The possibility of a lower counter-cyclical payment rate for the 2003-crop creates the potential for another economic hit to growers already facing either a total loss of production in 2003 or severely reduced crop prospects. The High Plains region suffered widespread damage due to cool temperatures, hail and high winds brought to the High Plains region in May and June.
To help growers, who may be needing a full 2003 counter-cyclical payment to make ends meet, the Texas Cooperative Extension Service and Plains Cotton Growers have worked to put together a program specifically aimed at educating growers about how they can offset an income loss if the 2003 counter-cyclical payment is less than the maximum rate.
The program will help growers identify and take advantage of market opportunities that can offset possible decreases in counter-cyclical payment rates.
TCES economists Carl Anderson, Jackie Smith and TCES Risk Management specialist Jay Yates will be covering a variety of topics including an overview of how the counter-cyclical program works within the framework of the current farm program, determining the most effective strategies to hedging against a possible drop in counter-cyclical payment rates, and figuring out when the best opportunities exist for implementing a hedging strategy.
CC Payment Primer
As the price received by growers approaches 52 cents per pound the potential for a reduction in the counter-cyclical payment rate increases.
Current farm law allows for counter-cyclical payments when the effective price for a covered commodity is less than the target price. The effective price is equal to the sum of (1) the higher of the national average market price during the 12-month marketing year for the commodity or the national average loan rate, and (2) the payment rate for the direct decoupled payments for the commodity.
The payment rate for counter-cyclical payments is equal to the difference between the target price and the effective price for the commodity.
Smith notes that with the volatile nature of the current cotton market there are still opportunities for growers to be proactive in their efforts and to protect themselves against a drop in the 2003 counter-cyclical payment rate.
The trick, he explains, is in having the information necessary to formulate a workable plan that can be put in place as soon as the market provides the opportunity to act. Helping growers understand what their options are and how they can develop a workable plan, he says, is the reason for holding the workshops.
The Counter-cyclical Payment Workshops will be held at three locations around the High Plains on August 5 and 6. Times and location for the workshop nearest you are:
- 9:00 a.m.-Plainview, Ollie Liner Center
- 2:00 p.m.-Muleshoe, Bailey County Coliseum
- 9:00 a.m.-Brownfield, Terry County Livestock Barn (2 miles north of Brownfield on FM 137)
Shawn Wade is a writer for Plains Cotton Growers Inc.