The U.S. Department of Agriculture Farm Service Agency announces the weekly average adjusted world price (AWP) and loan deficiency payment (LDP) rate every Thursday in the Upland Cotton Announcement. The low cotton prices recently have triggered the LDP for cotton. Producers are highly recommended to follow closely to the Upland Cotton Announcement for the updated value of LDP.
The AWP on the March 26, 2020 announcement was 44.99 cents per pound. The LDP rate of 7.01 cents per pound is available from March 27 through April 2. The LDP rate is the difference between the base loan rate of 52.00 cents and the AWP. If taking the LDP, the producer should be aware that there is no further protection from prices going even lower. Producers can wait until April 1 or April 2 to see what the prices hold for this week. If a producer is willing to take the risk and feels that cotton prices are going to improve, then the producer could take the LDP and market the cotton later.