This is "COTTON NEWS" from Plains Cotton Growers, Inc. 4517 West Loop 289 Lubbock, Texas 79414 806-792-4904 http://www.plainscotton.org

In 2012 ACRE May Be Worth A Look for Cotton

Friday, May 18, 2012
By Shawn Wade

In the most recent WASDE Supply/Demand report, USDA made its first estimate of the 2012/13 Market Year Average (MYA) price of $0.65-$0.85 (mid-point of $0.75). If a $0.75 MYA price is realized for the 2012/13 Upland cotton marketing year, then it might be worth looking at a nearly forgotten about provision of the 2008 Farm Bill – the Average Crop Revenue (ACRE) program.

Fortunately for cotton producers there is still a little time (two weeks) to weigh this option and possibly switch their program choice to ACRE. The deadline for notifying the Farm Service Agency of an election to participate in the 2012 ACRE program is June 1.

Before going too far in evaluating ACRE as an alternative for 2012, cotton producers who have signed agreements to market 2012 production through a marketing pool, or other mechanism, are STRONGLY ENCOURAGED to contact the entities with which they are dealing to make sure that there is no prohibition on participation in the ACRE program in the contracts that have been signed.

Choosing to participate in ACRE instead of the traditional Direct and Counter-cyclical (DCP) program comes with some trade-offs, which are discussed in more detail below. These trade-offs are the main reasons for clarifying your own situation with those who have contracted to market or purchase any of your 2012 cotton acreage.

The reason for the belated interest by cotton producers is that it appears the 2012 ACRE Guarantee Price, which sets the bar for both the State and Farm level triggers, will be higher than the projected 2012 MYA price for Upland cotton.

Texas AgriLife Extension Service Risk Management Specialist Jay Yates of Lubbock notes that the Preliminary 2012 ACRE Guarantee Price for cotton is $0.863. What this means, according to Yates, is that a 10% drop in price for the 2012/13 season (and assuming the final State average yield matches the 2012 Texas benchmark cotton yields of 885 pounds per acre for irrigated and 315 pounds per acre for dryland) would meet the 10% loss trigger for the state and open the door for ACRE payments to be made. After that the 10% farm level loss trigger would still also have to be met.

The farm level trigger (again assuming the farm's actual yield matches the farm's benchmark yield) would also be tripped with a 10% drop in the MYA price below the ACRE Guarantee price.

Once both triggers are met, the payment rate for the ACRE program is the lesser of the difference between the state ACRE Guarantee and the Actual State Revenue, or 25 percent of the State ACRE Guarantee times the calculated farm productivity factor.

According to Yates's calculations, a $0.10 drop in price to a MYA price of $0.76 should be enough for most farms to "break-even" with the 20% loss in direct payments that comes with participating in the ACRE program. It should also be noted that the dollars of direct payment that you give up in ACRE are added back to the ACRE program's payment limit.

"If a producer believes that the eventual 2012/13 MYA price will fall somewhere below $0.76, but above the $0.52 loan rate (since ACRE participants also agree to a reduced base loan rate of $0.364), they might want to take a second look at the ACRE program before the June 1 program election deadline," Yates said.

"The 2012 ACRE program may not be best for everyone, but every producer needs to evaluate the possibilities based on their own individual situation."

The bottom line according to Yates is that even though there are some trade-offs, ACRE may be worth a look due to: the current relationship of the benchmark price; state benchmark yields in a production season coming on the heels of the worst drought Texas producers have ever experienced; and finally, the fact that 2012 also is the final year of the ACRE program under the provisions of the 2008 Farm Bill and it is essentially a 1-year commitment.

Texas Farm Service Agency notes that it is not too late for a producer to switch from a previous decision to participate in the DCP program and go with ACRE for 2012. The important thing to remember is that there is ABSOLUTELY NO grace period after the June 1 deadline for making that decision.

As noted above there are a couple of loan and direct payment program changes that producers need to fully understand before they pull the trigger on ACRE.

First, agreeing to participate in the ACRE program includes the voluntary reduction in the base loan rate for program commodities of 30%. For cotton that means the effective base loan rate for cotton produced on farms enrolled in the ACRE program is $.364 cents.

Second, ACRE participation includes a 20 percent reduction in the amount of direct payments a producer receives. This reduction can total up to $8,000 for a producer that currently qualifies for the $40,000 maximum for direct payments. It is important to note, however, that the amount of this reduction is added to the $65,000 per entity payment limit for counter-cyclical program payments to create a total ACRE program payment limitation of up to $73,000, assuming reallocation of a full $8,000 from direct payments.

Farm Bill Hearings Continue for House Ag
Committee; Vaughan, Coley Testify

Friday, May 18, 2012
By Mary Jane Buerkle

Commodity group representatives and agricultural economists testified before members of the House Agriculture Committee's Subcommittee on General Farm Commodities and Risk Management on Wednesday and Thursday, sharing their thoughts as the Committee develops their version of the 2012 Farm Bill. U.S. Rep. Mike Conaway (R-Midland) is chairman of that subcommittee.

Much of the questioning surrounded a proposed bill recently passed by the Senate Agriculture Committee. That bill is waiting to go to the full Senate.

Dee Vaughan, president of the Southwest Council of Agribusiness and a PCG board member, outlined SWCA's position in six core principles: having a program that kicks in when needed, hopefully avoiding unwanted market distortions; equity among commodities and among regions in terms of the baseline; simple bankable protection tied to deep and persistent price drops; do no harm to crop insurance; assistance should generally be tailored to planted acres; and that outdated payment limits and arbitrary means tests should be eliminated. Vaughan noted that the Senate bill falls short in some of these areas.

"It is our strong belief that if you pair such a straightforward and bankable Title 1 and Federal Crop Insurance with similarly strong and progressive Conservation and Research titles, then you will lay a good foundation for continued growth in our nation's agricultural sector," Vaughan said in his testimony.

Read Vaughan's complete testimony on behalf of SWCA at http://agriculture.house.gov/pdf/hearings/Vaughan120516.pdf.

National Cotton Council Chairman Chuck Coley, who grows cotton in Georgia, said that the NCC-recommended Stacked Income Protection Plan (STAX), combined with the modified marketing loan, will meet cotton's unique challenge in resolving the World Trade Organization dispute with Brazil since the program is insurance-based. The WTO panel has found no trade distortion or price suppression related to insurance programs.

"In developing new farm legislation, the U.S. cotton industry pledges to work with Congress and the Administration to resolve the Brazil WTO case and remove the imminent threat of retaliation against exports of U.S. goods and services," Coley said in a news release from the NCC.

The STAX program allows growers the opportunity to purchase a county-based revenue insurance plan as a stand-alone policy OR to supplement an existing federal crop insurance policy. The STAX component can cover losses exceeding 1 percent of county target revenue with a maximum payment not to exceed 20 percent of the county target revenue.

Read Coley's complete testimony on behalf of the NCC at http://agriculture.house.gov/pdf/hearings/Coley120516.pdf.

The part of the Senate bill most criticized was the Agricultural Risk Coverage (ARC) program, which is a revenue-assurance program and a supplement to crop insurance. ARC will not affect cotton as an individual commodity, but will affect other crops grown on the High Plains. Critics called the program "essentially free insurance" and noted that it does not meet the needs of peanut and rice growers while almost locking in a profit for some crops for at least a limited time. A potential solution to these issues would be to give producers a choice between ARC and higher reference/target prices.

The Committee likely will begin their bill markup in June.

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Smuggled Horses in West Texas
Found to be Diseased

May 18, 2010
Texas Animal Health Commission

Austin - U.S. Border Patrol agents recently seized 10 adult horses and four yearlings as they attempted to enter Texas illegally by walking across the Rio Grande River near Indian Hot Springs, in southern Hudspeth county, south of El Paso.  The animals were turned over to the United States Department of Agriculture, Animal Plant Health Inspection Service, Veterinary Service (USDA/APHIS/VS) officials, who tested the horses in Presidio, Texas for a number of disease conditions that are considered foreign to the U.S. All 10 of the adult animals tested positive for Equine Piroplasmosis (EP). EP is routinely found in Mexico and numerous other countries around the world, but is not considered to be endemic to the U.S. The blood borne protozoal disease can be fatal to horses and could create major constraints to interstate and international movements if left undetected. EP does not affect humans.

According to Dr. Grant Wease, field veterinarian for USDA/APHIS/VS in El Paso, the illegal movement of animals is an ongoing concern in the vast open spaces of West Texas.  "In some places the Rio Grande poses no barrier at all to foot traffic for man or animal." According to the latest USDA information, Dr. Wease indicated that "In 2011, approximately 280 head of cattle and 160 head of equine (primarily horses) were intercepted by USDA officials along the Rio Grande." To further complicate the situation, many of the normal import process for livestock entering Texas have been impacted by border violence, making the attempt to smuggle animals into the state even more tempting.

The investigation by USDA and Texas Animal Health Commission (TAHC) is ongoing to determine not only the source of the horses, but the possible destination as well. The TAHC recently passed EP rules requiring testing of race horses prior to entry into a Texas track, and numerous other states have done the same because of recent cases found in that population of horses. "Racing Quarter horses with some connection to Mexico appear to be at highest risk of testing positive to the emerging disease," according to Dr. Dee Ellis, State Veterinarian and TAHC Executive Director. Although the interdicted horses were described as Thoroughbreds, they were considered to be more likely breeding type animals rather than race ready horses. Dr. Ellis went on to state, "This situation highlights the ongoing border security problems Texas is facing, which leads to an increased risk of disease introduction for the Texas livestock population when animals enter our state illegally. I encourage all citizens that witness unusual activity regarding livestock movement near the Mexican border to contact their local law enforcement or animal health officials as quickly as possible to report the situation."

The TAHC strives to provide quality customer service to the citizens of Texas and works with its USDA partners daily to protect Texas livestock and poultry from foreign animal diseases. With limited state and federal resources however, the two agencies must continually review ongoing surveillance efforts along the border to ensure their actions are as effective as possible.

For more information contact the TAHC at 1-800-550-8242 or visit  www.tahc.state.tx.us .

Deadline Approaches for Three Farm Service Agency Programs

May 16, 2012
FSA Press Release

College Station - USDA Texas Farm Service Agency (FSA) Acting Executive Director James B. Douglass, reminds producers that the approaching June 1, 2012, deadline is for Supplemental Revenue Assistance Payments (SURE), the Direct and Counter-Cyclical Program (DCP) and the Average Crop Revenue Election Program (ACRE).

"It is crucial that producers meet the deadline for these programs in order to receive disaster and income support," said Douglass. "FSA realizes that farmers and ranchers take risks everyday and these programs form part of the safety net that can keep producers operating after devastating natural disasters and during times of low market prices," he said.  

The SURE program compensates producers for production and/or quality losses during times of disaster. All producers who have experienced crop production and/or crop quality losses during the 2010 crop year must apply for SURE program benefits by the June 1 deadline. Eligibility requirements differ between producers located in counties designated as a primary or contiguous disaster county by the Secretary of Agriculture and between producers located in non-disaster counties. In addition to other eligibility requirements, producers must have purchased crop insurance through the Federal Crop Insurance Act or the Noninsured Crop Disaster Assistance Program (NAP).

While SURE helps after natural disasters strike, DCP and ACRE provide income support when there is a decline in commodity prices. Eligible DCP participants receive a direct payment and/or a counter-cyclical payment. Direct payment rates are established by statute regardless of market prices. FSA reminds producers that the 2008 Farm Bill does not authorize advance direct payments for 2012. Counter-cyclical payments vary depending on market prices, and are issued only when the effective price for a commodity is below its target price.

ACRE protects producers from farm market revenue declines when revenue triggers are met for a commodity at both the state and farm level. All owners and operators who will share in the DCP and ACRE payments on the farm must sign up by June 1.

"ACRE elections and enrollment must be completed by the June 1 deadline as late file provisions are not available for ACRE," said Douglass. "If elected in a previous year, producers must enroll for 2012 by June 1 to receive payment," he said. 

For questions regarding SURE, DCP or ACRE sign-up, please contact your local FSA office.

National Cotton Council:
Stronger Risk Management Sought in 2012 Farm Law

May 16, 2012
Contact: T. Cotton Nelson or Marjory Walker

Washington, DC - The National Cotton Council looks forward to working with the House Agriculture Committee on development of a 2012 farm bill that effectively meets U.S. cotton producers' risk management needs.

NCC Chairman Chuck Coley, in testimony before that Committee's General Farm Commodities & Risk Management Subcommittee here today, emphasized that even with budget constraints and trade concerns, it is critically important that new farm law provide certainty to those involved in production agriculture because "they make long-term investment decisions based in part on federal farm policy."

The Georgia cotton producer testified that the U.S. cotton industry faces the unique challenge of resolving the World Trade Organization (WTO) dispute with Brazil.

"In developing new farm legislation, the U.S. cotton industry pledges to work with Congress and the Administration to resolve the Brazil WTO case and remove the imminent threat of retaliation against exports of U.S. goods and services," he stated.

Coley told the panel that in light of budget constraints and trade considerations, the U.S. cotton industry recommends a revenue-based crop insurance program available for voluntary purchase -- which will strengthen growers' ability to manage risk. By complementing existing products, the program would provide a tool for growers to manage that portion of their risks for which affordable options are not currently available. He added that the revenue-based crop insurance safety net would be complemented by a modified marketing loan that is adjusted to satisfy the Brazil WTO case.

"This structure will best utilize reduced budget resources, respond to public criticism by directing benefits to growers who suffer losses resulting from factors beyond their control, and build on the existing crop insurance program, thus ensuring no duplication of coverage and allowing for program simplification," he stated. "The revisions will provide confidence to lenders and ensure market-oriented production decisions that ultimately serve the long-term financial health of merchandizers, processors, related businesses and rural economies."

Coley urged the Committee to include – beginning with the 2013 crop – the NCC's Stacked Income Protection Plan (STAX) in new farm law. He said the program will be administered in a manner consistent with current crop insurance delivery systems and is designed to complement existing crop insurance products.

"While this proposal does not change any features of existing insurance products, the STAX product is explicitly structured so as to avoid duplication of other insurance coverage," he said.

Regarding other insurance features, Coley said U.S. cotton strongly supports the continuation of the successful enterprise unit pricing that was introduced in 2008 farm legislation and urges Congress to provide for the availability of enterprise unit pricing for growers who separate their farms by irrigated and non-irrigated practices. He said the industry also supports crop insurance products that allow growers to insure the deductible of their underlying buy-up policy.

Coley said moving upland cotton's support into an insurance program is consistent with the determination of the WTO panel in the U.S.-Brazil WTO case -- that found no trade distortion or price suppression related to insurance programs. He said the NCC believes the combination of STAX and the modified marketing loan significantly reduces U.S. trade-distorting support for upland cotton.

As part of the 2012 farm bill, the NCC would oppose any further restrictions on payment eligibility, including lower limits or income means tests. Coley said the 2008 farm law included the most comprehensive and far-reaching reform to payment limitations in 20 years. The limitations were made more restrictive, and the adjusted gross income test was substantially tightened.

"Likewise, we have serious concerns with any efforts to change the requirements that determine whether an individual is considered to be actively engaged in the farming operation," Coley said. "Arbitrary restrictions on the contribution of management and labor are out of touch with today's agricultural operations and would only contribute to inefficiencies."

The NCC also supports the continuation of the Economic Adjustment Assistance Program (EEAP) for domestic textile manufacturers. Coley said the EEAP, authorized in the 2008 farm bill, has revitalized the U.S. textile manufacturing sector and added jobs to the U.S. economy.

Coley also called for retention of the extra-long staple competitiveness program and ongoing support of two vital export promotion programs -- the Market Access Program and Foreign Market Development Program.

AGRILIFE TODAY: Dicey Odds for Continued Drought

May 11, 2012
By Kathleen Phillips

COLLEGE STATION – A “coin toss” is how a Texas drought expert describes the forecast for rainfall across the state this season. But there are some actions farmers and ranchers can take rather than hoping for a stroke of luck.

“There’s a high probability that we’re going to have abnormally warm temperatures over the next 6 months,” said Dr. Travis Miller, Texas AgriLife Extension Service agronomist and drought spokesperson. “And there’s an equal chance of above or below normal precipitation. This drought is not over for large areas of the state.”

Texas: Cloudy and a chance for . . . ? (http://www.youtube.com/watch?v=BcbzqP0Pbjc)

The National Integrated Drought Information System predicts that the drought will persist or intensify for more than half of Texas through July.

Miller said about one-third of the state has received enough rainfall this year to climb out of the drought that began in October 2010, but the remainder is in “significant drought.” That means even with normal or above normal rainfall in those areas, more is needed to end the drought there.

“The High Plains, much of the western Rolling Plains, and virtually all of Far West Texas remains in significant drought and is predicted to stay in drought,” he said. “We know that the areas of the state that haven’t had significant rainfall have to have a lot more rainfall before they can get back to normal. A lot remains to be determined, because it’s still very dry.“

In the eastern part of Texas, where sufficient rainfall has been received this year, producers are cutting and baling hay. In the western part where it is still dry, ranchers are still feeding supplemental feed or hay, Miller noted.

He added that the East Texas hay supply is helpful for the western livestock raisers because it can be hauled from a shorter distance than from the places it came from in 2011.

The drought specialist said that many Texas ranchers lost stands of perennial grasses from their acreages in the drought and are encouraged not to restock if that grass has not grown back significantly.

“They need to go out and evaluate their forage supplies,” he suggested. “They need to determine if the grass has begun to regrow and become well-established before they “pull the trigger on restocking.”

“That’s how the effect of one really horrific year of drought can affect multiple years,” Miller said. “If you can’t restock, then you can’t have income coming in from your cattle herd.  And it trickles down from that part of the economy throughout the state.”

The lack of grass has a ripple effect in other ways as well, he added.

“A good stand of grass suppresses all kinds of weeds. If you’ve got a dense shade on your land, it discourages the germination of weeds. Many of the weeds in Texas have hard seeds that can last many years in the soil,” he said. “So when you have a major drought like that of 2011 and it kills your grass off, then you’re going to have weeds.”

Compounding that, he said, is the fact that thousands of tons of hay were transported into Texas from all over the U.S. to try to keep Texas cow herds in business.

“So we have brought weed seed in from everywhere,” Miller said, adding that no noxious weed infestations have been reported yet.

“I’m advising cattle operators to look very carefully for weeds they don’t recognize, and to contact their AgriLife Extension county agent if they see something that doesn’t look right,” he said.

Miller said among the key places to watch are locations where hay was stacked and fed.

“And of course, cattle take the weed everywhere, so if you see unusual weeds where the hay was fed, you’re going to see it out in your pastures,” he said.

On the positive side, Miller noted, wheat producers are nearing harvest on perhaps one of the best crops in more than a decade.

“We have an excellent wheat crop through much of the eastern Rolling Plains and the Blacklands,” he said. “It’s a beautiful crop, if we can get it out of the field. One of the issues on wheat is that its harvest time coincides with the highest probability of rain, so whereas last year wheat farmers suffered with drought, this year we’re hoping we can get some of that beautiful wheat cut.”

The outcome of the remainder of the year for crops and livestock in the field will depend on water supply, Miller said.

“Water is the most precious resource we have and we found out how finite it was in just one year of drought. If you look back at the drought of the 1950s, where we had seven years of drought in a row, we would totally rethink how we value water,” he noted.

Texas Plant Protection Conference
Slated for December

The Board of Directors of the Texas Plant Protection Association (TPPA) has set the dates and location for the annual Texas Plant Protection Conference. The Conference will be held on December 6 & 7 at the Brazos Center at Bryan-College Station, Texas.

For the past 24 years, the non-profit professional Texas Plant Protection Association has sponsored educational conferences for all those involved in production agriculture. These conferences include the annual Texas Plant Protection Conference and the TPPA Precision Ag Expo. The events have been successful due to the broad support of many leaders in Texas agriculture that represent academia, extension, research, consulting, agribusiness, farmers and regulatory.

Additional information about the agenda and on sponsor and exhibitor opportunities will be made available at a later date.

You may contact the TPPA office for questions or more information at:
http://tppa.tamu.edu/