Editor's Note: Few issues have created as much furor as President Bush's proposals to restrict farm program payments to $250,000 per individual and limit loan eligibility to 85 percent of a farmer's direct payment yield. Farm Press editors Elton Robinson, Ron Smith, Harry Cline and Cecil Yancy talked to growers to get their reaction to the president's proposals.
All things being equal, Barry Evans would just as soon make a living selling his cotton on the open market and forego any government support payment.
All things, however, ain't equal, leaving Evans, who raises cotton and grain sorghum near Kress, Texas, scratching his head in bewilderment at recent proposals to make significant cuts in the farm support program created in the Farm Security and Rural Investment Act of 2002.
Evans, like many farmers across the country, contends that the 2002 act represents a contract between American farmers and their government, with promises to maintain a farm safety net through 2007.
“We've based our five-year farm plans on this program,” Evans said. “The people in Washington D.C. do not understand the program. Many don't realize that we don't get those payments when prices are high. But when prices fall, we do get payments and that's when folks complain.” Evans said the 2002 legislation created “a good farm bill. It works and with previous high prices, agricultural spending is down. The program smoothes income out for farmers.”
Evans said farmers benefit from the government loan program and that with proposed cuts a significant amount of his cotton will not be eligible. “I'm not certain how much of my cotton will qualify,” he said, “but it's extremely important that what we grow is eligible for the loan. It's hard to plan what to grow without the loan program.”
Evans said West Texas cotton yields are “extremely variable. In a good year, we will make more cotton than will be eligible for the loan (under the proposed cuts).”
Harsh payment limitations also hamper a farmer's ability to reach optimum efficiency. “We can't expand to the most efficient size if we face lower payment limitations,” he said. Denying larger farms adequate support, “promotes inefficiency.”
U.S. farmers have a tough time making a living “in a world economy,” he said. “We have things such as the Plant Variety Protection Act, which I support. But other countries get those same varieties by bootlegging and they compete with us without having to pay fees.”
He said competing countries also do not have agencies like EPA and OSHA to protect the environment and workers' rights. “U.S. rules don't apply in China.”
Evans said farmers could compete with any country if they could buy on the world market and get labor for $1 a day and work with bootlegged products. “But I am glad we have the protection, even though we are not on a level playing field.”
He said the American standard of living would be jeopardized if labor were as cheap as it is for competitor countries.
He said the general public does not understand how their standard of living and farm subsidies are inter-related. “We have higher production costs than most of our competitors.
“I just want to run the most efficient business I can.”
That's a much tougher proposition without a government safety net.
Proposed changes in the farm bill might be designed to create more small farmers, but for Dyersburg, Tenn., cotton producer Jimmy Moody and Senath, Mo. cotton producer Charles Parker, “broke farmers” is the more apt description.
“I'm involved in two operations, my family operation and a partnership,” Moody said. “My grandfather formed Moody Properties Inc., in 1966 as an estate planning tool — a way to divide his property equally among his children. We've been farming as a corporation for almost 40 years. There are a lot of relatives in the corporation who rely on the income to live.
“Current USDA regulations make Moody Properties a single entity for payment purposes. The marketing loan today (March 2) is 13.43 cents. With a $75,000 hard cap, a 1,000 pound yield will limit my cotton acres out at 558 acres, and there's nothing left for any other crops.”
Moody knows what that will do to his operation and others. “To figure out cotton acreage every year, you'll have to project the marketing gain, then do the math to figure out how many acres of cotton you can afford to plant.
“Then, you're going to have to go to a crop that is not susceptible to that limit. Basically, the limit is going to dictate how I farm. It's going to eliminate the medium- and large cotton operations in this country.
“If the cap were to stand, it's just about going to prohibit us from growing cotton when prices are low at planting time. It's going to force us into other crops.”
The trickle-down effect on the rural economy is another consideration, according to Moody. “What do you do if you're a ginner knowing you're ginning this much one year and maybe 30 percent of that the next year? And you've got all these fixed costs to worry about. It will really wreak havoc with the cotton industry in this country.
“Warehouses, fertilizer and chemical vendors, ag pilots are all going to be hurt, too,” says Moody. “We have a lot of widows who have farmland rented out for cotton at a high dollar. But with the new limits, the cotton farmer who leases that land will limit out and won't farm it.
“When you tell your banker that you want to grow cotton, but the big percentage of it is not going to be eligible for marketing loan gains, it's going to make financing a lot tougher, too.”
Moody Properties currently farms about 1,600 acres of cotton, with the balance of acres in soybeans. Moody wonders if his partnership in another corporation will affect his benefits at Moody Properties. “Am I going to have to divest myself of the partnership to participate? I don't know. The devil is in the details.”
Moody believes that any decision should be put off until 2007, the end of the current farm bill. “In 2002, we made a decision on the purchase of Boll Buggies, module builders, irrigation and module trucks based on us growing cotton until 2007. Everything is geared to go through 2007. If I had thought that 2006 would be my last cotton crop on Moody Properties, we would not have made those decisions.
“It took two years for Chairman Larry Combest and the House Agriculture Committee to travel all over the country working to put the last farm bill together. Now we're going to dismantle it in a few months. In effect, we will unilaterally disarm in the face of our trading partners. They need to leave everything be until it expires in 2007.”
Senath, Mo., cotton producer Charles Parker says proposed changes would cut farmers off at their financial knees. “We signed a contract back in 2002 to last through 2007. We've been under budget the whole period of time and now they want to cut us.
“We can take a percentage cut on a direct pay and maybe the counter-cyclical. I'm not saying I want to, but one thing that has kept us in business is (marketing loan) certificates. When you talk about certificates applying against the limitation and then you cut your limitation, then change the 3-entity rule, it will be a disaster.”
Without an effective safety net, cotton producers can only hope for record-breaking crops every year. “I don't believe there's any way in the world we can make the same kind of crop in 2005 that we made in 2004. I hope we do. We can survive if we can make this kind of crop.”
Parker is holding out hope that good sense will prevail. “In past farm bills, they've kind of pitted the northern farmer against the southern farmer, but the way they have this one set up, it's going to affect the northern corn farmer as much as it does the southern cotton farmer. That's one reason why I think we might survive.
“I'm cautiously optimistic that something can be worked out. We realize that we can't keep spending money while the deficit keeps getting worse. But agriculture is between 1 percent and 1.5 percent of the total budget. And there are a lot of things in the ag budget that are not agriculture.”
If everything goes through as proposed, “I don't know what path I'd take,” Parker said. “But I'm sure our northern farmers don't want us growing a lot of corn and beans down here. We have some good irrigated cotton and rice land that will grow some corn and beans. This country needs the South's crops and it needs the North's crops.”
The Far West
The only debatable issue out West from President Bush's midstream cuts in the federal farm program is which state will it hurt the most: California or Arizona.
Rick Lavis, executive secretary of the Arizona Cotton Growers Association, says Bush's proposed reduction in payment limits to farms will impact almost three-fourths of Arizona producers and would cut income 20 to 40 percent.
Bush's proposed cuts would be devastating to the Arizona cotton industry already struggling to remain viable with less than 250,000 acres in cotton annually. At one time it was more than 1 million acres.
“There is no questions the President's proposed budget cuts in the farm program would have a huge impact on the California cotton industry,” said San Joaquin Valley cotton producer Tom Teixeira of Dos Palos, Calif. “More so than any, other part of the Cotton Belt.”
Teixeira, who farms about 2,700 aces in Merced and Fresno counties, said under the proposed reduced $250,000 payment limit, a California grower with 650 acres of cotton would max out.
By comparison, it would take about 1,600 acres for a Mid-South grower to max out.
Teixeira, who is the newly elected chairman of California Cotton Growers Association, acknowledged California producers make more cotton per acre than other parts of the Cotton Belt, except for Arizona, “but it costs a lot more per pound to produce in California because growing cost are so much higher in the irrigated West. Our margins are already thin.”
Western growers were gearing up for a big battle over the 2007 farm bill and were expecting major challenges once again to lower the payment limits. However, they are disappointed and miffed that the battle is coming now.
They contend the 2002 farm bill was a five-year contract and producers and bankers made commitments and loans based on that. Changing the rules in midstream is unfair, they contend.
Western farmers believe, overall, the current farm bill is a good one, giving the farmers a safety net and at the same time encouraging conservation with one of the most generous conservation titles ever included in a federal farm bill.
“Changing the farm bill at this stage is going to pull a lot of dollars out of the farm economy,” said Teixeira.
“I really believe the farm bill is working. It is working when prices are low and works when prices are profitable.”
Without something like the current farm program in place, the federal government would find itself back to funding expensive disaster programs to keep American agriculture afloat.
And, Teixeira said, without the safety net, there would be wide commodity market swings.
“There is no question the next farm bill will be a difficult sell to a lot of legislators who lack the understanding of the importance of a strong American agriculture,” said the San Joaquin Valley producer.
“We are told we must become more efficient and consolidate to compete on a worldwide basis yet the administration wants to reduce the amount of money allocated to support larger growers. What the government is telling us is not matching the actions we are seeing in these proposed cuts in the farm program,” said the California producer.
Teixeira acknowledged California producers have alternatives if the cotton program is gutted, However, as he has told vegetable and tree and vine producers, if the federal farm program no longer allows producers to grow commodity crops, they will switch to the so-called specialty crops and likely flood the markets for those crops.
“I sit on a farm credit board with vegetable producers from the coast who say the government does not need a farm program. I remind them that if we are not growing cotton or other program crops, we will grow something and it may be the some of the crops they now grow,” said the valley producer.
“It's not good news for farmers.” “We'll be able to dodge the bullet.” “It's premature to get excited about the proposed cuts to agriculture in the president's budget.”
Those are just a few of the comments coming from growers in the upper Southeast.
Cotton grower representatives are “thoroughly convinced that we'll be able to convince people in Washington, D.C.,” that the proposed cuts to farm programs in the president's budget are “disproportionate,” says Roy Baxley of Dillon County, S.C.
Readying for planting, Baxley expects to see some cuts, but not the magnitude of the Bush proposal, which includes payment limitations.
“Given the prices we have, if these cuts were implemented, I'd lose 35 to 40 percent of my assistance,” Baxley says. “That would mean I would grow less cotton and more wheat and soybeans.”
Baxley as well as others aren't ready to do that just yet. He's getting ready to plant 1,300 to 1,400 acres of cotton this season. He's also gearing up to plant peanuts this year.
“We're going to do everything in our power to fight it and prove to Congress that these programs are absolutely necessary,” Baxley says.
Cotton producer Allan Baucom of Union County, N.C., believes the budget proposal is “a first blush” of the process. “It's premature to get excited. We have made no changes in our plans for this year based on the president's budget.
“If they want to cut a budget, it must be equitable,” Baucom says. “Let's cut every department the same amount, every aspect of every department the same amount.”