Despite low prices and a large surplus of cotton, farmers are continuing to plant as if it was a normal year, Texas Cooperative Extension reports.
Carl Anderson, professor and Extension agronomist said, “America's cotton farmers are suffering from an excess of cotton and a weak demand in foreign markets. Prices are extremely low and the amount of carryover from last year is more than twice a reasonable amount. We have a six-month carryover supply right now when we should have a little less than three months.
“Despite these adversities, farmers are still planning on planting cotton rather than other commodities,” Anderson said. “Even with the low prices, there is still not enough of an economic incentive to shift acreage to other crops.”
It is still too early in the year to be certain of how much this year's planting will compare to 2001. So far, the south and Coastal Bend regions of Texas have planted 1 percent to 5 percent of their cotton, respectively, Extension reports.
A new farm program is implemented by Congress every five to seven years in order to manage the production of crops and insure economic stability. Farm programs are used in commercial crops such as cotton, rice, corn, soybeans, sorghum and wheat, Anderson said.
Until 1996, the farm program had “supply-management provisions,” which put regulations on how much farmers could plant each year. The current farm bill does not make these provisions, and policy makers are not expected to reinstate them when the bill expires later this year.
“There will be a surplus of cotton until we reinstate provisions to encourage farmers to plant other commodities,” Anderson said. “In 1996, Congress implemented the Freedom to Farm bill that allowed farmers to plant what they wanted when they wanted to.”
Farmers have been receiving agricultural support payments since the first farm bill was put into effect in 1933. The Freedom to Farm bill was planned to have ended these payments by this year. Farmers have been losing income each year, however, and the last three years have been the worst. Instead of cutting back, the payments have actually risen in order to keep rural America from diving into an economic collapse, Anderson said.
“Adverse weather conditions over a large part of the production areas or low prices causing enough countries to decrease their planting is the only hope in reducing the surplus. It could happen in China or another country where much of the cotton is produced,” he said.
“But developing countries such as China and India are very sensitive in making sure their producers get the needed income at a level that will keep them in place in the rural and farming areas.
“Policy makers are saying that we are going to export our excess production to the rest of the world, and that's what they're counting on. But they have been saying this for a long time, and it has not happened,” Anderson said.
“America is competing with foreign countries where land is lower-priced, labor is cheap and they are rapidly using the latest technology. This is what globalization is all about.”
America, he says, has not been in this position since 1933. The use of industrialized machinery in the 1930s caused a huge increase in agricultural production.
“We began producing major surpluses, and the farm programs began. At varying degrees of success, these programs have managed the supply and demand of cotton,” said Anderson. “In the mid ‘30s, the government simply paid farmers per pound to destroy a percentage of their crops until they met a level that would meet demand. When they did this, the price doubled within a year.”