100% (can range from 80-120%), actual yield of 800, with a harvest price of $0.64. This yields a maximum STAX payment of $112 if actual county yields fall below 608lbs. At an actual county yield of 736lbs, a $33 STAX payment is triggered.

screenshot_RMA tool 1

 

Example 2 has an APH or 900lbs, projected price of $0.70, expected county yield of 750, STAX protection factor at 120%, actual yield of 900lbs, and harvest price of $0.64. Max STAX payment is $126 if actual county yields are 570lbs or below. At 690lb actual county yield, STAX payment is $37.

 screenshot_RMA tool 2

 

Example 3 has an APH of 700lbs, project price $0.70, expected county yield of 800lbs, STAX protection factor at 120%, actual yield of 700 lbs, and harvest price of $0.64. Max STAX payment is $134 triggered when actual county yield is below 608 lbs. At 736lbs, STAX payment is $40.

 

 screenshot_RMA tool 3

My advice to anyone who is thinking about buying either STAX or SCO is to go to our webpage, click on the RMA Crop Insurance Tool icon, and take about an hour or two going through different scenarios on a farm to see how these programs will work on a real operation.

 

Decision Aids to Help Make Farm Bill Choices

Hopefully everyone involved in agriculture knows that the 2014 Farm Bill passed Congress and was singed into law this past spring. This farm bill is much different that the last few in that there are a myriad of choices the producer must make regarding enrolling in market support programs. Previously all a farmer needed to do was to go to their local FSA office and enroll their acres in the programs. Although there was the ACRE option in the 2008 Farm Bill, not very many people enrolled (only a handful of Georgia farms enrolled in ACRE). The new farm bill gives farmers the choice of enrolling in Price Loss Coverage (PLC) or Agricultural Risk Coverage (ARC), in reallocating base acres, and updating yields. As eluded to in a previous post, USDA awarded $6 million towards Farm Bill education and online decision tools. There are also several new insurance options that farmers will have to consider – Supplemental Coverage Option (SCO) and Stacked Income Protection Plan (STAX). SCO is available to any program crop (cotton is no longer a Title 1 program crop) that is not enrolled in ARC and has an underlying insurance policy. STAX is only available on cotton acreage and does not require an underlying policy. 

On our homepage, you will find a link to both Texas A&M and University of Illinois websites that contain online tools, articles, and decision aids. The tools will help a producer navigate through the multiple layers of decisions that have to be made to participate in the new farm bill programs. All a farmer will need is their FSA data, which should have arrived by now, and a computer with internet to get started.

Go to our homepage, select the decision aid/tool you would like. Log in or follow instructions on the host’s webpage. The end result should be a rough idea of what each program will return to a individual farm and what the results would be for updating yields and/or reallocating base acres.

You will see many disclaimers on these decision aids, and rightfully so. These tools are meant to be a guide to help a producer make a better informed decision. They are not intended to tell someone what to do on their farm. I would caution everyone using them to not only work your farm through the decision aid once. Do each farm several times with several different price scenarios to see how various prices can change the outcome of the different options presented in the Farm Bill. 

Also, both tools that are listed on our homepage are a work in progress. As you can read on their respective pages, the final versions of these tools will be available once USDA writes the final rules an regulations for the 2014 Farm Bill. Regardless, it is still a good idea to start playing with these tools now to get a better understanding of what decisions will have to be made and how they will affect a farm. One final note is that there are probably several other decision tools available online. Many land-grant and ag schools have very capable staff who may have developed tools and posted them online. These are also good to look at and see how the results may or may not differ from the tools mentioned above. 

Regardless of which tools are used, or how many hours are spent using these tools, the important thing is that these tools are available and should help farmers with the strenuous task of deciding on what to do under the 2014 Farm Bill.

The Cotton Story: Part 3…Telling the Story

The conclusion of The Cotton Story is not really a story, it is more of an action or a task. In Part 1 and Part 2 we discussed The Cotton Story in relation to it’s importance in our lives, the lives of rural Georgia, and it’s historical as well as present day economic impact on Georgia. Now it is our duty to tell that story to others. What good is a story if it is never told? It’s like having a book that you don’t read. All of that information is just sitting there waiting for someone to discover it.

Therefore, I challenge everyone involved in the cotton industry, whether it be a farmer, a retailer, a ginner, a consultant, a textile manufacturer, and even a consumer, to go out and tell The Cotton Story. And don’t just tell it once and be satisfied. Tell it every chance you get. The long term survival of the industry and everyone involved in the industry (from the farmer all the way to the consumer) depends on the world knowing The Cotton Story.

If you need more information on telling The Cotton Story, or just cotton information in general, visit our website or Facebook page. The Georgia Cotton Commission has been serving the Georgia cotton farmer since 1965 and we look forward to many more years of telling The Cotton Story and letting the world know about the importance of cotton in Georgia.

The Cotton Story: Part 2

Now for a brief history lesson about cotton in the United States. Often when people in the U.S. talk about cotton the conversation inevitably turns to slavery and how the cotton industry influenced slavery. When you go down this route of discussion the Civil War also comes up, and rightfully so. Though these are bitter subjects to discuss, it is important to know the role that cotton has played in shaping the United States as we know it today.

“King Cotton.” That was a common phrase used in the pre-Civil War days describing cotton’s importance to the economy in the South. The first written example of this phrase that I know of came in David Christy’s 1855 book Cotton is King. Christy explains the power of King Cotton and how it helped grow the South’s economy, with slave labor of course. What is interesting is that in the final pages of his book he notes that “King Cotton cares not whether he employs slaves or freemen. It is the cotton, not the slaves, upon which his throne is based. Let freemen do his work as well, and he will not object to the change.” And as I’ll discuss below that is exactly what happened. King Cotton was also referred to in U.S. Senator James Hammond’s (D-SC) floor speech in 1858 where he proclaimed that “Without firing a gun, without drawing a sword, should they [Northerners] may war on us [Southerners], we could bring the whole world to our feet. What would happen if no cotton was furnished for three years? England would topple headlong and carry the whole civilized world with her save the South. No, you dare not make war on cotton. No power on earth dares to make war upon it. Cotton is King.” Obviously Hammond was over stating the impact cotton had globally at that time and when war did start between the states, England and the rest of the world did not topple. But it is important to look at cotton production in those days to see the rationale behind he and Christy’s declaration that Cotton is King.

Good data is hard to come by pre 1865, but it appears that the South was responsible for two thirds of the entire world exports of cotton by 1860. Because of the invention of the cotton gin in 1793 by Eli Whitney, cotton acreage was allowed to greatly expand, and with it the economies of many southern states (of course this also increased the amount of slaves in the South). Some accounts indicate that cotton production increased by eight fold in just ten years after the introduction of the cotton gin. This rapid increased allowed for new railroads to be built, new ships set sail to take cotton across the Atlantic, and many job opportunities popped up moving cotton along the vast expansion of rivers across the South. By 1861 the South was producing 4.5 million bales of cotton, by 1864 it produced only 300,000 bales. Most reports indicate that farmers quickly had to shift into other food crops because of the inability to export cotton during the Civil War. After the war though, cotton acreage quickly picked back up (mainly due to the high price cotton was demanding during the low production years for the Civil War). In 15 years after the Civil War, Georgia alone quadrupled its cotton production from 246,000 bales in 1866 to 1,050,000 bales in 1880. Cotton obviously was still profitable and the cotton industry was vital to the rebuilding of the South.

Although the South rapidly increased its production of cotton after the Civil War, the rest of the world did as well. Again, data from this far back is hard to come by, but all indications are that England turned to India during the U.S. Civil War for cotton and thus India became a major exporter of cotton.

So, King Cotton helped build the South in the Antebellum days, helped rebuild it after the Civil War, and caused many other nations to start growing it for export. Cotton still remains a vital part of the Southern economy. As noted in The Cotton Story: Part 1, cotton provides $2.5 billion to the Georgia economy and supports over 15,000 jobs.

The Cotton Story: Part 1

Cotton has a very neat story and plays a vital role in American history. I’ll skip the history lesson for now and focus on what we call “The Story of Cotton,” or at least part of the Story of Cotton.

People, especially in the rural South, often see cotton growing in the field but think little of its importance to their local economy. Cotton in Georgia has an annual farm gate value (the value of cotton as it leaves the farm) of around $1.5 billion. Its total economic impact on the state is around $2.5 billion and supports over 15,000 jobs in Georgia. 15,000 people may not sound like a lot of people if you are from the metro area, but in rural Georgia that is larger than some counties. According to the latest Census estimates (2012) that I found online, there are 51 of the 159 counties in Georgia that have a population lower than 15,000. In fact, if you add the population of the smallest six counties it only comes out to 16,500 people.

What about those big cotton modules that people see in the fields or in the back of module trucks. One big module usually has 15-18 bales in it. A single bale of cotton is 480 lbs of lint. The little round modules usually can make about 4 bales. Most people will not see a bale once it leaves the gin, but one single 480 lb bale can make 215 denim jeans, or 249 bed sheets, or 690 bath towels, or over 1,200 pillowcases.

What about paper money? Did you know that 75% of a US bill is made from cotton. Paper money is actually made from cotton linters, the little pieces of fiber that are tightly attached to the seed after the ginning process.

Think you have ever eaten cotton? You probably have, not the cotton lint I hope, but there are a variety of food products made with cottonseed oil. Do you like potato chips? A good many brands are fried in a combination of soybean, canola, and cottonseed oils. Have you ever read the label on a bottle of salad dressing? Turns out many brands use cottonseed oil in their salad dressings. 

In conclusion, cotton is more than just another commodity that farmers grow. Cotton has a story that is interwoven (pun intended) throughout our lives. Whether it is providing much need jobs in rural Georgia, putting cloths on our back, or completing the next best recipe, cotton is truly a part of our everyday lives. Hopefully now you know.