Cottonseed and U.S. Oilseed Farm Program Issues01/29/2016
This article describes and assesses the proposal to add cottonseed to the list of “other oilseeds.” The proposal is important due to its potential cost and because it raises other issues, including the generic base program and other oilseed program. These issues are also discussed.
Background – Cottonseed Proposal
In response to the elimination of direct payments and to Brazil’s successful challenge of the U.S. cotton program at the World Trade Organization (WTO), the cotton program in the 2014 farm bill was based on: (1) crop insurance, including a county insurance program with an 80% subsidy enacted only for cotton and commonly known by its acronym STAX, (2) marketing assistance loans for upland cotton and (3) transition direct payments for the 2014 crop (2015 crop if STAX was unavailable). Insurance protects against losses that occur during a single year’s production period while marketing loans, which date to the 1985 farm bill for cotton, protect against low prices on production. Marketing loan benefits and loan deficiency payments for upland cotton total $372 million for the 2014 crop and over $150 million for the 2015 crop to date. Payments can also be received from ARC (Agriculture Risk Coverage) or PLC (Price Loss Coverage) if a program crop is planted on former upland cotton base (now called “generic base”) and if that crop is due a payment. Many cotton producers are calling for additional assistance against the broad, multiple year decline in crop prices that began after the 2012 drought. A proposal has emerged asking the Secretary of Agriculture to designate cottonseed, a co-product with cotton fiber, as an “other oilseed.” The Secretary was first given this authority in the 1990 farm bill, conditional upon receiving a request. The only oilseed making a request at this time is cottonseed. As a point of reference, for the 2014 crop cottonseed accounted for 16% of the value and 57% of the pounds of cottonseed plus cotton fiber the U.S. produced.