More on Quality Loss Adjustment

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While more guidance is likely forthcoming, the following article was published in last weeks “Cotton’s Week” from the National Cotton Council:

USDA Implementing Quality Loss Disaster Provisions

USDA announced the implementation of the Quality Loss Adjustment (QLA) program to assist Upland and extra-long staple cotton producers who suffered quality losses occurring in calendar years 2018 and/or 2019.  During the last month, NCC staff has worked closely with Farm Service Agency (FSA) on the proper implementation of QLA for cotton considering the distinct and unique ways cotton is marketed. Below is an outline of QLA eligibility, payment calculations and the quality information growers will need to submit to FSA when filing their QLA application. Quality losses are eligible in counties that received a qualifying Presidential Emergency Disaster Declaration or Secretarial Disaster Designation because of one or more of these qualifying disaster events or related conditions.  Qualifying events include:

  • Excessive moisture
  • Flooding
  • Hurricane
  • Snowstorm
  • Tornado
  • Typhoon
  • Volcanic Activity
  • Wildfire

Note that except for losses solely due to drought, producers may still apply for QLA in counties that did not receive a qualifying declaration or designation. However, they must provide supporting documentation to establish that the crop was directly affected by a qualifying disaster event. When applying for QLA, growers will need to provide FSA with every bale that received a net discount due to a qualifying event listed above. Bales receiving a net premium should not be provided to FSA offices as they are not part of the aggregate calculation. Discounted bales not due to an eligible loss are ineligible for QLA assistance. The base price per pound may be the price before discount if sold under a marketing contract or the CCC base loan rate of $0.52 for 2018 and 2019. If the average loss in aggregate value is 5% or greater than the base price, the producer will receive a maximum payment on his total quality loss multiplied by 70%. If the loss of value is less than 5%, the grower will not receive a QLA payment.    Unlike WHIP+, there is no interaction with a grower’s insurance indemnity. Growers receiving crop insurance assistance due to quality loss for 2018 and/or 2019 will still receive a QLA payment if they qualify. However, QLA participation does require a two-year crop insurance purchase commitment similar to WHIP+. Payments will not be made until after the conclusion of the March 5 signup date in order to verify the available funding is sufficient to cover all eligible payments. If adequate funding is not available, then an additional factor may be applied to the calculated QLA payment.