Effectiveness of the Loan Programs For Increasing Net Prices to Cotton Farmers

This paper examines, for the last 10 crop years, spot cotton price movements after harvest versus the cost of holding cotton in the Commodity Credit Corporation's nonrecourse loan program. The purpose is to clarify the behavior of net returns from holding cotton in the loan for up to 18 months. Results indicate a high probability of reduced net returns from holding cotton longer than 12 months, unless USDA waives the requirement that farmers pay direct carrying costs.