Local cotton farmers may face drastic decisions with the new 2014 Farm Bill from the United States Department of Agriculture. A meeting will be held October 9 in Stamford to discuss the Farm Bill. The bill makes changes to the 2008 Farm Bill by increasing the funding to development programs such as the Beginning Farmers and Ranchers Development Program as well as providing $250 million to the Emergency Food Assistance Program (TEFAP). The bill will also increase funding to local food systems and specialty crops, helping ensure the continued growth of product.
However, one major change in the new bill will strike a major blow in how farmers can be paid for their crops. Previous bills allowed for farmers to continue receiving direct payments for their crops, regardless if they had incurred losses for the year. This ensured that farmers would continue to have a “safety net” to work under as they would continue to be paid as long as they produced their product. In an attempt to compensate for this, farmers will need to choose between insurance plans of Price Loss Coverage and Agricultural Risk Coverage in the event of loss. In the case of cotton farmers, a new policy called the Stacked Income Protection Plan (STAX) will provide coverage for farmers when county revenue is greater than 10% but no more than the farmer’s deductable level. By eliminating direct payments, the 2014 Farm Bill is looking to save $5 billion, which will be used to cover the increases in other portions of the bill as well as crop insurance. Under the older program, farmers were able to be paid for every acre they owned, regardless if they planted and made profit, suffered losses as a results of environmental factors, such as weather, or if they did not plant at all. The move to crop insurance will, theoretically, only pay farmers in the event of losses.
The main concern with this change stems from the fact that farmers will no longer be directly paid for their crops, which could lead to major problems at a later date. One example of this occurred in July when Scopia Windmill Fund sued the West Texas Guar Company and its 285 farmers who had not been paid for their crops. The Brownfield company, having gone bankrupt, reached a settlement with their farmers that will allow them to be repaid for their crops. However, because of Scopia’s lawsuit, farmers will not be able to be paid until Scopia can be repaid their loan of $7.2 million the last year. With the new bill and the fact that the farmers did not suffer a major loss covered by an insurance plan, they will be unable to be paid the near $23 million owed to them from the bankrupt West Texas Guar. This incident can affect future loans with cotton farmers as lenders can potentially follow suit to be repaid first before farmers can be paid for their crops. This may not occur, but the lack of direct payment regardless of the circumstances can become an issue when the payments completely end.
In the wake of the new farm bill, local farmers will need to make some major decisions in regards to payment from the result of a loss. Currently, cotton farmers will still receive direct payments for the next two years, a provision that has been in place since 1996, but farmers will need to move to a crop insurance program when the payment program ends. Farmers will need to choose from the existing and new crop insurance plans in the event of a loss for the season.
Although the end of direct payments may not come into effect immediately, farmer will need to plan accordingly as they will face the new, and old, challenges that come with the passing of the new farm bill. There will be an area-wide meeting for farmers on October 6 at the Stamford High School Auditorium at 507 S. Orient St. to train and educate the farmers on the new bill and their options moving forward. For more information on the new farm bill, please visit www.usda.gov.