Although Brazil is struggling with various concepts of the STAX plan, which could be a key component for cotton in a future farm bill, they are showing a willingness to work with it to resolve subsidy disputes, according to Darci Vetter, USDA deputy undersecretary for Farm and Foreign Agricultural Services.

Speaking at the National Cotton Council’s mid-year board of directors meeting in Memphis, Vetter said, “We in this room would probably agree that U.S. cotton subsidies, particularly as they have not been paying out in past years, are probably not the cause of a lot of the production and pricing problems that are faced by producers around the world.

“But that narrative and that belief by some of our trading partners has been difficult to dispel. We continue to try and put a spotlight on the fact that export bans in India, and very flexible tariff policies in China, have a greater impact on global cotton prices and volatility in the market than our U.S. programs do.”

The STAX plan, or Stacked Income Protection Plan, is designed to address revenue losses on an area-wide basis, with a county being the designated area of coverage. The ‘stacked’ feature of the program implies that the coverage would sit on top of the producer’s individual crop insurance product. While designed to complement an individual’s buy-up coverage, a producer would not be required to purchase an individual buy-up policy in order to be eligible to purchase a STAX policy.

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Vetter said when Brazil “first saw the STAX proposal, they listed a number of criticisms they did not like. If you look at their critiques of it over time, you will now see that they are willing to work with it to find a solution. They understand that what is on the table is STAX. They need to work with STAX and find a way forward based on that.”

Vetter believes that part of Brazil’s opposition to STAX “comes from the fact that they don’t completely understand it, and that they are particularly unfamiliar with area-wide crop insurance programs.

“One of the things that they’re very concerned about is the potential for STAX to make very large payments at a time of high prices because it’s based on the difference between the futures price at the time of planting and your harvest price. It’s difficult for their producers and some of their government officials who see that as a sort of hedging mechanism rather than a loss protection program. They have also expressed concerns about the level of producer subsidy.”

Vetter says Brazil “has some similar questions and misunderstandings about our GSM-102 (Export Credit Guarantee Program), particularly about all the things we have done to bring fees for this program better in line with the risk conditions.