January 25, 1995

BULLETIN NO.:   MGR-95-003

TO:       All Reinsured Companies
          All Risk Management Field Service Offices
          CFSA Headquarters, State and County Offices
           
FROM:     Kenneth D. Ackerman
          Acting Deputy Administrator

SUBJECT:  1995 Cotton (Upland and ELS) Price Election Change


BACKGROUND:

The Federal Crop Insurance Corporation (FCIC) established the 1995 crop year 
price election for upland and ELS cotton based on the market outlook during 
October 1994.  This timing was needed so that a price could be published in 
the actuarial documents for crops with a November 30 contract change date.  
Since that time, unanticipated events in the cotton market have driven 
expected market prices for the 1995 crop year significantly above the 
previously established price elections.  Several factors, including unexpected
crop damage in other countries, are expected to decrease U.S. ending stocks 
and increase exports for the 1994 and 1995 crop years.  As a result, many 
interested parties have asked FCIC to reconsider and increase the 1995 price 
elections.

ACTION:

FCIC is increasing the price election for upland cotton by $0.09 per pound 
and ELS cotton by $0.10 per pound for the 1995 crop year as follows:
                                                
                   Current 1995     New 1995
                     Election       Election
UPLAND COTTON     ---- Dollars Per Pound ---

New Mexico
     Eastern:          0.53           0.62
     Western:          0.61           0.70

Oklahoma
     Eastern:          0.56           0.65
     Western:          0.53           0.62

Texas
     Southwest:        0.61           0.70
     High Plains:      0.53           0.62
     Central:          0.56           0.65
     Southeast:        0.59           0.68

Other States:          0.61           0.70                                                

ELS COTTON

All States:            0.90          $1.00


For cotton policyholders whose sales closing date was January 15, 1995 (28 
counties in Texas), and who selected 100 percent of the price election, 
companies are authorized to increase the price election to 100 percent of the 
new price election.  These producers may elect any price between the current 
and new price election but must notify the agent in writing by February 28,
1995, of their decision.  Any policyholder who previously chose a price 
election amount less than 100 percent will continue to have that lower price 
election.

Under the Federal Crop Insurance Reform Act of 1994, subsidy and producer 
administrative fees are based on the relationship of the price election 
chosen by the insured compared to the maximum.  Many producers already may 
have made their choices based on the previously announced price election 
filed at the contract change date.  Therefore, to protect such persons from 
unanticipated changes in subsidy and producer administrative fees, the 
previously announced price elections will be considered to be the maximum 
price election for calculating subsidy and producer administrative fees.  
Price elections that exceed the previously announced levels will be regarded 
as 100 percent of the maximum price election.  Thus, there will be no effect
on the producer premium factor or producer administrative fees as a result 
of this increase in the price election.  This rule applies to all cotton 
policies in all counties nationwide.

All cotton policyholders whose sales closing dates are February 28 or March 
15 will have the option to select any price election up to the new price 
elections prior to the sales closing date.

Sales will not be re-opened in the 28 counties because of this change.  
Reinsured companies should immediately notify all policyholders of the price 
election changes.

Catastrophic coverage (50/60) will be based on 60 percent of the new price 
election.