The Hagstrom Report

Agriculture News As It Happens

National Cotton Council holds off on farm bill, monitors trade issues


SAN ANTONIO — With action on the farm bill not unexpected until 2012, trade negotiations in flux, cotton prices at record levels and the outcome of federal budget battles uncertain, the National Cotton Council has postponed any decisions about farm bill priorities and is focusing on trade issues in the short term.

The council, which represents all sectors of the cotton industry, appointed a farm bill task force but has decided to take a “wait and see” attitude, said John Maguire, the council’s director of Washington operations. He spoke in an interview Sunday after the annual meeting of the group, which includes cotton producers, ginners, warehousers, merchants, cottonseed processors, cooperatives and textile manufacturers.

Maguire noted that Congress has not yet passed a continuing resolution to fund the government from March 4 through the end of this fiscal year on September 30, and said the industry wants to see the budgetary implications of that document before gearing up for the farm bill.

Brian Breaux, assistant commodity director of the Louisiana Farm Bureau, said House Agriculture Committee Chairman Frank Lucas, R-Okla., had advised cotton growers not to take any positions on contentious issues early in the debate.

Behind the scenes of the meeting, however, there was plenty of talk about possible cuts to direct payments, changes to the crop insurance program, and continuing international pressures to change the U.S. cotton program.

Critics have suggested cutting the direct payments that farmers get whether prices are high or low because farmers get the money whether times are difficult or not. Breaux noted that the direct payments program is not considered trade distorting because the payments do not influence what farmers plant.

While there is a general impression in Washington that southern farmers are determined to save the direct payment program while northern farmers would prefer to take some of the money to improve crop insurance, Steve Verett, executive vice president of the Plains Cotton Growers, based in Lubbock, Texas, said that Texas cotton growers do buy crop insurance and that their bankers insist on it. Breaux added that southeastern cotton farmers would be more interested in crop insurance if companies would offer policies that worked better for them. If cotton growers had to make a choice between cutting the direct payments or cutting the producer subsidy for crop insurance, “that would be a hard choice,” Verett said.

One of the major issues that the cotton industry is expected to face in the next farm bill is resolution of the World Trade Organization case that Brazil won against the U.S. cotton program on the grounds that U.S. subsidies caused damage to Brazilian producers between 1999 and 2005, when world prices were low.

In August 2009, a WTO arbitration panel said the United States had failed to comply with an earlier panel regarding the export credit guarantee programs and certain provisions of the upland cotton farm program, and that Brazil could retaliate. The Obama administration negotiated an agreement under which Brazil would not impose retaliatory tariffs and the U.S. government would make payments to Brazil, promising that changes will be made in the next farm bill for an annual limit on trade-distorting subsidies “significantly lower” than the average of subsidies between 1999 and 2005.

Maguire noted that the 2008 farm bill eliminated the Step 2 cotton program and that the Agriculture Department has already adjusted the export credit guarantee program, but that the government of Brazil has not given a clear indication of what more it expects to be changed. The next meeting between U.S. and Brazilian officials is expected to take place in March or April, Maguire said.

Meanwhile, cotton-producing countries in West Africa are continuing to press for aid through the In the Doha round of multilateral trade talks and development programs, Maguire said. High world cotton prices and low stocks in comparison with demand would appear to negate some of the West African charges that U.S. subsidies have resulted in overproduction and low prices. However, it is hard for West African farmers to increase their incomes because they do not have the modern industrial infrastructure, and there are continuing problems in marketing cotton in those countries, Maguire said.

The cotton council’s economic outlook report, which was released at the meeting, noted that high input costs and higher prices for cereals have also led some West African producers to switch crops.

On January 27 in Geneva, the African, Caribbean and Pacific Group of countries called for immediate resumption of cotton negotiations on the basis of the December 2008 Doha round agreement, with priority for an “early solution” to the cotton issue and for it to be treated in parallel with the rest of the negotiations rather than subsequent to it.

The ACP Group also criticized the U.S.-Brazilian agreement, saying it offers nothing for producers in other countries who contend they have been hurt by U.S. subsidies. “The ACP Group deplores the present impasse consisting in an unprecedented and exceptional situation where a WTO member is avoiding bringing its trade policy into compliance with its obligations towards the organization in return for a payment made towards the producers of one other member only,” the group said in a news release.

Maguire said the cotton council’s highest priority in the Doha round is better access to the Chinese market. The issue is not so much the level of access, he said, but how the Chinese administer that access. The cotton council has not taken a position on the proposed U.S.-South Korea free trade agreement because textile manufacturers oppose it, and the council only takes positions when all segments of the industry agree, Maguire said.

The cotton council elected Charles Parker, a Senath, Mo., cotton producer, as chairman for 2011. Parker is past president of the Cotton Producers of Missouri and the Arkansas Agricultural Council.

The council also raised the fundraising goal of its political action committee, the Committee for the Advancement of Cotton, from $235,000 in the 2010 political cycle to $330,000 for 2012. Bobby Green, a ginner from Courtland, Ala., who heads the cotton PAC, told the growers that the $235,000 funding level had meant growers were contributing only 2.35 cents per acre to the PAC at a time they were getting more than $100 per acre in federal benefits.