2005 Loan Table Reflects Market Preference For Longer, Whiter Upland Cotton

Friday,April 22, 2005                                 By Shawn Wade

      Tax Day includedsome good news to U.S. cotton producers with the announcement of the 2005Upland Cotton Loan Premium and Discount tables by the United States Departmentof Agriculture Farm Service Agency on April 15.

      For farmers thegood part of the announcement is that the 2005 Upland Cotton Loan chartincludes a welcome, upward trend in loan values. The improvement in loan valuescomes from generally lower discounts and increased premiums for just aboutevery Color, Staple and Leaf combination. The new tables continue to mirror themarketŐs desire for high quality fiber.

      High Plainsgrowers are increasingly making cotton variety selections based on yield, aswell as the ability to deliver improved fiber qualities, and will find a lot tolike about the new loan chart going into the 2005 growing season.

      Improvements fromjust a few points at the lower end of the spectrum to as much as 100-125points, or 1-1.25 cents per pound, on the higher end of the scale will be wellreceived by growers. These increases are measured in comparison to what thesame Color/Staple/Leaf combinations were valued at using the 2004 Upland CottonLoan Premium and Discount tables.

      In order tobetter reflect the signals provided by the market, the 2005 table was preparedwith a slightly different set of rules than has been used in the past.

      Generallyspeaking, the procedures used for determining the 2005 schedules were the sameas those used to develop the 2004 upland cotton crop premiums and discounts.The only difference this year is that the traditional minimum spread betweenstaple 33 and staple 32 cotton was narrowed from 150 points to 100 points to betterreflect prevailing market prices.

      It is hard todetermine just how much allowing a narrower spread between staple 32 and staple33 values really had considering the overall upward shift in the 2005 chart.USDA pronounced the move budget neutral since less than five percent of thecrop typically measures less than a 32 staple.

      One of the morenoticeable 2005 changes however, is where the transition from a discount to apremium occurs within the 11-31 Color grades. In the past a premium was notprovided until staple length measured 34 or better.

      In 2005 thetransition to a premium occurs beginning at a staple length of 33 for cottonColor grades 11 & 21, Leaf 1-3, and for cotton Color grade 31, Leaf 1-2.Other staple length 33 cottons, with Color grades 11-31 and Leaf grades of 4 orhigher, are also positively impacted with the average discounts reduced fromone-half to one cent from the previous yearŐs table.

      Changes to thepremium and discount tables for other High Volume Instrument (HVI) measured cottonquality components in 2005 where generally minor.

      One differencethat producers will notice is a change in the Length Uniformity table toreflect USDAŐs move to report this measurement to the nearest tenth of apercent in 2005. There were also changes in the table for Micronaire.

      In the 2005Micronaire table producers will see cotton with Staple lengths of 32 andshorter receive higher discounts for low mike readings from 2.7-3.4 as well asa slightly lower premium for mike readings from 3.7-4.2 in 2005.

                                                Continued on Page 2

 

Disaster Calculators Still Helping Producers Capture Full CDP Benefits

Friday,April 22, 2005                                 By Shawn Wade

      As farmers go through the2003/2004 Crop Disaster Program sign-up process it is becoming evident that themost effective way to ensure they are receiving full CDP benefits is to beprepared before they get to the Farm Service Agency office.

      One good way for farmers toget prepared is to use the Disaster Calculators developed by Plains Cotton Growerswith the assistance of Texas Cooperative Extension Risk Management SpecialistJay Yates. PCGŐs Calculators are available for download from the PCG website(www.plainscotton.org) and have been recently updated to include the 2003/2004FSA yield tables for cotton, corn, wheat, sorghum and peanuts.

      Growers getting ready toundertake the CDP application process are encouraged to gather their productionand insurance information and enter it into one of the PCG DisasterCalculators.

      Doing so gives a producer aclear picture of which farms or units qualify for the CDP, estimates how muchbenefit they are likely to receive and helps identify records needed tocomplete an application should the FSA database be incomplete.

      Like past CDP programs, muchof the information producers need is available to FSA personnel electronically,but it is always a good idea to have back-up copies of insurance and productioninformation just in case there is a hole in the data FSA received.

      By taking the time to runthrough their information before getting to the FSA office, growers can quicklyidentify and fix incorrect information know if an eligible farm is beinginadvertently left out due to incomplete information.

      To use the PCG calculators, agrower should first determine the loss year in which they will apply forbenefits. Growers can then input what crop was produced, the county where thecrop was grown, whether the unit was irrigated or dryland, verify if the cropwas insured or not and if it was carried to harvest.

      In addition to theinformation outlined above, growers will also need to have the followinginformation to estimate CDP benefits: Actual Production History (APH) yieldused to determine the insurance guarantee for each qualifying unit; Harvestedproduction or amount of cotton counted against the insurance guarantee in theyear of loss; Planted acres for each qualifying unit; Share of production(percent); Gross insurance indemnity for each qualifying unit; and, the Cropinsurance premium paid on each qualifying unit.


2005 Loan Table . . . continued

      Cotton withStaple lengths of 33 and longer will see slightly larger Micronaire premiumsand lower discounts in 2005 across the board.

      Strengthdiscounts continue to increase in 2005 for readings below 23.4 g/tex. Strengthreadings from 24.5 g/tex through 29.4 will again receive no premiums in 2005,while readings above 29.5 will see slightly lower premiums, ranging from 25 to50 points, compared to 2004.

      Another area thatwill see changes in 2005 is the discount schedule for Level One and Level TwoBark. The discount for Level One Bark in Texas, New Mexico and Oklahoma wasincreased from 170 points in 2004 to 200 points in 2005.

      The CommodityCredit Corporation Premium and Discount tables provide the applicable premiumand discount figures used to determine marketing loan values for cottonproduced in the United States and supplied as collateral to the CCC.

 

      Base loan ratesfor specific U.S. warehouse locations, also established by the CCC, remainunchanged in 2005. For cotton warehoused at Lubbock, a 2005 loan value will becalculated from a 51.6 cent per pound base, 40 points lower than the 52 centsper pound national base loan rate for cotton.

      Producers wantingto see the 2005 Loan Premiums and Discounts first-hand can download them fromthe Plains Cotton Growers website at http://www.plainscotton.org by following the linksprovided.

      The table belowprovides comparisons between 2004 and 2005 loan values for White Grades 11-41and Light Spot grades 12-42, Staple 32 through 35.


 

 

 

 

COMPARISON OF LOAN PREMIUMS AND DISCOUNTS FOR SELECTED
GRADE, STAPLE LENGTH, AND LEAF CONTENT
OF 2005-CROP AMERICAN UPLAND COTTON

 

Base Loan Rate: LUBBOCK = 51.60 ˘/pound; U.S.= 52.00 ˘/pound

 

Staple

32

33

34

35

Color

Leaf

2004

2005

Change

2004

2005

Change

2004

2005

Change

2004

2005

Change

 

 

Loan

Loan

 

Loan

Loan

 

Loan

Loan

 

Loan

Loan

 

11&21

1 & 2

-260

-155

105

-70

35

105

230

300

70

400

500

100

 

3

-270

-170

100

-75

30

105

220

275

55

390

465

75

 

4

-305

-225

80

-135

-65

70

105

115

10

230

265

35

 

5

-410

-355

55

-260

-245

15

-155

-110

45

-50

30

80

 

6

-510

-470

40

-360

-370

-10

-335

-330

5

-260

-255

5

 

7

-665

-620

45

-515

-520

-5

-490

-475

15

-435

-420

15

31

1 & 2

-275

-175

100

-90

10

100

180

235

55

355

440

85

 

3

-285

-185

100

-100

-5

95

180

225

45

355

430

75

 

4

-320

-240

80

-150

-95

55

90

100

10

200

225

25

 

5

-425

-370

55

-275

-255

20

-190

-155

35

-80

5

85

 

6

-530

-485

45

-380

-385

-5

-365

-360

5

-285

-280

5

 

7

-675

-630

45

-525

-530

-5

-505

-490

15

-455

-440

15

41

1 & 2

-325

-250

75

-165

-115

50

70

90

20

200

220

20

 

3

-325

-260

65

-175

-125

50

65

80

15

195

210

15

 

4

-360

-290

70

-205

-170

35

Base

Base

Base

145

140

-5

 

5

-475

-415

60

-325

-305

20

-255

-220

35

-175

-120

55

 

6

-590

-545

45

-440

-445

-5

-420

-425

-5

-385

-380

5

 

7

-730

-685

45

-580

-585

-5

-570

-570

0

-560

-545

15

12&22

1 & 2

-335

-275

60

-185

-110

75

70

100

30

205

255

50

 

3

-345

-290

55

-195

-120

75

50

75

25

180

230

50

 

4

-410

-345

65

-260

-195

65

-35

5

40

75

130

55

 

5

-505

-460

45

-355

-340

15

-245

-230

15

-185

-150

35

 

6

-610

-560

50

-460

-460

0

-420

-415

5

-380

-365

15

 

7

-750

-690

60

-600

-590

10

-570

-565

5

-565

-550

15

32

1 & 2

-380

-330

50

-230

-165

65

-10

15

25

100

130

30

 

3

-385

-340

45

-235

-170

65

-20

-5

15

90

115

25

 

4

-450

-400

50

-300

-250

50

-110

-90

20

-10

25

35

 

5

-550

-505

45

-400

-400

0

-350

-335

15

-290

-260

30

 

6

-660

-615

45

-510

-515

-5

-485

-485

0

-460

-450

10

 

7

-805

-755

50

-655

-655

0

-645

-635

10

-635

-620

15

42

1 & 2

-480

-405

75

-330

-280

50

-220

-180

40

-155

-95

60

 

3

-485

-415

70

-335

-290

45

-225

-190

35

-165

-110

55

 

4

-525

-460

65

-375

-325

50

-275

-240

35

-220

-165

55

 

5

-625

-575

50

-475

-450

25

-430

-410

20

-390

-350

40

 

6

-740

-695

45

-590

-595

-5

-575

-575

0

-560

-550

10

 

7

-885

-835

50

-735

-735

0

-725

-715

10

-725

-705

20