Low prices and a global oversupply of cotton have been putting a lot of pressure on America’s cotton producers. They have been having a tough past few years for a number of reasons. Among these are low demands and reduced federal subsidies, stemming from a World Trade Organization dispute. Brazil had complained that US subsidies were distorting global trade markets. The WTO agreed, and the US revised its subsidy program for cotton farmers in the 2014 farm bill.
And China, which had been holding a lot of cotton stocks in reserve, has been releasing them into the global market, pushing prices down. That means the price of cotton is not covering the cost of production.
Cotton growers will be given $300 million in aid to help stabilize the industry. Texas is the nation’s leading cotton-producing state. The new aid program will offer producers one-time payments that are determined by their acreage last year and a portion of average ginning costs in their regions. Ginning is the process by which cotton lint is separated from cotton seed. The aid will mostly help farmers finance their operations. The aid program caps payments at $40,000 per producer.