Careful Planning Key To Maximizing

Returns During 2004Marketing Season

LUBBOCK, September 3,2004                By Shawn Wade

      Whileprospects for a bountiful High Plains cotton crop are still excellent,producers need to begin seriously considering how the last phase of the 2004growing season will be managed.

      Infact, realizing the full potential of the outstanding crop that is in the fieldwill require everyone in the marketing chain to shake a few cobwebs loose.

      Withthe Adjusted World Price (AWP) of cotton still tracking below the 52-centnational average loan rate for cotton, payment limitations on the amount ofLoan Deficiency Payments (LDP) and Marketing Loan Gains (MLG) a producer canreceive become important factors to consider.

      TheJune 2004 re-emergence of an upland cotton LDP, combined with prospects for anexceptional crop, means producers will need to carefully monitor their use ofLDPs to prevent payment limit complications.

      Theamount of LDP and MLG benefits received by a producer are applied against thatproducer's $75,000 per person payment limitation for loan benefits.

      Withan LDP payment rate of 10 cents per pound, and an average bale weight of 500pounds, reaching the $75,000 payment limit only takes 1,500 bales. If the LDPrate goes to 20 cents per pound, that threshold drops to 750 bales, well withinthe realm of possibility for many producers in 2004.

      LDPand MLG benefits are calculated as the difference between the Upland cottonbase loan rate (52 cents per pound) and the Adjusted World Price of cotton whenthe AWP is below 52 cents.

      LDPand MLG are two versions of the same benefit with the only difference beingwhen the producer decides to take action.

      LDPbenefits are provided to the producer in exchange for the producer's agreementto forego placing the commodity in the CCC loan.

     Producers receive a Marketing Loan Gain after they have placed their cotton inthe CCC loan. MLGs are automatically accrued when a loan is repaid at a rateless than the national average loan rate upon which the loan was originallybased. This situation only occurs when the Adjusted World Price (AWP) fallsbelow the national average loan rate for cotton.

      Inorder to be eligible for LDP/MLG benefits, producers must fulfill therequirements for participating in the Commodity Credit Corporation marketingloan program and also meet the requirements for maintaining "beneficialinterest" in the crop.

      To beeligible for a marketing assistance loan, producers must comply with applicableconservation and wetland requirements, report upland cotton planted acreage,comply with crop insurance requirements and maintain "beneficialinterest" in the cotton from harvest throughout the term of the loan.

     "Beneficial Interest" is maintained as long as the producer maintainsALL of the following: Control of the Commodity; Risk of Loss; and Title of theCommodity.

      Forcotton "Beneficial Interest" is considered lost, and the cropineligible for LDP or MLG benefits, when any one of the following eventsoccurs:

The producer receivespayment (without option to purchase)

The date the commodityis invoiced

Delivery of warehousereceipts to the buyer or agent

FOB warehouse when thecommodity is loaded for shipment from the warehouse to the buyer

Contract signing date,when the contract restricts the producer from obtaining CCC loans or LDPs

Entry of the commodityinto a warehouse when a contract casualty clause provides that aftercommencement of insured warehouse coverage the insurance settlement goes to thebuyer

When the commodity isredeemed from Commodity Credit Corporation loan

     Producers should be careful to note that while most "option topurchase" contracts offered have sufficient language to keep"beneficial interest" with the producer, any payment made to theproducer under a sales contract causes beneficial interest to be lost, even ifthe contract contains "option to purchase" language. Producers whoare unsure of the language in an "option to purchase" contract canhave that language reviewed by their county FSA office.

      Inorder to obtain LDP benefits on cotton for which "beneficialinterest" will be lost soon after harvest or ginning, producers are allowedto request an LDP prior to harvest using FSA form CCC-709. The LDP rate forcotton covered by the request will be the rate in effect the date the cotton isginned.

      LDPrequests filed on cotton, using FSA form CCC-Cotton AA, after ginning will havean LDP payment rate based on the date of the request.

     Producers can also lock-in an LDP rate on cotton stored in a module, before itis ginned, by using the same form CCC-Cotton AA. The producer retainsbeneficial interest in the commodity, but will receive an LDP based on thelock-in date.

      Withprospects for the crop still good, producers who have not worried aboutreaching their limit on LDP/MLG benefits in the past are gearing up to marketall of the cotton they produce and still receive the full protection of theloan program.

      Theanswer for many will be using the CCC loan and generic certificates. Producersclose to exceeding their limit on LDPs can put their cotton in the loan, sellit and then redeem the cotton themselves or through their designated agentusing a generic commodity certificates.

      Whencotton is redeemed using generic certificates, the MLG that would have accrueddoes not count against a producer's LDP/MLG payment limit and helps providefull CCC loan protection on every pound of cotton produced.

      Forproducers that market their cotton through a marketing pool there is little toworry about other than making sure the pool has appropriate procedures in placeto prevent payment limit complications for the grower.

     Growers that market cotton on their own, or who have signed "option topurchase" contracts, should make sure they apply for LDP benefits beforethey lose beneficial interest, keep track of how much LDP benefit they accrueand be prepared to switch their marketing plans to include the CCC loan andgeneric certificates to prevent missing out on benefits they are otherwiseentitled to receive.

     Growers that put their cotton in the CCC loan and then sell at a later datehave another ace in their pocket thanks to the Farm Service Agencies release ofa new, fully automated Centralize Cotton Redemption (CCR) System.

      Thenew CCR system allows merchants who purchase upland cotton pledged as collateralfrom multiple loans in multiple counties to redeem the bales they purchase in asingle online transaction. The primary benefit for merchants who register touse the system is it makes loan redemption process easier and more convenient.

     Merchants are still required to obtain a valid producer signature on formCCC-605 designating them as the producers agent and authorizing them to redeemthe loan using the CCR.

      Theprimary benefit for producers is that whenever the AWP is below the nationalaverage loan rate, the loan repayment is considered to be a commoditycertificate exchange and no MLG is charged against the producer's paymentlimitation.


LDP Quick Facts

    Cotton must be Loan Eligible to receive LDP

    Producer must maintain "Beneficial Interest" through date that LDP isrequested

    The LDP/MLG payment rate for cotton is calculated weekly, announced eachThursday and is effective from 11:01 p.m. CST that day through 11:00 p.m. CSTthe following Thursday.

    Generic Certificates help guarantee full loan benefits should producers reachLDP payment limitation


NASS Releases Final JulyMarketing Figures;
FSA Preparing Final CCP Rate Calculation

LUBBOCK, September 3,2004                By Shawn Wade

      For thosewho are tracking the monthly numbers and using them to generate an estimatedWeighted Average Price Received, the last piece of the puzzle has now beendropped into place.

      Thatmeans that a fairly accurate estimate of the final 2003-crop Counter-cyclical(CC) payment for cotton can now be made. Assuming that there are no significantadjustments made in the monthly figures released up to this point, cottonproducers participating in the 2003 Direct and Counter-cyclical Program (DCP)should expect a final 2003 payment rate of approximately 3.5 cents per pound tobe announced in the next few weeks.

      Calculation of a final CC paymentrate of 3.5 cents is based on the marketings and average prices received bygrowers as reported by the National Agricultural Statistics Service (NASS).  Producers who received an advance CC payment would receive thedifference between the amount of the advance and the final payment rate.

     Producers who received a 2003 advance CC payment of 2.01 cents should expect tosee a final payment of approximately 1.49 cents per pound.

      The2003 Counter-Cyclical payment rate authorized under the 2002 Farm Bill will bebased on the 12-month Weighted Average Price Received by growers. For cottonthe 12-month Weighted Average Price will reflect price and bales marketed forthe 2003 marketing year. The 2003 cotton marketing year began August 1, 2003and ended July 31, 2004.

      Thefollowing table shows the average price received each month by farmers and theassociated Weighted Average Price based on cumulative bales marketed throughJuly 2004.


Average PriceReceived Through July 2004

For 2003-crop UplandCotton

(Weighted by balesmarketed)


Bales Marketed



(000's of Running bales)







August 2003

























January 2004



































Source: NationalAgricultural Statistics Service

Calendar of Events

     September is a busy month across the High Plains as growers are given theopportunity to participate in a wide variety of Texas Cooperative Extension andindustry crop tours. In an effort to help producers plan to attend these tours,a list of county crop tours will be included as soon as this informationbecomes available.



Event \ Location \ Directions:


Sept. 7

West Texas Agricultural Chemical Conf.

Location: Lubbock Memorial Civic Center

7:00 a.m.

Sept. 10

Lubbock Co. Come-and-Go Field Day -

Location: Texas Tech Research Farm.

Directions: Farm is just north of the intersection of 4th Street and Quaker Ave. (on north side of the TTU Rodeo Arena)

8:00 a.m. Noon

Sept. 13

Yoakum Co. Farm Tour

Location: Plains Community Building

9:00 a.m.

Sept. 14

Dawson Co. Crop Tour

Location: Busses load at the Dawson Co. Courthouse

8:00 a.m.

Sept. 15

Lynn Co. Ag Tour

Location: Farmer Coop Gin in Tahoka, 8:00 a.m. Registration; 8:30 a.m. Tour Start

8:00 a.m. - Noon

Sept. 16

Terry Co. Farm Tour -

Location: Tour departs from the First Baptist Church parking lot in Brownfield.

9:00 a.m.

Sept. 16

West Texas FiberMax Field Day

Location: Bayer CropScience Cotton Research Farm. 9:30 a.m. Registration; 10:00a.m. Tours Begin, followed by lunch

Directions: FM 40 and FM 1729, 4 miles east of Lubbock on the Acuff Highway

9:30 a.m. Noon

RSVP Required

To RSVP call

800-777-9249 or contact your Bayer Rep


Sept. 17

Helms Research Farm Irrigation Tour

Location: 2.5 south of Halfway

9:00 a.m.