News Column

Commodity Credit Corporation Implements Cotton Transition Assistance Program Provisions

August 9, 2014



Targeted News Service

WASHINGTON, Aug. 9 -- The U.S. Commodity Credit Corporation published the following rule in the Federal Register:

Cotton Transition Assistance Program and General Provisions for Agriculture Risk Coverage and Price Loss Coverage Programs

A Rule by the Commodity Credit Corporation on 08/08/2014

Publication Date: Friday, August 08, 2014

Agencies: Department of Agriculture

Commodity Credit Corporation

Entry Type: Rule

Action: Final rule.

Document Citation: 79 FR 46335

Page: 46335 -46348 (14 pages)

CFR: 7 CFR 1412

RIN: 0560-AI22

Document Number: 2014-18719

Shorter URL: https://federalregister.gov/a/2014-18719

Action

Final Rule.

Summary

This rule implements the new Cotton Transition Assistance Program (CTAP) authorized by the Agricultural Act of 2014 (the 2014 Farm Bill). It also includes general provisions needed to implement CTAP, the Agriculture Risk Coverage (ARC), and Price Loss Coverage (PLC) Programs. ARC and PLC will be implemented through a separate rulemaking and will provide benefits for other commodities. CTAP is a temporary program that provides payments to producers on farms for which cotton base acres were in existence as of September 30, 2013, as adjusted. It will operate for only the 2014 crop year and in certain counties for the 2015 crop year, and is intended to be a transition for producers on farms with upland cotton base acres that were in existence as of September 30, 2013, between the previous Direct and Counter-cyclical Payments Program (DCP) and the new Stacked Income Protection Plan (STAX), which is authorized to begin no later than the 2015 crop year.

DATES:

Effective Date: August 8, 2014.

FOR FURTHER INFORMATION CONTACT:

Brent Orr; telephone: (202) 720-7641. Persons with disabilities who require alternative means for communication (Braille, large print, audiotape, etc.) should contact the USDA Target Center at (202) 720-2600 (voice and TDD).

SUPPLEMENTARY INFORMATION:

Background

Section 1119 of the 2014 Farm Bill (Pub. L. 113-79) authorizes CTAP for producers on farms "for which cotton base acres were in existence for the 2013 crop year." CTAP is only authorized for the 2014 crop year, and for the 2015 crop year in counties where STAX is not available. STAX, as specified in section 11017 of the 2014 Farm Bill, is required to become available no later than the 2015 crop year, but is not required to provide coverage for every county in 2015. (USDA's Risk Management Agency is implementing STAX.) CTAP has some similarities to the direct payment aspect of DCP, for upland cotton only. The new ARC and PLC Programs authorized by sections 1116 and 1117 of the 2014 Farm Bill, respectively, which are being implemented through separate rulemaking, provide benefits for the commodities, other than upland cotton, that were previously covered by DCP.

The 2014 Farm Bill specifies that CTAP payments will be based on the farm's upland cotton base acres that were "in existence for the 2013 crop year." Accordingly, the 2014 CTAP payments will be made available to eligible producers on farms for which cotton base acres were in existence as of September 30, 2013, as adjusted. STAX is scheduled to be available in some counties beginning with the 2015 crop year; producers on a farm located in a county where STAX is available will not be eligible for CTAP for the 2015 crop year. In counties where STAX is not available for the 2015 crop year, producers on farms for which 2013 upland cotton base acres were in existence as of September 30, 2013, as adjusted, will be eligible for 2015 CTAP payments after October 1, 2015. This rule specifies the eligibility requirements for CTAP, which are different for 2014 and 2015 because of the provision involving STAX availability. Similar to DCP, producers do not have to actually grow or harvest upland cotton to be eligible for CTAP. However, producers must have an interest in the upland cotton base acres on the farm and must meet or satisfy other payment eligibility requirements (including average adjusted gross income requirements, conservation compliance provisions, and actively engaged in farming) to be eligible for CTAP.

The regulations for CTAP, ARC, and PLC will be specified in 7 CFR part 1412. Some definitions and requirements for base acres that are needed for all three programs are specified in this rule. For example, as specified in the 2014 Farm Bill, base acres of upland cotton in effect on September 30, 2013, are defined as generic base acres for the purposes of ARC and PLC. As another example, provisions for double cropping and replacement crops are similar to those for DCP, but the definitions are being revised to remove references to DCP and to insert references to CTAP, ARC, and PLC. Additional terms "eligible subsequently planted crop acreage" and "subsequently planted crop acreage" are added as those terms have different applicable meanings under the 2014 Farm Bill. Under section 1114 of the 2014 Farm Bill, subsequently planted crop acreage can be used as payment acres or for attributing generic base acres if the initial crop is any crop other than a covered commodity. These subsequently planted crop acres are termed "eligible subsequently planted crop acreage." The term "subsequently planted crop acreage" is also added to distinguish it from "eligible subsequently planted crop acreage" by virtue of it following any planted and considered planted (P) covered commodity not in an approved double cropping sequence. To reiterate, "eligible subsequently planted crop acreage" may be used to determine payment acres under ARC or PLC and to attribute generic base acres on a farm; "subsequently planted crop acreage" may be used to facilitate base acre reallocation. Common provisions in 7 CFR 718 that apply to all FSA and CCC programs, including those for base acres and farm reconstitutions, apply to CTAP.

Eligible Land and Payment Amounts for CTAP

The eligible land for CTAP in 2014 and 2015 is based on the farm's upland cotton base acres that were in existence for the 2013 crop year, as of September 30, 2013, adjusted, including, but not limited to, adjustments for expired, terminated, or released Conservation Reserve Program (CRP) land, and limited by the total number of cropland acres on the farm (cropland is defined in 7 CFR 718.2). A producer's share interest in cropland on a farm must be equal to or greater than that producer's share interest in cotton base acres on the farm for that crop year, as reported on that farm's acreage report. FSA will verify and confirm the producer's share interest in cotton base acres reported on the CTAP application by comparing it to the producer's share interest in the cropland as reported on that farm's acreage report for that crop year. For example, if a farm has 50 base acres of cotton and two producers report equal shares of those 50 base acres of cotton, each must each have a 100 percent share interest in at least 25 reported cropland acres on that farm's acreage report for the same crop year to support their reported share of cotton base acres on that farm.

Section 1119(c) of the 2014 Farm Bill states that the CTAP payment amount is equal to the number of adjusted base acres of upland cotton divided by the national program yield for upland cotton of 597 pounds per acre times the transition assistance rate for upland cotton times the farm's DCP yield, times a specified percentage payment rate. The 2014 Farm Bill specifies that the transition assistance rate of upland cotton is the June 12, 2013, midpoint estimate for the marketing year average price of upland cotton for the marketing year beginning August 1, 2013, less the December 10, 2013, midpoint estimate for the marketing year average price of upland cotton for the marketing year beginning August 1, 2013, as contained in the applicable World Agricultural Supply and Demand Estimates report published by USDA, multiplied by the national program yield for upland cotton of 597 pounds per acre. Mathematically, the 597 pounds per acre cancels out of the above equation. Accordingly, the transition assistance rate can be restated as simply the difference between the August 1, 2013, and the December 10, 2013, midpoint estimates. FSA has calculated the transition assistance rate to be $0.09 per pound. The payment rates, as specified in the 2014 Farm Bill are: 60 percent for the 2014 crop year and 36.5 percent for the 2015 crop year. Therefore, the payment per base acre of upland cotton for 2014 would be $0.09, times the farm's DCP yield, times 60 percent. If the farm's DCP yield was 500 pounds, that payment would be $27.00 an acre. For 2015 it would be $0.09, times the farm's DCP yield, times 36.5 percent. If the farm's DCP yield was 500 pounds, that payment would be $16.425 an acre.

CTAP payments will be made to eligible producers on or after October 1 of the crop year when upland cotton is or ordinarily would have been harvested. Similar to DCP, payment eligibility is based upon the number of upland cotton base acres, which are not required to be planted to cotton. As discussed earlier, eligibility for CTAP in 2015 is determined in part by the availability of STAX.

Eligible Acreage Reductions for ARC and PLC

ARC and PLC have similar provisions to the former DCP with regard to planting flexibility and reductions for plantings of fruits, vegetables, and wild rice on base acres. The acreage reduction provisions apply to ARC and PLC, but not to CTAP. However, we are specifying them in this rule so that producers are informed of how generic acres and acreage reductions will be used in the payment calculations for ARC and PLC.

Similar to DCP, the planting or harvesting of perennial or non-perennial fruits, vegetables (except mung beans and pulse crops), or wild rice will result in an acre for acre payment reduction for ARC and PLC (but not CTAP), unless an exception applies for double cropped acreage in approved double cropping counties. Under DCP, the reduction was applied beginning with the covered commodity or peanut acres with the lowest direct payment amount per acre until the acreage reduction amount was met. In addition, producers could agree to adjust the DCP acre reduction between covered commodities and peanuts on the farm, but only to the extent that the total acre reduction amount did not change for the farm, and all producers affected by the adjustment agreed to the adjustment in writing. Under CTAP, ARC, and PLC, as specified in the 2014 Farm Bill, peanuts are now a covered commodity, upland cotton is not a covered commodity, and what were upland cotton base acres under the 2008 Farm Bill are now generic base acres that will be counted as acres of covered commodities if planted (or considered planted). Therefore, determining the acres that have the lowest payment amount per acre for all covered commodities for ARC and PLC on the farm is more complicated than under DCP.

This rule specifies that in determining reductions to base acres that are payment acres for ARC and PLC (only payment acres are reduced, not base acres) the acreage of any fruit or vegetable will first be attributed to cropland not having base acres, followed by base acres, before applying any payment acreage reduction that is required by this rule. The reduction will be attributed to each of the covered commodities on the farm having payment acres on a pro rata basis to reflect the ratio of the payment acres of the covered commodity on the farm to the total payment acres of all covered commodities on the farm. The reductions are required by the 2014 Farm Bill; the pro rata procedure for determining the reductions is discretionary and within FSA's authority.

CTAP Payment Limits, Eligible Persons and Legal Entities

As specified in the 2014 Farm Bill and in 7 CFR part 1400, payment limits and average adjusted gross income (AGI) limits apply to CTAP. CTAP payments in each of the 2014 and 2015 program years are limited to $40,000 per person or legal entity, similar to the $40,000 per person or legal entity limitation that applied to DCP under the 2008 Farm Bill. A person or legal entity is ineligible for payments if the person's or legal entity's AGI for the applicable compliance program year is in excess of $900,000. Similar to how AGI provisions applied to members of legal entities in the 2008 Farm Bill, under the 2014 Farm Bill if a person with an indirect interest in a legal entity has AGI in excess of $900,000, the CTAP payments subject to AGI compliance provisions to the legal entity will be reduced as calculated based on the percent interest of the person in the legal entity receiving the payment. AGI will be calculated based on the average income for the 3 taxable years preceding the most immediately preceding complete taxable year for which benefits are requested. For example, the relevant years used to calculate AGI for 2014 CTAP are the 2010, 2011, and 2012 tax years. For 2015 CTAP the relevant years are the 2011, 2012, and 2013 tax years.

To be eligible for CTAP, each producer is required to be a person or legal entity who is actively engaged in farming and otherwise eligible for payment, as specified in 7 CFR part 1400, and who complies with requirements including, but not limited to, those pertaining to highly erodible land conservation and wetland conservation provisions (commonly referred to as the conservation compliance provisions) specified in 7 CFR part 12.

Appeal regulations specified in 7 CFR parts 11 and 780 apply. FSA program requirements and determinations that are not in response to, or result from, an individual. disputable set of facts in an individual participant's application for assistance are not matters that can be appealed. Crop insurance is not required as a condition of eligibility for CTAP.

Sharing CTAP Payments Between Multiple Producers on a Farm

The procedures to determine shared payments will be similar to those used for DCP. Each eligible producer on a farm will be given the opportunity to apply for CTAP and receive CTAP payments determined to be fair and equitable as agreed to by all the producers on the farm and approved by the FSA county committee. Each producer leasing a farm is required to provide a copy of their written lease to the county committee and, in the absence of a written lease, is required to provide to the county committee a complete written description of the terms and conditions of any oral agreement or lease. An owner's or landlord's signature, as applicable, affirming a zero share on an application for CTAP may be accepted as evidence of a cash lease between the owner or landlord and tenant, as applicable, as determined by CCC. Such signature or signatures, if entered on the application for CTAP to satisfy the requirement of furnishing a written lease, is required to be entered on the application by October 7, 2014 for 2014 CTAP and by July 31, 2015, for 2015 CTAP. When a farm's 2013 base acres of upland cotton are leased in 2014 or 2015 on a share basis, neither the landlord nor the tenant will receive 100 percent of CTAP for the farm. CCC will approve an application for CTAP and approve the division of payment when all the following, as applicable, occur or have been determined to have occurred:

(1) Landlords, tenants, and sharecroppers sign the application and agree to the payment shares shown; and

(2) CCC determines that the interests of tenants and sharecroppers are being protected; and

(3) CCC determines that the payment shares do not circumvent either the provisions of this rule or the provisions of 7 CFR part 1400.

Signup Deadlines for 2014 and 2015 CTAP

Section 1119 of the 2014 Farm Bill authorizes CTAP, which is not to be paid before October 1 of the calendar year in which the crop of upland cotton is harvested. This means that FSA cannot make 2014 CTAP payments before October 1, 2014. However, signup for payments can occur earlier. FSA is exercising discretion and establishing a signup deadline of October 7, 2014, for 2014 CTAP so as to not delay CTAP payments. We anticipate that most producers who enrolled 2013 cotton base acres in 2013 DCP or the Average Crop Revenue Election (ACRE) Program will likely choose to apply for CTAP. For 2015 CTAP, the signup deadline will be July 31, 2015.

Applications for CTAP are independent of any election and participation in ARC or PLC. It is possible for upland cotton base acres eligible for CTAP to also qualify as eligible generic base acres for ARC and PLC, and (more commonly) for a farm to have some cotton base acres eligible for CTAP and base acres for different commodities eligible for ARC and PLC. A producer needs to separately elect and enroll in ARC or PLC to be eligible for those benefits. The application for CTAP has no bearing on ARC or PLC elections or decision to participate in ARC or PLC. Likewise, persons or legal entities that enroll and elect ARC or PLC and who do not file an application for 2014 or 2015 CTAP in accordance with this rule will not be paid for 2014 or 2015 CTAP, even if those acres were eligible for CTAP.

[*Federal RegisterVJ 2014-08-08]

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