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Farm Program Support Mechanisms

Farm Program Support Mechanisms. 2004 Beltwide Cotton Conference San Antonio, TX January 5-9, 2004. Farm Security and Rural Investment Act of 2002. Covers 2002-2007 crops Allows base/yield updating options Retains marketing loans with adjustments

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Farm Program Support Mechanisms

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  1. Farm Program Support Mechanisms 2004 Beltwide Cotton Conference San Antonio, TX January 5-9, 2004

  2. Farm Security and Rural Investment Act of 2002 • Covers 2002-2007 crops • Allows base/yield updating options • Retains marketing loans with adjustments • Makes direct payments similar to those under the ’96 Act • Introduces counter-cyclical payments

  3. Marketing Loans • Base loan rate set at 52 cents • As compared to maximum level of 51.92 cents under the ’96 Act • Maximum term reduced from 10 months to 9 months • Repayment at the higher of the loan rate plus interest and storage or the AWP

  4. Direct Payments • Set at 6.67 cents • Similar to the AMTA (or PFC) payments under the ’96 Act • Paid on 85% of base acreage and program yields established under ’96 Act

  5. Counter-cyclical Payments • ’02 farm bill established target prices for upland cotton, grains, and oilseeds • Cotton target price set at 72.4 cents • Target price is used to determine counter-cyclical payments (CCP) • Paid on 85% of base acreage and new program yields, if updated.

  6. Counter-cyclical Payments • Target price - direct payment - greater of loan rate or MYA price

  7. What is the MYA Price? • Published by USDA’s NASS, the market year average (MYA) price reflects the average price received by farmers for the marketing year. (Cotton is Aug-Jul) • Monthly farm prices are weighted by marketings to calculate the MYA price.

  8. Cotton Monthly Farm Price vs. Nearby Futures

  9. Cotton Gross Receipts (Cents/Lb)

  10. 2004 Calendar of Payments

  11. Understanding Farm Programs • Farm bill is vital to the structure and stability of the US cotton production sector • Further information in the afternoon workshop on • How the mechanisms work • How are prices determined and what do they mean • How do support mechanisms enter into marketing decisions

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