Cotton growers benefited from the 2002 farm bill, and as a result cotton acreage has remained high and, in general, profitability has been good for growers. Though some growers contend minor tweaking of the 2002 farm bill, in particular assignment of base to absentee landowners, is needed, most agree status quo for 2007 would be good.
The new Democratic makeup of the U.S. House and Senate provides some unknowns, but cotton lobbyists contend the changeover could actually be good for cotton growers. Rep. Collin Peterson, D-Minn., who will become chairman of the House Agriculture Committee, grew up on a farm in North Dakota and has been supportive of agriculture throughout his political career.
On the negative side, Congressman Peterson is staunch advocate of bio-energy programs and is likely to lead an effort to include a strong alternative energy program in the 2007 farm bill. Peterson, a CPA, is also a strong supporter of a permanent disaster program for agriculture. Depending on how these are written, either or both could be good for cotton farmers.
On the Senate side, Sen. Tom Harkin, D-Iowa, is in the middle of corn and soybean production areas and will likely be a strong leader for those commodities. Support of a Revenue Assurance Program being touted by corn growers could be a major stumbling block for cotton growers. Harkin, an attorney by training, has been a strong supporter of agriculture, but how he will react to the corn lobby is not known.
The sticking point of the Revenue Assurance Program is the first 30 percent of the loss, which will be picked up by the farmer. The program is based on countywide production, and if one part of the county falls below a certain production level, the whole county qualifies for payments.
Cotton growers, especially in the Southeast, have dramatically upped acreage to compensate for low per-acre margins. For many Southeastern cotton growers, the up-front 30 percent cost would put them out of business.
Perhaps the biggest positive change in Democratic leadership in Congress, from agriculture's perspective, is John Spratt, chairman of the Budget Committee. Spratt, a long-time advocate of production agriculture, will have a dramatic impact on what does and what doesn't go into the 2007 farm bill.
Billy Carter, executive director of the North Carolina Cotton Growers Association, says all the components linked to marketing loans will be important to cotton growers. The LDP, he says, is very important because it takes some of the guesswork out of marketing and allows a grower to negotiate with lending agencies with some assurance of what he will be working with when he harvests his crop.
David Ruppenicker, executive vice-president of the Southern Cotton Growers Association and the Southeastern Cotton Ginners Association, agrees that the marketing loan program will be the key issue in the 2007 farm bill for cotton growers.
One of the main components of the marketing loan is that all production is eligible. He believes counter cyclical payments will be next in importance to growers.
There is some concern that marketing loans and counter-cyclical payments will be reduced, if not replaced, by conservation, energy programs and/or a revenue assurance program. Ruppenicker and Carter agree this would be a mistake, and it would create financial difficulties for Southeastern cotton growers.
Ruppenicker points out that because of consistent low prices, cotton growers have benefited more from counter-cyclical payments than have growers of other crops, which may create some concern for the 2007 farm bill.
The maximum counter cyclical payment of 13.7 cents per pound has been adequate to keep cotton growers in business. Ruppenicker points out that the 72.4 cents per pound target price on which countercyclical payments are based has been close to this level in previous farm bills.
Third in importance to cotton growers are direct payments to landowners. Of the three, direct payments are the most acceptable, or compliant with WTO initiatives. Growers contend direct payments should be made to the grower, not to the landowner.
Cameron, S.C., cotton grower Monty Rast says the risk taken by landowners and the risk taken by the person planting cotton is not equal. While agreeing that the 2002 farm bill has been beneficial to cotton growers, Rast contends the new bill needs some tweaking to provide more incentives to the person taking the greatest risk in planting a cotton crop.
Status quo OK
“The majority of our cotton growers would take the 2002 Farm Bill the way it is written for 2007,” Carter says. “Ideally, we would like to see the current bill tweaked a little to address issues, like direct payments to landowners, but the reality is that there will be no more money to fund the 2007 farm bill, so keeping what we have will be a big win for cotton growers,” Carter says.
“The commodity programs contained in the 2002 farm bill account for less than one-half of 1 percent of the total federal budget, Ruppenicker adds. “With corn being the most expensive crop, and, if corn prices continue to be good and continue to reduce overall cost of the farm bill, I believe the money will be there.
“Energy, conservation and fruits and vegetables will receive more attention in this debate, but there will be money for traditional commodity programs.”
There are some compelling reasons for keeping the bulk of the 2002 farm bill for 2007. “The biggest reason, Carter says, is that it works. Cotton is a more expensive crop to grow and a more valuable crop than some other commodities, so maintaining a higher payment limit is critical to cotton farmers.”
If WTO negotiations are restarted, it would make sense to have a farm bill that is in compliance with those agreements. The current farm bill is a known commodity for negotiators and keeping the program status quo would give all parties in the trade negotiations a known base from which to work.
Some contend that waiting would allow the WTO to write the next farm bill for Congress, but that is far-fetched at best. To avoid that conflict, most cotton growers contend minor tweaking of the 2002 farm bill would satisfy most growers and the WTO.