Project Summaries

12-285LA  Project Manager: J. M. Reeves

IMPACT OF FARM PROGRAM CHANGES ON THE ECONOMICS OF LOUISIANA COTTON PRODUCTION

Michael E. Salassi, LSU Agricultural Center

The current economic conditions, alternative crop production practices, crop variety choices, crop production expenses, market forces impacting commodity prices and potential changes to farm program provisions or options for program crops will have a significant impact on the profitability and economic viability of cotton production in Louisiana over the next several years.

The overall objective of this study is to evaluate the impacts of farm program changes on Louisiana cotton production. Specifically, the objectives are: 1) to develop economic and financial simulation models which can simulate revenue and expenses from cotton production and farm program participation; and 2) to evaluate the economic impact of farm program changes as well as other factors on the economics of cotton production in Louisiana.

An analysis of the farm program parameters of the STAX program for cotton, as currently specified in the House and Senate farm bill proposals, was finalized. Under S. 3240, the STAX program is offered at a county-wide level and provides coverage for a revenue loss of not more than 30% of the expected county revenue, specified in 5% increments. The STAX parameters contained in H.R. 6083 establishes coverage based on an expected price that is the higher of the expected price under existing GRIP or area-wide policy for the applicable county and crop year or a $0.6861 per pound reference price and the expected county yield for the existing area-wide plans or the 5-year Olympic average of the yield data for the county. The inclusion of a reference price coupled with the yield multiplication factor allows a producer to adjust coverage relative to price and yield risk. Analysis of how these two price support programs would have performed over the 2008-2012 period was included in the analysis report. Since the Farm Bill was not passed in 2012 and extended by 9 months for 2013, a new farm bill should be available soon that will allow for further analysis of possible alternatives.

 

Project Year: 2012
 

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