Combo Rule, Cottonseed Endorsement
Put New Spin On 2011 Crop Insurance Choices

Friday, January 28, 2011                           By Shawn Wade

      Thinning out the alphabet soup of acronyms that populate the federal crop insurance program and eliminating duplicative policy provisions was a major goal of the recently completed USDA Risk Management Agency effort to develop the new combination insurance plan that will be used to establish yield and revenue insurance coverage starting with the 2011 crop year.

      Add in the new Cottonseed (Pilot) Endorsement and it is clear that cotton producers across the nation have an exciting new risk management option to consider and a new set of acronyms to familiarize themselves with as they sit down to finalize their 2011 risk management plans.

Combo Plan Streamlines Provisions

      While the new Combo plan provisions do not eliminate any of the specialty products available to growers, they do try to accomplish the important goal of simplifying choices and aligning terminology for the two most used types of insurance sold - yield and revenue coverage.

      The new combination plan, also known as the Combo rule, revises the Common Crop Insurance Regulations to combine the Actual Production History (APH), Crop Revenue Coverage (CRC), Revenue Assurance (RA), Income Protection (IP), and Indexed Income Protection plans into a single insurance plan.

      These five insurance plans represent the products that producers have bought most often in the past. Under the Combo plan these policies will now be governed by a single set of program regulations and use common terminology to describe various aspects of the coverage they provide.

      In a further effort to streamline the delivery and effectiveness of the different plans, RMA also developed a single rating and pricing component to ensure that all of the insurance coverage provided under the Combo plan remains consistent in terms of insurance protection and cost to producers.

      Under the new Combo rule growers will purchase insurance policies under two main categories. Yield protection (YP) will essentially replicate what was previously referred to as the APH (Actual Production History) plan. Revenue protection (RP), with options to recreate the various plans of insurance it replaces, will be used to replicate insurance previously offered under the revenue-type plans mentioned previously.

      The most visible difference for cotton growers, aside from the change in acronyms, lies in the establishment of the insurance price for the various coverage options. Instead of a mixture of price discovery methods, the Combo plan will now use a single price discovery model to establish both Base and Harvest prices for the various insurance plans.

      An example of how this impacts things is that now the Base price for both Yield and Revenue insurance plans will always be the same because they will both use the price discovery mechanisms outlined in the Commodity Exchange Price Provisions (CEPP).

      For cotton producers on the High Plains of Texas who share the March 15 federal crop insurance sales closing date for initiating or cancelling insurance coverage, the Base price for Yield and Revenue protection policies will be established during the month of February by averaging each trading day's closing value of the new crop (i.e.- 2011) December Cotton futures contract traded on the New York-based InterContinental Exchange (ICE).

      That average will constitute the 2011 Base price and be used to establish coverage under the Yield protection plan for the insurance period, as well as establishing the minimum level of protection provided through the Revenue protection plan of insurance.

      On the back-end of the season, beginning in 2011, High Plains growers that select a Revenue plan utilizing a Harvest price will have that price established during the month of October using the same cotton futures contract (i.e.-December 2011) used to establish the Base price.

      Upland cotton growers in other region's can download the Commodity Exchange Price Provisions (CEPP) for 2011 and succeeding years to see what the Base and Harvest price discovery periods are for their area. To download the Cotton CEPP file go to: http://www.rma.usda.gov/policies/2011/11-cepp-cotton.pdf

Cottonseed Endorsement Offers New Option

      An exciting new crop insurance option for cotton growers across the U.S. in 2011 is the Cottonseed (Pilot) Endorsement, an optional endorsement that growers can use to insure the cottonseed they produce alongside their cotton lint.

      To purchase coverage under the Cottonseed Endorsement a grower (Upland or Extra Long Staple) must purchase a qualifying buy-up policy of insurance (Yield or Revenue) under the new Combo plan provisions for cotton. The endorsement will not be available to growers who purchase CAT, GRIP or GRP cotton policies.

      Under the endorsement cottonseed is insured against yield losses that might occur during the growing season. There is NO revenue component attached to the Cottonseed Endorsement.

      Yield coverage is established using the grower's approved APH (actual production history) cotton lint yield, a national cottonseed price (which has been set by USDA RMA at $0.09 per pound, or $180 per ton, for the 2011 growing season) and the same level of coverage that applies to their cotton lint policy.

      Premiums for the Cottonseed Endorsement will be calculated using the coverage level of the grower's lint policy, the national cottonseed price and the premium rate applicable to the growers approved lint yield for Yield protection coverage under USDA RMA's Combo plan provisions. Growers purchasing Revenue protection on their cotton lint will also have their Cottonseed Endorsement premium calculated based on the rate applicable to Yield only coverage at their approved APH yield level.

      Premiums applicable to the Cottonseed Endorsement will qualify for the same level of federal premium subsidy as the producers underlying cotton lint policy.

      For additional information about the Combo plan or the Cottonseed (Pilot) Endorsement producers are encouraged to contact their insurance agent or crop insurance provider to learn how the new provisions and the Cottonseed Endorsement will impact their 2011 risk management decisions.

 

 

The COTTON USA Advantage

CCI FAX – January 28, 2011

 

AIC in Japan expands range of COTTON USA licensed products. A COTTON USA licensee for T-shirts, labeling more than 1 million pieces annually, AIC added men's underwear to its list of COTTON USA-licensed products. AIC also is the sourcing company for Japan's largest retailer, AEON, and expects to label 10 million units of men's underwear annually. AIC and AEON attended the COTTON USA Japanese Fiber Education Tour held in November 2010 and have expanded their products as a result.

CCI answers Italian trade media's hottest questions about U.S. cotton. An interview with CCI, covering topics from production and sustainability to branding and marketing, was published in various Italian trade media. The coverage generated an earned advertising value of $52,000 and reached more than 100,000 trade contacts in Italy. The interviews were uploaded on the Italian trade website www.cottonusa.it. The average time spent on the trade website section by viewers confirmed the high interest in hearing in-depth information about the characteristics of U.S. cotton and the COTTON USA Mark.

COTTON USA "Naturally in Love" PR campaign in China and Hong Kong receives award. TA Weekly Magazine, the official magazine of the China National Textile and Apparel Council, listed CCI's campaign as one of the "Top 10 Sales and Promotional Events in the China Textile & Apparel Industry in 2010." In addition, PublicAffairsAsia nominated CCI for the Gold Standard Award for Public Affairs. CCI's "Naturally in Love" campaign connected COTTON USA to all stakeholders during a two-phase program from September 2009 to June 2010.

      The first phase garnered interest and attention toward the "Naturally in Love" theme and the second phase aimed to promote U.S. cotton among apparel manufacturers and consumers. The involvement of the "Cotton Ambassador," who participated by appearing in both the finales and designing the special cotton wedding dress, created awareness and excitement about upcoming finales and of COTTON USA from both consumers and licensee brands.

 

 

 

2010 Crop Quality Report

      The following is a summary of the cotton classed at the Lubbock and Lamesa USDA Cotton Division Cotton Classing Offices for the 2010 production season.

2010 High Plains Cotton Quality Summary

 

Current Week:

 

Office

Bales

Color

Leaf

Staple

Lamesa

28.222

21+ - 82.0%

31 – 10.5%

1.81

35.96

Lubbock

35,399

21+ - 69.5%

31 – 24.4%

2.29

35.79

 

Mike

Strength

Uniformity

Bark

Lamesa

4.21

29.43

80.11

13.8%

Lubbock

4.11

29.63

80.52

16.8%

 

 

Season Totals To Date:

 

Office

Bales

Color

Leaf

Staple

Lamesa

1,299,745

21+ - 83.8%

31 - 11.2%

2.14

35.35

Lubbock

3,927,364

21+ - 84.4%

31 - 12.0%

2.30

35.98

 

Mike

Strength

Uniformity

Bark

Lamesa

4.35

29.57

80.66

8.4%

Lubbock

4.02

30.24

80.59

8.8%

Source: USDA AMS

 

2011 Production Conference & Meeting Dates

Date

Event

Feb 8

Cotton Production Meeting,

Wellington

Feb 9

Southwest Farm & Ranch Classic,

Civic Center, Lubbock

Feb 9

Cotton Planning Conference,

Groom

Feb 10

South Plains Ag Conference,

American Legion, Brownfield

Feb 10

Hale/Swisher Crops Conference,

Ollie Liner Center, Plainview

Feb 11

Cotton Conference,

Hereford

Feb 21

Cotton Variety Meeting,

Farwell

Feb 22

Sandyland Ag Conference,

Seminole