Producers concerned about the inability of RMA to implement for the 2015 crop the APH yield adjustment provision contained in the 2014 farm law. Insurance coverage levels regarded as crucial for financing.
Cotton futures climbed above the four previous weekly highs and settled near the dayΆs top level in benchmark December Tuesday.
December finished up 74 points to 66.89 cents, its highest close since July 23 and six ticks from the high of its 112-point range from down 32 points at 65.83 cents to up 80 points at 66.95 cents. It closed above its 40-day moving average for the first time since May 22.
Volume increased to an estimated 17,300 lots from 15,538 lots the previous session when spreads totaled 5,203 lots or 33% and EFP 41 lots. Options volume totaled 1,583 calls and 3,108 puts.
Cotton producers have continued to voice concerns about reports the USDAΆs Risk Management Agency will be unable to implement for the 2015 crop the actual production history (APH) yield adjustment provision contained in the 2014 farm law.
The National Cotton Council has applauded the RMA for a timely announcement that the Stacked Income Protection Plan (STAX) will be available to upland cotton producers through the federal crop insurance program beginning with the 2015 crop.
But the American Cotton Producers unit of the council also urged the NCC at a meeting earlier this month to continue its efforts to have the APH yield adjustment provision implemented for the 2015 crop.
In its announcement, USDA said it wanted to make as much information available now to assist with farmersΆ risk management planning. It said STAX is one of several new risk management options created by the 2014 farm law that will help protect farmers from events beyond their control such as weather disasters.
But on its webpage the RMA says the APH adjustment “will require significant modifications to RMAΆs business support systems and will require RMA staff to evaluate the impact this change will have on program actuarial soundness and the existing premium rating methodology.
“In sum,” the agency adds, “while RMA desires to have the APH adjustment ready for the 2015 crop year, RMA is unable to implement this provision given the current time and resource constraints.”
A provision in the 2014 farm bill allows producers to “exclude any year from their insurable production (APH) if the countyΆs yield per planted acre for the crop in that year is at least 50% below the previous 10-year average of the yield per planted acre for the crop in the county. This also applies to contiguous counties and allows for the separation of irrigated and non-irrigated acres.”
This provision is particularly important in the Southwest where three straight years of drought have drastically impacted yield histories and insurance coverage levels.
With upland cotton no longer classified as a program crop, insurance coverage levels will be crucial this fall and winter when producers seek financing for the 2015 crop, growers say, especially if prices remain low.
Futures open interest expanded 1,869 lots Monday to 169,716, with DecemberΆs up 145 lots to 111,248 and MarchΆs up 776 lots to 45,471. Cert stocks declined 7,061 bales to 76,248.
World prices as measured by the Cotlook A Index gained 20 points Tuesday morning to 8.95 cents, reflecting a premium of 8.95 cents over MondayΆs December futures settlement.
