4 TAC §§3.607 - 3.609
The Texas Department of Agriculture (the department) proposes
new Chapter 3, Subchapter J, §§3.607 - 3.609, concerning eligibility
for indemnification and calculation of indemnity to organic cotton producers
and payment of assessments by organic cotton growers. The new sections are
proposed to establish eligibility and a method and procedures for the indemnification
of growers of organic cotton in active boll weevil eradication zones, in accordance
with the Texas Agriculture Code, §74.125, and to provide for payment
of an assessment by organic cotton growers farming in an active boll weevil
eradication zone.
Sections 3.607 - 3.609 were previously proposed as part of new 4 TAC, Chapter
3, Subchaper J, published in the February 11, 2000, issue of the
Texas Register
(25 TexReg 993). Upon review of the many comments received
on proposed §3.607 and §3.608, the department determined that it
would withdraw the original proposals and resubmit new §3.607 and §3.608,
taking into consideration the comments and other information received after
the comment period from both organic and conventional cotton growers and state
and federal agencies dealing with cotton production. The original proposals
for these sections have been withdrawn and replaced with new proposed §3.607
and §3.608. Although no comments were received on §3.609, the department
is refiling that section because substantive changes were required to be made
to that section to make it consistent with new §3.607 and §3.608.
As with the remaining sections in Subchapter J, which have been adopted by
the department in a separate submission, the department intends to review
the rules again in January, 2001, and set public hearings to take public comment
on whether or not changes should be made to the rules for the next growing
season.
New §3.607 provides eligibility criteria for indemnification of organic
cotton growers growing certified organic or transitional organic cotton in
active boll weevil eradication zones. In response to comments from both conventional
growers that they opposed the notion that organic growers would be paid not
to grow cotton using a pre-set formula set by TDA if they could show eligibility
and demonstrate to the department that their decision not to grow was based
on sound farming practices, and comments from conventional growers that the
department, in essence would allow and pay organic growers not to grow without
input from grower steering committees, the department is now proposing a process
which allows organic growers and steering committees to negotiate agreements
for indemnification at any point during the growing season, up to the point
at which the field triggers and is subject to destruction. There is no pre-set
indemnification formula for these negotiations, however, agreements would
be subject to approval by the foundation and the department. The indemnification
formula proposed in new §3.608 would only apply as to indemnification
due to destruction required by the department. Also, in response to comments
received from cotton growers on the original proposal filed by the department
for §3.607, the base acreage on which indemnification will be determined
is determined by row acres planted to cotton, as opposed to land acres.
New §3.608 provides procedures for calculating indemnification to
growers in the event a crop is required by the department to be destroyed.
The department has based its indemnification formula on four components: APH
yield, acreage, an average market price of the sum of the established price
of conventional cotton and the average premium for organic cotton and a 65%
rate of compensation. The department has also based indemnification on a graduated
scale, based on the point in the growing season at which a crop is required
to be destroyed. If a crop is required to be destroyed within the first 30
days of the growing season, indemnification will be at 50% of the prescribed
formula. Thereafter, indemnification will be at the full rate of the prescribed
formula. The 50% indemnification early into the season is based on the basic
catastrophic insurance coverage available from the Risk Management Agency
of the United States Department of Agriculture (RMA).
The APH Yield is the Actual Production History for that farm, based on
planted row acres, as determined by the RMA. The Actual Production History
is a yield factor used by RMA in the federal crop insurance program. This
factor takes into account up to ten years of previous production on an individual
farm, removing high and low yields. Every farm, even a farm on which there
has been no previous cotton production, can be assigned an APH yield. This
is widely accepted in the cotton industry as the most accurate, most easily
obtainable estimate of pounds of cotton produced per acre. The APH yield for
all cotton is used because of lack of accurate data to establish an exclusively
organic APH yield. According to information received by the department both
from organic and conventional growers, the APH yield is similar for organic
and conventional production.
The per pound price component was determined by using the conventional
cotton price and adding a premium for organic cotton. A $0.39 cent premium
is added to this price to reflect the value of organic cotton. This premium
was determined by evaluating the five-year average price of conventional cotton
and organic cotton lint and seed. The price of conventional cotton as determined
in the definition of conventional cotton price provided in §3.608 for
the 2000 crop year is $.59. The total of these brings the per pound price
to $.98. This price is further supported by sales figures provided by organic
growers to show an average market price of approximately one dollar.
The price and yield portions of this formula are intended to estimate the
reasonable value of an organic cotton crop should it become necessary under
these rules for the grower to destroy that crop during the growing season.
The department is aware that if destruction of an organic cotton crop is deemed
a absolutely necessary, the grower will not have put 100% of his or her cost
into that crop at that point (inputs such as harvest and ginning costs would
not be incurred by the grower). The department is also aware that all growers,
conventional and organic, assume some amount of risk when planting cotton
or any other crop. In determining the appropriate percentage of a crop's total
value that a grower should be indemnified for, the department found it important
to analyze the extent to which cotton growers protect themselves from the
risks of natural perils. Data obtained from the RMA indicates that 94% of
cotton farmers in Texas choose to insure their crops at a level of 65% through
the federal crop insurance program. The department feels it is appropriate
to provide this same level of protection for organic cotton crops in active
boll weevil eradication zones.
Matt Brockman, special assistant for producer relations has determined
that for the first five-year period the new sections are in effect, there
will be no fiscal implications for state or local government as a result of
enforcing or administering the sections. Costs of administering and enforcing
the sections, including the actual cost of indemnification will be borne by
the Texas Boll Weevil Eradication Foundation, Inc. using other than state
funds.
Mr. Brockman also has determined that for each year of the first five years
the sections are in effect the public benefit anticipated as a result of enforcing
the sections will be having established procedures and requirements regarding
the growing of organic crops in active boll weevil eradication zones. Considering
that the boll weevil costs cotton growers millions of dollars in damages and
lost revenues each year, eradication of the boll weevil will allow both traditional
and organic cotton growers to become more efficient and competitive, thus
providing an indirect benefit to consumers, and having a more viable cotton
industry due to the eradication of the boll weevil will help sustain the economy
of many parts of rural Texas. There may be a cost to organic cotton growers
who operate as micro-businesses or small businesses and to individual growers
who are required to Comply with the rule as proposed. The indemnification
formula provided in new §3.608 is intended to reasonably compensate organic
cotton growers whose cotton is destroyed or ordered to be destroyed in order
to not jeopardize the eradication program. As noted previously, the indemnification
formula is based several components including the eligible acreage, average
yield of that acreage, and the compensation rate of 65%. In addition, indemnification
will be based on the point in the growing season at which a crop is required
to be destroyed. The department recognizes that such compensation may not
in all cases serve to make the grower whole, and that an organic grower may
incur uncompensated costs as a result of implementation of the sections, however,
the department believes that the proposed formula does provide reasonable
compensation to organic growers. The department is not able to determine the
costs that the average organic grower might incur, as those would depend on
several factors including the actual amount of organic acreage involved, the
actual market price at the time, the quality of the crop, actual production
costs of individual growers, the production costs not incurred by the grower
due to the destruction of the crop prior to harvest, the ability of the organic
grower to plant and harvest an alternative crop and the proceeds that the
grower would receive from an alternative crop.
Comments on the proposal may be submitted to Matt Brockman, Special Assistant
for Producer Relations, Texas Department of Agriculture, P. O. Box 12847,
and Austin, Texas 78711. Comments must be received no later than 30 days from
the date of publication of the proposal in the
Texas
Register
.
The new sections are proposed under the Texas Agriculture Code
(the Code), §74.125, which provides the department with the authority
to develop rules and procedures to protect the eligibility of organic cotton
growers to be certified by the commissioner of agriculture, ensure that certification
by the commissioner meets national certification standards and in all events
maintain the effectiveness of the boll weevil or pink bollworm eradication
program administered under the Code, Chapter 74, Subchapter D, including rules
that provide indemnification for organic cotton growers for reasonable losses
that result from a prohibition of production of organic cotton or from any
requirement of destruction of cotton; and the Code, §74.120, which provides
the department with the authority to adopt reasonable rules to carry out the
purposes of the Code, Chapter 74, Subchapter D.
The code that will be affected by the proposal is the Texas Agriculture
Code, Chapter 74, Subchapter D.
§3.607. Eligibility for Indemnification.
(a)
Certified organic and/or transitional cotton growers in
active eradication zones may enter into voluntary agreements with grower steering
committees to negotiate indemnification provided that those agreements are
negotiated and made in good faith by both parties and are approved by the
foundation and the commissioner.
(b)
Until each respective zone is declared eradicated by the
commissioner, certified organic and/or transitional cotton growers in eradication
zones that are active at the time this rule becomes effective will be eligible
for compensation under the following conditions.
(1)
The grower must have planted certified organic or transitional
cotton during or prior to the 1999 crop year.
(2)
The grower's base acreage will be based on the grower's
choice of one of the following:
(A)
row acres planted to certified organic and transitional
cotton in 1999; or
(B)
an average of row acres planted to certified organic and
transitional cotton in the 1997, 1998, and 1999 crop years.
(3)
Until each respective zone is declared eradicated
by the commissioner, certified organic and/or transitional cotton growers
in the Southern Rolling Plains, South Texas/Winter Garden, and Rolling Plains
Central Boll Weevil Eradication Zones will be assigned a base acreage by the
commissioner based upon historical production of organic and/or transitional
cotton by that grower.
(c)
Certified organic and/or transitional cotton growers in
boll weevil eradication zones which become active after the effective date
of this subchapter will be eligible for compensation under the following conditions.
(1)
The grower must have an application for transitional or
organic cotton approved by the department's Organic Certification Program
at least one year before the date a referendum is held establishing a boll
weevil eradication program and assessment and approving a budget for that
zone.
(2)
The grower's base acreage will be based on the growers
choice of one of the following:
(A)
the grower's row acreage planted to certified organic
and/or transitional cotton in the year preceding the crop year on which the
referendum is based; or
(B)
an average of the grower's row acreage planted to certified
organic and/or transitional cotton in the year preceding the crop year on
which the referendum is based and the two previous years.
§3.608. Calculation of Indemnity.
(a)
To be eligible for indemnification if a crop must be destroyed
under § 3.606, a grower must report the Farm Service Agency farm numbers,
physical locations, and row acreage on each farm that the grower will use
as the base acreage calculated in §3.607 of this title (relating to Eligibility
for Indemnification), to the foundation before planting each year on a form
provided by the foundation.
(b)
If certified organic or transitional cotton on the growers
base acreage is destroyed through the requirements of this subchapter, the
grower will be entitled to indemnification by October 31 of that year.
(c)
If the commissioner determines that the foundation is
delinquent in a payment owed to a grower, the foundation will be responsible
for an additional payment to the grower of 1.5% of the amount owed per month
of delinquency.
(d)
The following factors will be considered when calculating
indemnity payments for organic cotton growers whose cotton is required to
be destroyed in accordance with §3.605 of this title (relating to Trigger
Levels) and §3.606 of this title (relating to Crop Destruction; Extensions;
Choice of Conventional Treatment):
(1)
eligible acreage - the base acreage, in row acres planted
to certified organic or transitional cotton, determined as provided in §3.607
of this title (relating to Eligibility for Indemnification), and identified
for that field as described in this section; Organic or transitional cotton
must be planted on this acreage by the final planting date set by the Risk
Management Agency of the United States Department of Agriculture in the county
in which the crop is planted.
(2)
yield - the yield per acre will be determined by
using the Actual Production History per row acre planted to cotton for that
farm, as determined by the Risk Management Agency of the United States Department
of Agriculture; and
(3)
conventional cotton price - the conventional cotton
price will be determined by the upland cotton price election for an APH policy
in the county in which the organic or transitional cotton in question lies
for the current crop year. This price for the coming crop year is published
by the Risk Management Agency of the United States Department of Agriculture
before December 31 of each year.
(e)
When a grower is entitled to indemnification as a result
of crop destruction, the foundation will indemnify the grower in accordance
with the following formulas:
(1)
If the notice is received by the grower less than thirty
days after the final planting date in that county that destruction of a crop
is required, the indemnity will be: eligible acreage x yield x (conventional
cotton price + $0.39) X 50%, with no mitigation required; or
(2)
If the notice is received by the grower thirty days
or more after the final planting date in that county that destruction of a
crop is required, the indemnity will be: eligible acreage x yield x (conventional
cotton price + $0.39) X 65%, with no mitigation required.
(f)
After a zone has been declared eradicated by the commissioner:
(1)
any grower who plants certified organic or transitional
cotton will be eligible for indemnification on an acre per acre basis only,
if all or part of a crop is required to be destroyed;
(2)
indemnification will only be available for certified
organic and/or transitional cotton acreage that is required to be destroyed;
and
(3)
indemnification will be acreage x yield x (conventional
cotton price + $0.39) X 75%, with no mitigation required.
(g)
The commissioner will resolve any dispute between the
grower and the foundation regarding the amount of indemnification.
§3.609. Payment of Assessment.
(a)
Organic growers who plant certified organic or transitional
cotton will be required to pay an assessment in accordance with the Code,
Chapter 74, Subchapter D and rules adopted thereunder. This assessment will
be in the amount set for the entire zone and will be billed in the same manner
as all cotton grown in the zone.
(b)
Agreements negotiated under §3.607 of this title
(relating to Eligibility for Indemnification) may include provisions for payment
of an assessment or reduction of payment to an organic grower in the amount
of an assessment for that acreage.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State, on March 27, 2000.
TRD-200002207
Dolores Alvarado Hibbs
Deputy General Counsel
Texas Department of Agriculture
Earliest possible date of adoption: May 7, 2000
For further information, please call: (512) 463-4075