The Cottonseed Conundrum04/28/2017
With news that Congress continues seeking a way to fold cotton back into the ARC and PLC program, this article looks specifically at the cottonseed issue. It builds on the review of the operation of generic base acres (see farmdoc daily, April 13, 2017) and concerns that generic base acres effectively recouple Federal payments to production decisions (see farmdoc daily, April 20, 2017).
The key background component to this discussion is the decision by Congress to decouple farm program payments from production in the Federal Agriculture Improvement and Reform Act of 1996 (P.L. 104-127). From that point forward, the farm programs (direct payments, counter-cyclical payments, ACRE, ARC and PLC) operated on base acres for covered commodities. Base acres were calculated using historical averages of planted acres. With decoupled base acres, the farmer was free to plant any crop (other than fruits and vegetables) on the acres and that planting decision would not impact payments. The programs paid on a percentage of the base acres, not on any specific crop planted on the farm. Importantly, this differed from the Marketing Assistance Loan (MAL) program which continued to be coupled with production decisions because the loans (or Loan Deficiency Payments (LDP) in lieu of a loan) are made on actual harvested crops; the farmer’s crop in storage serves as the collateral for the loan.