It also reviews the legislative attempts—which successfully culminated with the Bipartisan Budget Act of 2018 ( P.L. 115-123 ; BBA)—to reintegrate cotton as a program crop eligible for major farm revenue support programs. With trade retaliation in the offing, the United States removed upland cotton from eligibility for the PLC and ARC revenue support programs in the 2014 farm bill. Cotton in the 2014 Farm Bill

Under the 2014 farm bill, upland cotton was made ineligible for new revenue support programs available to traditional program crops—referred to as covered commodities —and was given a reduced marketing loan rate. Instead, upland cotton producers were eligible for new temporary transition payments and a stand-alone, county-based revenue insurance policy called the Stacked Income Protection Plan (STAX). Cotton Excluded from New Revenue Programs

The 2014 farm bill established two new support programs—the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs—were established. Cotton-Specific Programs Remaining in the 2014 Farm Bill

Producers of upland cotton remain eligible for support under several other farm programs under the 2014 farm bill including benefits under the following programs:
Marketing Assistance Loan (MAL) Program for Cotton Producers . Under these conditions, the new ARC and PLC programs paid out nearly $20 billion to eligible program crops during the first three years of the 2014 farm bill ($5.3 billion in 2014, $7.8 billion in 2015, and $6.9 billion in 2016). In response to its exclusion from PLC program eligibility, the U.S. cotton sector actively sought to regain cotton's former status as a "covered commodity" but on the basis of cottonseed rather than cotton lint. Several members of the House Agriculture Committee agree d with the NCC proposal and, in December 2015, urged then-Secretary of Agriculture Tom Vilsack to use his authority under the farm bill to designate cottonseed as a covered oilseed, thus allowing cottonseed to be a "covered commodity" eligible for the ARC and PLC programs immediately and without further action by Congress. Instead, the explanatory statement accompanying P.L. Both of these farm program changes have long-term policy implications because they change the 2014 farm bill statutes. Seed Cotton: Program Design

The BBA provision, Section 60101(a), includes seed cotton as a covered commodity, thus making it eligible for participation in PLC and ARC beginning with crop year 2018. Participating producers must make three decisions during the signup period (July 30, 2018, to December 7, 2018): how to allocate their generic base acres, whether to update cotton program yields, and whether to participate in ARC or PLC. However, according to CBO, the net costs of the seed cotton provision in the BBA would be reduced to $61 million over 10 years by associated budget offsets—including the reallocation of generic base and the removal of residual generic base from ARC and PLC program eligibility (-$2.188 billion over 10 years) and by repealing the eligibility for the STAX program for cotton producers that enroll their seed cotton base in either ARC or PLC (-$711 million over 10 years). Potential Issues

Three issues that could figure into future policy debate as a result of this program change include the potential for large budget costs if commodity markets weaken further, the realignment of program payment acres, and considerations surrounding the potential for re-opening of the WTO U.S.-Brazil cotton dispute

		Potential Budget Cost of Seed Cotton as a Program Crop

Projections for PLC payments on seed cotton base are sensitive to changes in market prices.
The Bipartisan Budget Act of 2018 (P.L. 115-123; BBA), signed into law on February 9, 2018, included a provision—Section 60101(a)—which amended the 2014 farm bill (P.L. 113-79) to add seed cotton as a "covered commodity," thus making cotton eligible for the Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC) farm revenue support programs.
The 2014 farm bill provides authority for farm programs for the 2014 through 2018 crop years. Under the 2014 farm bill as signed into law in February 2014, neither cotton nor its co-product, cottonseed, were eligible to participate in the newly created ARC and PLC programs. During the first three years of the 2014 farm bill (crop years 2014 through 2016), nearly $20 billion in support payments have been made to eligible program crops under ARC and PLC.
Upland cotton had been eligible for U.S. Department of Agriculture (USDA) farm support programs since their origin in the 1930s. However, in response to a trade dispute with Brazil, the 2014 farm bill permanently removed upland cotton from eligibility for the ARC and PLC programs. Instead, the remaining cotton-specific support programs were supplemented by offering the U.S. cotton sector new transitional payments and, in 2015, a new shallow-loss revenue insurance product: the Stacked Income Protection Program (STAX).
Since early 2014, U.S. cotton producers have been largely unsatisfied with their economic situation due to falling cotton prices and the perceived lack of revenue support offered under STAX. In early 2015, the U.S. cotton sector began advocating to be made eligible for payments under the ARC and PLC programs. Several Members of the House Agriculture Committee (including both its chairman and ranking member) were supportive of this effort and actively sought a legislative opportunity to reintegrate either cottonseed or seed cotton—the harvested but un-ginned cotton boll that includes both lint and cottonseed—back into the revenue support programs in the 2014 farm bill. After several legislative attempts, this effort was successful when Congress passed the BBA with a provision that amended the 2014 farm bill to add seed cotton as a "covered commodity," thus making it eligible for either ARC or PLC beginning with the 2018 crop.
To participate in the seed cotton program, producers must first make three decisions specified in the new statute: what portion of their farm program generic base acres will be designated as cotton-specific base, whether to update historical cotton program yields (needed to determine the per-acre payment rate), and which program to participate in—ARC or PLC.
The Congressional Budget Office (CBO) projects the cost of adding seed cotton as a covered commodity at nearly $3 billion over 10 years. However, accompanying budget offsets are projected to lower the net cost to $61 million.
The policy change for cotton has potential implications for both domestic and international commodity markets. However, perhaps the most critical aspect of the new seed cotton policy is that, as part of current law, it becomes part of CBO's budget baseline used to write the next farm bill. As a result, it avoids the potential policy debate surrounding a search for budgetary offsets that would otherwise be needed to pay for the costs associated with adding a new farm program. This result could facilitate reaching an agreement among congressional negotiators working on the farm support programs in Title I of a new farm bill.