Month: February 2018
Understanding Your Generic Base Conversion Options With the Seed Cotton Program
Thanks to Dr. Don Shurley and Dr. Adam Rabinowitz for providing this information.
A Little History. You will recall that under provisions of the 2014 farm bill, landowners were given the opportunity to make a one-time election to keep existing crop bases on the farm as they were or to update these bases. This decision applied to “covered commodities” only and excluded cotton.
Bases of covered commodities (corn, peanuts, soybeans, wheat, grain sorghum, oats, sunflowers, canola, etc.) could be “retained” as they were as of September 30, 2013 or these bases could be “reallocated” based on the farm’s planting history for 2009-2012. Total base acres of covered commodities could not be increased but could be “reshuffled” based on 2009-2012 planting.
If a farm had cotton base, that base was pulled aside and could not be updated/changed. Cotton was not a covered commodity and not eligible for ARC/PLC. Cotton base on a farm became generic base.
What Now. Since 2014, the generic base on a farm has just been sitting there. It has had no value for cotton and cotton has had no income safety net since cotton is not eligible for ARC/PLC payments. The only contribution generic base has had is the provision that says acres planted to covered commodities on that farm can earn temporary base of the commodity and are eligible for ARC/PLC up to the amount of generic base. But this did nothing for cotton specifically.
For several years, cotton industry leadership sought ways to improve the safety net for cotton producers and to get cotton back in Title I and eligible for ARC/PLC. With the Bipartisan Budget Act of 2018, “seed cotton”—a combination of lint and seed, is now a covered commodity under Title I of the 2014 farm bill. This becomes effective with the 2018 crop year.
Under the new seed cotton program, generic base on a farm will no longer be in effect starting with the 2018 crop year. Generic base must be converted to seed cotton base or other covered commodity bases.
Conversion Options. To convert generic base, landowners will have 2 options to choose from:
The higher of 1-A or 1-B
1-A—80% of generic base, or
1-B—the average cotton acres planted 2009-2012, but not to exceed the generic base
With 1-A and 1-B, any generic base remaining becomes “unassigned base”
Or Option 2
2—allocate generic base to seed cotton base and base of other covered commodities based on 2009-2012 acres planted; there would be no “unassigned base”
If a farm has generic base (former cotton base under the 2008 farm bill) but no covered commodity (including cotton) has been planted on the farm during 2009-2016, all generic base on that farm will automatically become unassigned base and not eligible for ARC/PLC. Conversion options would not apply.
Some have asked why a more current planting history is not allowed. Remember that in the 2014 “retain or reallocate” decision, cotton was excluded. This new seed cotton program is simply going back to that same window of history given to other covered commodities (2009-2012) and now giving the landowner the opportunity of several alternatives to convert generic base/former cotton base to seed cotton base or seed cotton base and bases of other covered commodities based on that same window of history.
An Example. Let’s suppose farm (FSN) 4178 has the following 2009-2012 planting history. With the exception of cotton, this is the exact same history used back in 2014 for the retain or reallocate decision. The 2009-2012 average includes any years the crop was not planted. The farm has averaged 19.25 acres of corn, 105.25 acres of cotton, 32.5 acres of peanuts, and 7 acres of soybeans.
The farm has 111 acres of generic base (former cotton base under the 2008 farm bill). This generic base must be converted to seed cotton base (option 1-A or 1-B) or seed cotton base and base of other commodities (option 2). Here are how the choices compare for this example:
Option 1-A would result in 88.8 acres of seed cotton base and 22.2 unassigned base acres.
111 acres generic base x 80% = 88.8 acres seed cotton base
111 – 88.8 = 22.2 acres unassigned base
Option 1-B would result in 105.25 acres of seed cotton base and 5.75 unassigned base acres.
2009-2012 average cotton acres planted = 105.25 acres
Seed cotton base = lesser of generic base acres (111) or average acres planted (105.25)
111 – 105.25 = 5.75 acres unassigned base
1-B results in higher seed cotton base. So, 1-B can be compared to Option 2
Option 2 would result in 71.24 acres of seed cotton base, 13.03 acres of corn base, 22 acres of peanut base, and 4.74 acres of soybean base. This allocation is determined based on each crops proportion of the 2009-2012 average acres planted:
Seed cotton base = 105.25/164 = 64.2% x 111 acres generic base = 71.24 acres
Corn base = 19.25/164 = 11.7% x 111 acres generic base = 13.03 acres
Peanut base = 32.5/164 = 19.8% x 111 acres generic base = 22.0 acres
Soybeans base = 7/164 = 4.3% x 111 acres generic base = 4.74 acres
Total bases = 111 acres; Unassigned base = 0 acres
Making the Decision. Potentially, every farm (FSN) could be different because of the amount of generic base and planting history. It is possible, however, that your farms could be divided up into different “types” based on similar bases, planting history, and seed cotton payment yield and a decision made for choice of conversion option by type.
Obviously, the major factor in the decision will be expected total ARC/PLC payments with each option. In the hypothetical example shown, Option 1-B gives the highest seed cotton base. Option 2 has less seed cotton base in exchange for corn, peanuts, and soybean base. Future ARC and PLC payments, and thus which conversion option may be best, depends on market prices, yields vs historical yields (for crops in ARC), and PLC reference prices.
The University of Georgia Department of Agricultural and Applied Economics and UGA Cooperative Extension are developing a decision aid that will be available to assist producers and landowners to analyze the conversion options.
Answers to a Few Questions. The seed cotton program and conversion of generic base does not in any way impact your current crop bases for other covered commodities. The conversion will simply add to the other bases you may now have on the farm. The decision regarding generic base conversion option is on a farm-by-farm basis. You can select one option for one farm and a different option for another farm. The treatment of any “unassigned base” in future farm bills is uncertain and will likely depend on budget availability.
Acknowledgment
Appreciation is expressed to the Georgia Cotton Commission and the Georgia Peanut Commission for funding support. Appreciation is expressed to the National Cotton Council for review and comment.
Seed Cotton Program Good for Georgia Agriculture
In the wee hours of February 9, 2018, both houses of congress passed the Bi-Partisan Budget Agreement of 2018, which the President signed later that morning. Within this legislation, a safety net program for seed cotton, the unginned cotton that producers harvest, was established. This makes cotton a covered commodity under Title 1 of the Farm Bill, of which cotton had been left out in 2014.
In 2017, cotton was planted on over 12 million acres of land in the U.S., making it the 4th most widely planted row crop in the nation behind soybeans, corn, and wheat. In Georgia, cotton was planted on 1.27 million acres in 91 counties across the state. This production brings in roughly $1 billion into Georgia’s economy and supports 15,000 direct jobs. Cotton, along with yarn, is exported through the Port of Savannah. Cotton is one of the crown jewels of American agriculture, as well as here in Georgia, and supports a wide number of jobs in states beyond the cotton belt in a variety of segments.
Under the original 2014 Farm Bill, existing cotton base became “generic base”, a last minute addition to the bill to give cotton base value rather than leaving producers completely out. This allowed producers to plant those base acres with another covered commodity and get safety net protections for their operations. While agriculture was glad to have that protection, cotton, as one of the leading row crops in the U.S., needed protections from an extremely depressed market. Cotton producers made their case to congressional leaders for quite some time before this passed, including multiple cotton provisions failing on the house floor. Inclusion of cotton at this time leads to cotton having a seat at the table as the negotiations for the next Farm Bill begin in earnest.
President Trump’s signature makes cotton producers eligible for Agriculture Risk Coverage and Price Loss Coverage programs. Cottonseed prices will be averaged with cotton prices to develop the seed cotton price for this program. Generic base will be converted one of two ways: one, the greater of 80% of generic base into seed cotton or average acres planted of cotton from 2009-2012; two, 100% of generic base transferred into seed cotton and other bases of commodities planted from 2009-2012. Research done by University of Georgia economists Dr. Don Shurley and Dr. Adam Rabinowitz shows that farmers would have been paid in six of the last ten years had this program been the law of the land. In 2017, current estimates show a roughly $25/acre payment. This will significantly help farmers keep their businesses sustainable while commodity prices are so low, and most importantly put cotton back on par with other commodities.
In conclusion, this program will be good for Georgia’s farmers and good for agriculture as a whole. This will lead to greater economic health on the farm and will provide support to the large cotton infrastructure here in Georgia during price troughs like we are currently in. Furthermore, this action will better protect the existing commodity programs for other commodities that give Georgia’s farmers a safety net. Protection of Georgia’s number one row crop will be extremely helpful to rural communities when markets create times of stress.
NCC Seed Cotton Webinars
The National Cotton Council is having webinars/conference calls regarding the new Seed Cotton provisions. Space is extremely limited in these webinars, so we are asking producers and other interested parties to listen/watch in groups. The call for Georgia will be held next Monday, February 19, from 10:00-11:30 AM. Another will be the same times on Monday, February 26. All of the other pertinent call in and website information is in the attached image.
If you do not mind, please share this to anyone interested and be sure to note the importance of listening in groups so that we can maximize how many people listen to the sessions. Just a note, if someone is blocked out of the call/webinar, try one of the other listed numbers/websites. If someone misses out on the call, they can try to get in the one on the 26th. If someone misses both, the Council will have a recording that we can send them at a later date. To get the most out of these calls/webinars, one must both call in and view online.
NCC: New Cotton Policy Gives Much Needed Boost
MEMPHIS, Tenn. – The National Cotton Council greatly appreciates Congress’ passage of a supplemental disaster bill that includes critically needed policy that restores eligibility for cotton in the Title I ARC/PLC programs of the farm bill. The legislation also includes important agricultural disaster assistance, as well as additional support to dairy producers.
“This measure will provide cotton producers and lenders some certainty as they prepare for the 2018 growing season,” NCC Chairman Ronnie Lee said. “The new policy will help ease the financial burden as producers struggle to cover total costs.”
The Georgia cotton producer said the U.S. cotton industry is very appreciative of the strong leadership of Senate Appropriations Committee Chairman Cochran (R-MS) and House Agriculture Committee Chairman Conaway (R-TX) that made it possible to advance this important policy through the House and Senate. He said the industry also is very grateful for the key support of Representatives Aderholt (R-AL), Bishop (D-GA), Peterson (D-MN), and Arrington (R-TX) and Senators Roberts (R-KS), Cornyn (R-TX), Boozman (R-AR), Shelby (R-AL), Leahy (D-VT), and Stabenow (D-MI).
“Our industry is also thankful for the strong support and commitment to this issue by the Cotton Belt Members in the House and Senate, and the recognition by Congressional leadership that this situation had to be addressed,” Lee stated. “These Members recognized the need for cotton policy that could stabilize our industry. They are keenly aware of the challenging financial situation that American cotton producers and their families have faced and continue to face.”
Lee said the Council has worked for more than two years to get stabilizing policy in place in advance of the next farm bill.
“And we will continue to work with Congress and the Administration to get a new farm bill enacted that will enable America’s farmers and ranchers to continue producing the abundant and affordable food and fiber our nation and world has come to expect,” he said.
2017 Georgia Quality Cotton Award Winners Announced
The 2017 Georgia Quality Cotton Awards were presented at the Georgia Cotton Commission’s 11th Annual Meeting and UGA Cotton Production Workshop on January 31, 2018 in Tifton, GA. The awards are co-sponsored by the Georgia Cotton Commission and Bayer CropScience, and administered by the University of Georgia Cotton Team.
The purpose of the awards are to recognize producers and ginners of high-quality cotton fiber and to identify their general management practices for the benefit of other growers. The producers and their gins received a plaque and the winning producers received a $500 cash award. The UGA County Extension Agent for each winner was also recognized as they work closely with the farmers during the growing season.
The awards are given in each of these three cotton acreage categories: 1) less than 500 acres, 2) 500 to 1,000 acres, and 3) greater than 1,000 acres within the four regions of the state. Winners in these categories are determined by the loan value and premiums of their cotton. The winners’ excellent achievements are due largely to their management practices and expertise. The sponsors of this program congratulate all of the following winners:
Region 1: Less than 500 acres – Robert Rawlins of Turner County, Sconyers Gin and Warehouse with agent Will Gay. 500 to 1,000 acres – Lee Mays of Wilcox County, Sconyers Gin and Warehouse, with agent Andrew Sawyer. Greater than 1,000 acres – Donnie Keene of Wilcox County, Sconyers Gin and Warehouse, will agent Andrew Sawyer.
Region 2: Less than 500 acres – Van Hiebert of Jefferson County, Midville Warehouse, with agent Pam Sapp. 500 to 1,000 acres – Buckhead Creek Farms of Jenkins County, Midville Warehouse, with agent Jason Mallard. Greater than 1,000 acres – Sandeford Farms of Burke County, Midville Warehouse, with agent Peyton Sapp.
Region 3: Less than 500 acres – Charles Sumner of Tift County, Omega Gin Company, with agent Scott Carlson. 500 to 1,000 acres – G.A. Farms of Tifton County, Omega Gin Company, with agent Scott Carlson. Greater than 1,000 acres – Ken and Brian Ponder of Tift County, Omega Gin Company, with agent Scott Carlson.
Region 4: Less than 500 acres – Walter Powell of Colquitt County, The Cotton Gin, with agent Jeremy Kichler.
Ken Hall Farms of Worth County, Omega Gin Company, with agent Blake Crabtree. 500 to 1,000 acres – Creek Bank Farms of Miller County, Clover Leaf Gin, with agent Brian Creswell. Greater than 1,000 acres – Ken Hall Farms of Worth County, Omega Gin Company, with agent Blake Crabtree.
The final award given was the overall Best Cotton Award. This was awarded to the Georgia cotton producer with highest loan value and premium. The 2017 Best Cotton Award went to Robert Rawlins with a loan value of 54.14 cents/lb and a premium of 4.65 cents/lb.
For a full photo album of the winners, visit our Facebook page at www.facebook.com/GeorgiaCottonCommission.
Georgia Cotton Commission 