US cotton producers are to receive $300m in federal aid to help offset the downturn in cotton prices and global oversupply.
However, the aid from the US Department of Agriculture (USDA) Farm Service Agency (FSA) is being packaged as “marketing assistance” after US lawmakers in 2014 axed subsidies for cotton growers – called direct payments – to end a long-running trade dispute with Brazil.
Agriculture Secretary Tom Vilsack said the new Cotton Ginning Cost Share programme will help expand and maintain the domestic marketing of cotton, and will offer “meaningful, timely and targeted assistance to cotton growers to help with their anticipated ginning costs and to facilitate marketing.”
He added: “The programme will provide, on average, approximately 60% more assistance per farm and per producer than the 2014 programme that provided cotton transition assistance.”
The new scheme doesn’t directly pay farmers based on crop production, but instead provides 40% of a farmer’s ginning costs in a one-time payment based on the amount planted in 2015.
Sign-up for the programme will begin on 20 June and run through 5 August. Payments will be processed as applications are received, and are expected to begin in July.
The new initiative comes amid “dramatic changes” in cotton fibre markets since 2011. Back then, cotton was selling at highs of over $2 per pound, compared with the current 65 cents per pound on cotton for July delivery.
“As a result of low cotton prices and global oversupply, cotton producers are facing economic uncertainty that has led to many producers having lost equity and having been forced to liquidate equipment and land to satisfy loans,” the FSA says.
“The ginning of cotton is necessary prior to marketing the lint for fibre, or the seed for oil or feed. While the Cotton Ginning Cost-Share programme makes payments to cotton producers for cotton ginning costs, the benefits of the program will be felt by the broader marketing chain associated with cotton and cottonseed.”
Shane Stephens, chairman of the National Cotton Council (NCC), said the new programme “will help stabilise a seven sector industry that provides employment for some 125,000 Americans and generates more than $75bn in annual economic activity.
While Mike Tate, chairman of the American Cotton Producers, added that the commodity “is suffering a serious decline in market revenue partly due to heavily-subsidised foreign competition, with no signs of the commodity prices reaching the level needed to offset their production costs.
“The industry will continue to work with Congress and USDA to seek long-term policy solutions that will provide stability for the cotton industry.”
The Agricultural Act of 2014, also known as the farm bill, replaced subsidies with a $16m a year, five-year ‘Pima Agriculture Cotton Trust Fund’ “intended to reduce the injury to domestic manufacturers resulting from tariffs on cotton fabric that are higher than tariffs on certain apparel articles made of cotton fabric.”