COTTON NEWSLETTER

September 23, 1998

Crop Update 1

Defoliation Recommendations 1

Crop Insurance and Economic Decisions on Non-Irrigated Cotton 2

Example Comparison of Cotton Insurance and Grow-Out Strategies 3

Harvest Can Indicate Soils Work Left to be Done 4

Calendar 5



Crop Update. (Brown) As of September 23, only about 10 percent of our crop is harvested. Much more is ready to pick but wet conditions and Hurricane Georges may keep us out the field for several more days. The September USDA estimate lowered expectations for Georgia to 1.55 million bales from 1.3 million acres. I personally continue to believe our production will range as low as 1.2 to 1.4 million bales from an unknown harvested acreage.

Defoliation Recommendations. (Brown) There a few minor changes in defoliation recommendations. The new recommendations are enclosed.

Defoliation has been difficult in some fields, particularly those that have had significant late season growth. Dropp has been by far the best choice for dealing with this juvenile foliage. Even with warm to moderate temperatures, it has been necessary to use rates of l lb per 7 or 8 acres in order to obtain adequate results. Addition of crop oil concentrate with standard mixtures may improve overall results with little risk of desiccation under the prevailing moderate conditions. In terms of retreatment, where defoliants have already been applied but substantial regrowth remains, Starfire has generally done a very poor job.

One addition to our recommendation comment section is Ginstar, which is an emulsifiable concentrate formulation of thidiazuron (the active ingredient in Dropp) and diuron (the active ingredient in Direx and Karmex). For comparative purposes, equivalent rates of Dropp and Ginstar (based on thidiazuron rates) are included in the following chart.

Dropp and Ginstar, Comparative Rates of Based on AI of Thidiazuron
Dropp 50W 1 lb/10 A 1 lb/9 A 1 lb/8 A l lb/7 A 1 lb/6 A 1 lb/5 A
Ginstar EC 6.4 oz/A 7.1 oz/A 8 oz/A 9.1 oz/A 10.7 oz/A 12.8 oz/A

Crop Insurance and Economic Decisions on Non-Irrigated Cotton. (Shurley) An estimated 60-65 percent of Georgia's cotton acreage is non-irrigated. This year's drought has greatly reduced yield prospects on much of this acreage. As a result, cost of production per pound of lint will be much higher than normal. Profit margins will be small or negative.

Since the mid-1980's, government's role in providing an income safety net for farmers has reduced. Disaster payments, for example, have been eliminated. The current farm bill (1996-2002) eliminated market price deficiency payments and instituted MTP's (Market Transition Payments) which offer less protection. Crop insurance, therefore, has now become the primary safety net for farmers.

Acreage insured has increased significantly since the Crop Insurance Reform Act of 1994. In 1998, 90 percent of Georgia's cotton acreage was insured compared to only 31 percent in 1994. Data were not available by level of coverage for 1998, but of the Georgia cotton acres insured in 1997, 49 percent was at the CAT (50%) level.

Producers are due an indemnity (insurance payment) on an insured crop when either the actual harvested yield or the yield potential estimated by the loss adjuster (production to count) is less than the yield guarantee for the level of coverage selected. When the loss adjuster assesses a loss in the field, producers may elect to receive an indemnity for that loss or continue to care for the crop through to harvest and then settle the claim. If electing to receive indemnity for that loss, producers must abandon the crop.

A problem arises when the "production to count" or yield estimated by the adjuster is less than producers consider economical to harvest. This has been a source of consternation for producers. For example, if the producer has APH yield of 650 pounds insured at the 75 percent level, the yield guarantee is 488 pounds. In a loss situation, if production to count is assessed at 200 pounds, the amount of indemnity would be based on 288 pounds. The argument is that, if the producer determines that it is not economically feasible to invest more inputs to harvest whatever amount of cotton is left in the field, the indemnity should be based on the full guarantee (488 pounds) and not the guarantee minus the production to count (400 - 200 = 288 pounds).

This year in Georgia, the cotton crop in some fields has already been destroyed based on earlier yield assessments. It is thought by some observers that as much as 100,000 acres or more of this year's crop could be abandoned or destroyed. However, recent rains may save some of the crop that was earlier thought uneconomical to produce and harvest

The purpose of this article is not to argue or defend this FCIC policy but rather to make sure that producers understand the economics of this important decision. Producers must determine if it is more economical to accept the loss estimate and insurance payment or carry the crop through harvest and incur the additional costs. This will depend on additional costs expected, expected selling price for cotton, and likelihood for actual yields to be better or worse than the current production to count.

Let's define and examine several possible scenarios using the example already given:

Scenario 1: Accept Current Production to Count and Loss Estimate, Abandon Crop
Scenario 2: Continue to Produce and Harvest, Final Yield Same as Current Production To Count
Scenario 3: Continue to Produce and Harvest, Final Yield Less Than Current Production To Count
Scenario 4: Continue to Produce and Harvest, Final Yield Higher Than Current Production To Count

Example Comparison of Cotton Insurance and Grow-Out Strategies

Scenario 1 Scenario 2 Scenario 3 Scenario 4
Actual Yield N/A 200 150 300
Covered Loss * 288 288 338 188
Indemnity @ 69 cents/lb loss ** 199 199 233 130
Cotton sold @ 62 cents/lb *** N/A 125 94 188
Total Receipts Per Acre 199 324 327 318
Defoliation and boll opener 10 10 12
Insect control 0 0 0
Picking and hauling **** 50 50 50
Destroy stalks 7 7 7 7
Other
Total Additional Cost 7 67 67 69
Net Return Per Acre 192 257 260 249
* Only if actual yield is less than yield guarantee.
** FCIC price for cotton is 69 cents. Producers may select payment for loss at 60 to 100% of the price.
*** 71-cent cash price minus 5 cents net charges after cottonseed minus 3 cents quality discounts.
**** Minimum custom charge used to approximate grower cost of fuel and lube, repairs, depreciation, and labor.

Growers are encouraged to work through their own particular situation. There are many variables that can influence the results and best decision. Most notable would include:

A final point is that in all situations the grower must determine the economic feasibility of carrying the reduced crop through to harvest. Crop insurance only adds an additional wrinkle. Assuming the above expenses and net price for cotton are close to accurate, the break-even yield needed to justify additional expenses and harvest would be about 100 pounds per acre. Of course, this is highly dependent on the stage of growth the crop is at and anticipated expenses from that point on.

Scenario 1 Scenario 2
Yield Guarantee 488 488
Production To Count 100 100
Covered Loss 388 388
Actual Yield N/A 100
Cotton Income 0 63
Indemnity 268 268
Added Cost 7 67
Net Return 261 264

Growers are strongly encouraged to modify this approach as needed to fit their unique situation. FCIC offers three types of insurance coverage for cotton in Georgia - APH (Actual Production History), CRC (Crop Revenue Coverage), and IP (Income Protection). Of the over 7,000 policies on cotton sold in Georgia for 1998, all but about 150 are APH policies. The analysis presented here would apply to APH only.

Harvest Can Indicate Soils Work Left To Be Done. (Harris) You thought you heard the last of El Nino. But as your driving the picker across the field you notice weak spots, washes, and areas where the stalks are much shorter than they should be. Unfortunately, you may be seeing residual effects of the excessive rains from El Nino.

Two major concerns with the 40+ inches of rain last fall and winter were pH and potassium problems this season. Both pH and potassium levels can decline rapidly on our low organic matter, poorly buffered soils. Soil test results from samples taken last fall may have changed significantly by planting time. Most of our soil samples were taken in late spring or not at all. Soil pH levels measured in spring may have read higher than if they had been taken in fall. All said and done, it is surprising we did not see more pH and potassium problems than we did.

Now is the time to correct soil fertility problems still left over from El Nino. Money is going to be tight for intensive, precision soil sampling. However, there are some "low-cost" ways to correct these problems for next year. The easiest method is to simply use the height of cotton stalks before mowing to guide soil sampling, fertilization and liming. Obviously, short stalks this year could be due to drought or other problems besides fertility. However, until a reliable, commercial cotton yield monitor is available, stalk height is a good way to find problem areas and check them out. For cotton following other crops, the amount of corn stalks or peanut hay in field areas may be good indicators for guiding soil sampling. Unfortunately, there still work to be done to recover from El Nino. But now is the time to do it, and harvest can provide some excellent clues to where to put those important fertilizer and lime dollars.

The 1998 Georgia Crop Production Workshop for Dec 10-11 is being finalized.

MAKE PLANS TO ATTEND.

Calendar

Dec.10-11 - Cotton Production Workshop, Tifton

Jan. 3-7, 1999 - Beltwide Cotton Conference, Orlando, FL

Steve M. Brown, Extension Agronomist-Cotton
Mike Bader, Extension Engineer-Cotton
Glen Harris, Extension Agronomist-Soils & Fertilizer
Don Shurley, Extension Agronomist-Cotton & Peanuts