Hedging Against Lower 2003 CC Payments Topic for August 5-6 TCEWorkshops

LUBBOCK,July 25, 2003              By Shawn Wade

      Producersacross the Cotton Belt are taking a closer look at the direction cotton pricesare heading and wondering whether or not the 2003-crop counter-cyclical paymentrate could start dropping.

      Thepossibility of a lower counter-cyclical payment rate for the 2003-crop createsthe potential for another economic hit to growers already facing either a totalloss of production in 2003 or severely reduced crop prospects. The High Plainsregion suffered widespread damage due to cool temperatures, hail and high windsbrought to the High Plains region in May and June.

      Tohelp growers, who may be needing a full 2003 counter-cyclical payment to makeends meet, the Texas Cooperative Extension (TCE) service and Plains CottonGrowers (PCG) have worked to put together a program specifically aimed ateducating growers about how they can offset an income loss if the 2003counter-cyclical payment is less than the maximum rate.

      Theprogram will help growers identify and take advantage of market opportunitiesthat can offset possible decreases in counter-cyclical payment rates.

      TCEeconomists Dr. Carl Anderson, Dr. Jackie Smith and TCE Risk Management specialistJay Yates will be covering a variety of topics including an overview of how thecounter-cyclical program works within the framework of the current farmprogram, determining the most effective strategies to hedging against apossible drop in counter-cyclical payment rates, and figuring out when the bestopportunities exist for implementing a hedging strategy.

CCPayment Primer

      Asthe price received by growers approaches 52 cents per pound the potential for areduction in the counter-cyclical payment rate increases.

      Currentfarm law allows for counter-cyclical payments when the effective price for acovered commodity is less than the target price. The effective price is equalto the sum of (1) the higher of the national average market price duringthe 12-month marketing year for the commodity or the national average loanrate, and (2) the payment rate for the direct decoupled payments for thecommodity.

      Thepayment rate for counter-cyclical payments is equal to the difference betweenthe target price and the effective price for the commodity.

      Smithnotes that with the volatile nature of the current cotton market there arestill opportunities for growers to be proactive in their efforts and to protectthemselves against a drop in the 2003 counter-cyclical payment rate.

      Thetrick, he explains, is in having the information necessary to formulate aworkable plan that can be put in place as soon as the market provides theopportunity to act. Helping growers understand what their options are and howthey can develop a workable plan, he says, is the reason for holding theworkshops.

      TheCounter-cyclical Payment Workshops will be held at three locations around theHigh Plains on August 5 and 6. Times and location for the workshop nearest youare:

      August5    9:00a.m.-Plainview, Ollie Liner Center

                        2:00p.m.-Muleshoe, Bailey County

                                          Coliseum

     August6   9:00 a.m.-Brownfield,Terry County

                                    LivestockBarn (2 miles north of

                                    Brownfieldon FM 137)

      Advanceregistration is not required to attend the workshops. Anyone interested inobtaining additional information may contact Dr. Jackie Smith or Jay Yates atthe Lubbock Research and Extension Center at 806-746-6101.

 

Texas Producers Visit Mid-South July 26-31

LUBBOCK,July 25, 2003              By Shawn Wade

      Cottonfarmers from across the Southwest production region leave July 26 toparticipate in the 2003 Producer Information Exchange Mid-South Tour.

      ThisyearÕs Southwest Region participants will tour operations across the Mid-Southover the next week, returning home July 31.

      Tourstops include locations in West Monroe, Louisiana, Portland, Arkansas,Greenville, Mississippi, and, Tribbett, Mississippi.

      TheProducer Information Exchange Tour is sponsored by FMC Corporation and fostersthe exchange of information and the creation of friendships among producersthroughout the Cotton Belt.

      Growersfrom the Mid-South region will south Texas for the Southwest P.I.E Tour August9-14.