Rep. Chip Pickering, a Republican who represents Mississippi's Third Congressional District, has introduced new legislation aimed at helping farmers battle rising energy prices.
The bill, the “Farm Emergency Energy Act,” would provide funding for a new program under the Commodity Credit Corp. that would provide relief to farmers and ranchers who are facing rising prices for fuel and fertilizer as a result of high energy costs.
“All across America high energy prices are crippling each and every sector of the agricultural economy,” said Pickering in a statement. “Now, they are facing another major obstacle — the rising price of energy.”
Pickering said he took the step of introducing legislation following a meeting with members of the Mississippi Farm Bureau, farm credit groups and representatives from the poultry and row crop industries in Jackson, Miss.
“Nowhere is the mounting energy crisis more evident than among the poultry industry in Mississippi,” said Pickering. “Poultry farmers in our state are being devastated by the high cost of gas needed to heat their poultry houses during these unusually cold winter months.
“For the past three years, farmers have faced adverse weather conditions and low prices. Now, (farmers) are facing another major obstacle — the rising price of energy.”
“The prices for gas are triple what they paid last year. That is why poultry farmers — and all farmers — need emergency assistance in dealing with current energy costs,” he noted.
Pickering introduced the new legislation as USDA economists predicted another year of financial difficulties due, in part, to higher diesel fuel and natural gas costs. That's despite the fact that natural gas prices have eased somewhat in recent weeks.
Farm input costs rose a record $7 billion to $8 billion in 2000 primarily due to higher diesel fuel costs, interest expenses and labor costs, USDA Chief Economist Keith Collins said in a speech in Philadelphia.
Collins said fertilizer prices are running about $350 per ton for anhydrous ammonia, or triple what they were in 1999. Fertilizer costs are tied to natural gas prices, which, in mid-December, were five times greater than December of 1999, leading the fertilizer industry to idle half of its nitrogen capacity.
Natural gas prices have fallen about 40 percent in the last month, however, enough for at least two fertilizer plants to resume operations in mid-February, according to the USDA economist.
“The U.S. farm sector is suffering its third weakest market since World War II,” he said, noting that prices of many commodities are near 25-year lows while prices farmers pay for energy and fertilizer have risen sharply.
In recent weeks, National Cotton Council leaders have been working to persuade USDA to include high energy costs as a part of a “Severe Economic Loss” program. Although the latter was authorized in the 2000 Crop Disaster Program passed by Congress last fall, USDA has yet to develop the program.
When NCC President Robert McLendon met with President Bush before Christmas, he pointed out that authority for a third segment of disaster assistance does exist under the severe economic loss section of the 2000 program.
Pickering's legislation conceivably would add further impetus to that argument and lead USDA to implement the program.
An analysis by Cotton Council economists shows that cotton producers should receive payments of $6.40 per dryland acre and $8.05 per irrigated acre to offset economic losses resulting from increased fuel costs in 2000.
The analysis is based on extrapolating the cost of fuel for producing an acre of rice in 1998 into the cost for producing the same acre using the higher energy prices farmers paid in 2000 across each of the major commodities. It assumes $1 billion would be provided for the severe economic loss section of the 2000 disaster program.
“Agriculture is in a state of crisis,” said David Waide, Mississippi Farm Bureau president, following the meeting in Jackson. “Low commodity prices combined with extremely high energy prices have dealt the industry an extreme blow.
“The legislation introduced by Congressman Pickering will provide assistance to all farm producers who have been hit hard by unusually cold temperatures and high energy costs,” he noted.
Russia consuming about 3 million to 5 million bales in the next five years as their economy picks up. The big tariffs are coming off in the near future and I wouldn't be surprised to see them buying U.S. cotton.
“Turkey is buying 1.7 million bales of cotton and the primary seller is going to the United States. We are one of their favorite suppliers. Mexico is importing 2 million bales this year and the United States will be the supplier.”
Dunavant said Indonesia is on track to import 2 million bales, “but Korea, Japan, Hong Kong and Taiwan are now developed economies and their textile industries are going downhill like the United States'. Five years ago, Japan bought 2 million bales. It will be 1.1 million bales this year. Korea, at 2 million bales five years ago, is at 1.4 million bales today.”
Brazil is rapidly growing its textile industry, noted Dunavant. “We see them importing 300,000 bales this year, although most of it is going to come from Paraguay and Argentina. Bangladesh is going to buy about 810,000 bales of cotton in the coming year, up from 450,000 bales four years ago.”
Dunavant says China will produce 19 million bales and consume 22 million bales of cotton in 2001. “China will import a small amount of cotton in May, June and July, 2001. They've already bought 54,000 bales of U.S. cotton making the total for this year around 150,000 bales.”
However, when China becomes a member of the World Trade Organization in June or July, 2001, “we believe that will dramatically change their posture on allowing import quotas for buying cotton in the world market,” Dunavant said. “In January/February of 2002, we project that they will buy about 1.6 million bales minimum. Hopefully, a lot of it will be U.S. cotton.”
Dunavant says there will be a “real crisis” of quality cotton supply during the April-August time frame, 2001, especially if Australia receives heavy rainfall during its harvest season, which is about to get underway.
Unfortunately, the makeup of the U.S. carryover of 4.45 million bales does not include a high percentage of high quality cotton, due to problems in Texas (low strength, low staple, high bark) and the Mid-South and Southeast (short staple, low strength).
As for new farm legislation, Dunavant stressed that U.S. agriculture, “needs a safety net for cotton producers that gives them sound protection. Second, we must have a continuation of the marketing loan to allow U.S. cotton to be competitive with foreign growths. Third, we must have a marketing certificate program to keep the U.S. textile industry competitive with the cheap imports that are coming in.
“We must also have a marketing certificate program for the merchants and U.S. cotton cooperatives. And we must have a certificate program on date of sale not bill of lading date. If we do that, I believe U.S. exports will be 500,000 bales to a million bales higher every year.”
Dunavant also cautioned producers about recent consideration to raise the cotton loan rate from its present level of 51.92 cents. “I sympathize with the growing movement of farmers who want to raise the loan rate. I am not totally opposed to it.
“But I would caution you about over-production. There has not been a time that I can recall that when we raised the loan, we also raised U.S. production and foreign production. And when those things happen, I don't see how we get the price of cotton up.”