Change Allows Cotton Farmers Price Option

October 12, 1999

Upland cotton farmers now can lock in a price prior to ginning that will be used to calculate loan deficiency payments. The new provision is available for cotton pledged as collateral for a seed-cotton recourse loan.

Producers will be allowed to lock in the adjusted world price after harvest but before ginning. The lock-in price will be used after ginning to calculate loan deficiency payments that will be paid after ginning when production evidence is available.

Prior to the change, cotton producers requested LDPs based on the prevailing AWP after their cotton had been ginned and baled. Now producer can lock in their AWP rate after harvest while the seed cotton is in ricks, modules or trailers. USDA says the change is to improve the orderly marketing of cotton.

Once an LDP has been requested on a quantity of cotton, that cotton no longer is eligible to be pledged as collateral for a marketing assistance non-recourse loan. However, the AWP lock-in provision is available for cotton while pledged as collateral for a seed-cotton recourse loan. The AWP and resulting LDP rate locked in at the time of application will be irrevocable.