Having closed out the 2008 Upland cotton marketing year, cotton producers across the U.S are shifting their thoughts to the upcoming USDA announcement of the Average Price Received by Growers and the final 2008-crop counter-cyclical program payment rate.
With June Upland cotton marketings of only 358,000 bales and no change in the price growers received for cotton from the previous month, the latest calculation of the weighted average price received by growers for Upland cotton declined slightly from the previous month.
June marketings of 358,000 bales were 104,000 bales below the previous month. With the inclusion of the June marketing numbers, the preliminary USDA marketing total for 2008-crop Upland cotton crop is now 8.953 million bales with only the July bale totals to add to the mix. U.S. growers marketed 11.672 million bales during the same time period last year.
According to USDA the average price received by growers for the month of June was unchanged from the previous month's 46.4 cents per pound.
Comparing 2008-crop marketings and prices to the 2007-crop for the same time period indicates the gap between the two remains significant.
Comparing prices reported in June 2008 and June 2009 continues to illustrate the impact of the past year's economic upheaval. This June's price of 46.40 cents is 17.6 cents lower than USDA's final June 2008 price of 64.00 cents.
This month's calculation yielded an average price received of 48.58 cents using preliminary data reported through the end of June by the USDA National Agriculture Statistics Service. Based on these figures, which are still subject to revision, the Weighted Average Price Received by Growers for Upland cotton appears to be well below the Upland cotton base loan value of 52 cents per pound.
As calculated with preliminary information for the first 11 months of the marketing year, the 48.58 cent Average Price Received figure would trigger an estimated counter-cyclical payment rate of 12.58 cents, the statutory maximum allowed by the 2008 farm bill. Final July marketing and price figures will be released at the end of August.
Growers wondering what to look for in regard to the final 2008-crop counter-cyclical payment should remember that the USDA Farm Service Agency (FSA) issued a 5.03 cent advance CC payment in February of this year. The advance CC payment was equal to 40 percent of USDA's projected final payment rate of 12.58 cents.
If, in fact, the final payment rate is announced at the maximum possible 12.58 cents, growers that received an advance CC payment should expect to receive a final CC payment equal to 7.55 cents per pound. Growers who did not receive an advance CC payment would receive the full 12.58-cent final payment rate.
The 2008 counter-cyclical payment rate authorized under the 2008 farm bill will be based on the 12-month Weighted Average Price Received by growers. For cotton the 12-month Weighted Average Price will reflect price and marketings for the 2008 marketing year. The 2008 cotton marketing year began Aug. 1, 2008 and ended July 31, 2009.
To calculate the counter-cyclical payment rate you start with the 71.25-cent Upland cotton target price and subtract from it the 6.67-cent Upland cotton direct payment rate and the higher of the 52.00 cent Upland cotton base loan rate or the Weighted Average Price Received by growers for the marketing year.
The following table shows the preliminary average price received each month by farmers and the associated weighted average price based on prices and cumulative marketings from Aug. 1, 2008 through June 2009.
Average Price Received For 2008-crop Upland Cotton
(Weighted by Marketings)
|(000's of Running bales)||(cents/LB.)|
Source: National Agricultural Statistics Service; * = preliminary