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Vilsack Explains Why Cotton Can't Qualify for ARC/PLC

15:40PM Feb 24, 2016

By Tom Vilsack, U.S. Secretary of Agriculture

During my seven years as Secretary of Agriculture, the U.S. Department of Agriculture has been a strong, staunch supporter of American farmers, ranchers and producers—through thick and thin, good times and bad. Our producers support 1 in 11 American jobs, provide American consumers with more than 80 percent of the food we consume, ensure that Americans spend less of their paychecks at the grocery store than most people in other countries, and support markets for homegrown renewable energy and materials. You, our producers, are vital to our economy and the fabric of our nation.

Today, after several years of high commodity prices and strong domestic and foreign demand for U.S. farm goods, cotton and many other major commodities are experiencing lower market prices. Although we’ve started to see farm income slow and household income begin to tick up, USDA will continue to use our full programmatic authorities to assist where we can, however we can. 


Just before the holidays, I received a request from the cotton industry to designate cotton as an "other oilseed" in order to qualify for Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) payments. We examined the laws closely—the 2014 Farm Bill, the 2016 Appropriations law, and other authorities—and after close scrutiny, we determined that such a designation is not authorized under the 2014 Farm Bill. The reason is very clear: The Farm Bill expressly removed eligibility of cotton for such payments, as cotton is no longer listed as a “covered commodity.” In other words, the Farm Bill intended to exclude cotton from ARC and PLC payments and USDA was provided with clear direction that it would not be included nor covered. Instead, at the request of the cotton industry, the Farm Bill created two new programs for cotton as an alternative to ARC and PLC: STAX, or the Stacked Income Protection Plan, and the Cotton Transition Assistance Program (CTAP).


Despite these limitations, USDA is providing ongoing assistance to cotton producers through several programs.

While STAX payments will be calculated and made early this coming summer, USDA has already disbursed more than $1 billion in crop insurance payments to cotton producers in 2014 and 2015. Since 2014, USDA has provided over $2 billion in safety net support and nearly $3.5 billion in credit. For example, Marketing Assistance Loans (MAL) and Loan Deficiency Payments continue to provide both a price support and credit function for producers: Over 7.9 million bales with a loan value of over $2.1 billion were covered by MALs in 2014 and over 4.3 million bales worth over $1.1 billion have already gone under loan in 2015. Although cotton is no longer a covered commodity, cotton producers received over $246 million in ARC and PLC payments related to other types of plantings on their farms this fall.

Vilsack Explains Cottonseed Designation, Says Alternative Relief Available


  In addition to this assistance provided through the Farm Bill, USDA began to explore other ways to provide support to struggling cotton producers as we’ve done in the past. This has been done in two ways, historically: first, provide temporary assistance to cotton producers facing low prices through a Congressional action or, second, administratively use either Section 32 (of the Act of August 24, 1935) or Section 5 of the Commodity Credit Corporation (CCC) Charter Act to provide some level of support. Unfortunately, these administrative options have been severely limited by the law that funds the government, also called the Appropriations Act.

Knowing that our tools to provide assistance have been severely limited, I have asked Congress to examine the appropriations language to see if they could grant USDA flexibility through legislative action. Outside of that option, we will continue to work closely with the cotton industry and representatives to explore other avenues of assistance within USDA’s existing authorities. We have made clear that we are not able to designate cotton as an "other oilseed” under current authorities, and my hope in continuing to talk with the cotton industry and representatives is that, together, we can take a realistic look at how USDA can assist, and work from there. 

There is no question that we want to help, and we will continue to examine all options for assistance and make those options available to cotton producers.


State of the Rural Economy Hearing - Cotton Comments

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