With almost half of cotton growers' income for the past two seasons coming from government payments, it's little wonder there was a very attentive overflow crowd at Arizona Cotton Growers Association (ACGA) annual meeting recently when the issue of federal support payments was discussed.
Tom Smith, president of Calcot, told growers there is a 30-cent per pound spread today between profit and loss. It may take awhile and the hurt may even get worse before that spread is narrowed in the marketplace.
In the meantime, Congress must continue to provide relief for an agricultural economy and more specifically Western cotton producers to survive.
Although nothing is certain, Rich Lavis, ACGA executive vice president, told his members congressional agricultural leadership is aiming to provide relief of 15 cents per pounds each of the next two seasons.
Now, don't call your banker and say you are getting 15 cents per pound more this year,” Lavis warned, but that is what the people like U.S. Thad Cochran has told Senate leaders is needed for cotton producers to survive in a marketplace where prices are at Depression era levels
“What we are looking at over the next three years are three farm programs — this year, next year and the new federal farm program to be for 2003,” said Lavis, explaining legislative process ahead. The first two will be strictly about money and survival. The third will be about the long-term future of farming.
While the debate about the next farm bill is nearing the front burner, the more pressing issue is survival until that bill is written.
AMTA or transition payments were supposed to wean American farmers from government support under the 1996 farm bill. However, the fortunes of American agriculture have gone south since then and rather than transition payments, they have become survival checks.
Ask higher payments
The 2001 payment is scheduled for 5.77 cents and it is supposed to 5.60 cents for 2002. Casa Grande, Ariz., producer Tom Isom, chairman of ACGA's national legislative committee, said the association recommends AMTA payments this year be at the 1996 level of 8.8 cents and then doubled under market loss assistance provisions.
Smith said Calcot recommends that 2001 AMTA payments be at least at last year's level of 7.33 cents and doubled if necessary for market losses.
Federal farm programs have once again become very expensive and some congressmen question that. Smith said if America wants a strong dollar to keep inflation down, it must support American agriculture.
The strong U.S. dollar is a key reason commodity prices are low and why U.S. foreign agricultural competitors can out-compete American farm products in world markets.
“In my opinion, the strong dollar must carry some of the responsibility for low commodity prices today,” Smith said. “As long as the U.S. continues to support a strong dollar, federal farm programs are not only justified, but necessary to maintain a viable U.S. farm economy.”
To that aim, Isom and Smith laid out what Calcot and the Arizona growers group would like to see in the 2003 federal farm bill, which Smith called “more critical that the 1996 farm bill, which was a real turning point in federal farm legislation.”
They both support raising the cotton loan to 55 cents, but Smith cautioned it is imperative that loan rates for other commodities “increase as much, if not more than cotton.”
Both support removal of payments limits and a “counter cyclical” income programs for times when commodities prices are unprofitable for producers. Arizona producers are opposed to mandatory supply and demand management of the U.S. cotton crop.
Isom said Arizona producers support the idea of farmers being allowed to set aside tax free a percentage of net farm income for five years to smooth out the highs and lows of farming.
Both support the Conservation Reserve Program. Smith added modifying the program with a “supplemental” CRP of three to five years could reduce burdensome cotton supplies and stimulate demand.
Continuation of the three-step competitiveness program is imperative for Western producers, who market 85 percent of their crop into exports. He proposed making it an entitlement program.
There have been Step 2 program abuses in the past. These were rectified when the program was refunded. Calcot would like certificate values set at the time of sale rather than shipment as they were before. However, that invited abuses.
“Congress gave us a second chance with Step 2. If abuses occur again, I doubt Congress will give us a third chance,” Smith said.
Calcot also supports the USDA's biofuel program that diverts grain to ethanol production.
Both Isom and Smith support continuation of the Pima Step 2 program and making it an entitlement program. They also support a counter cyclical financial protection program to protect ELS producers, who do not have a futures market, from unprofitable markets.
Smith reassured struggling Arizona producers that all segments of the Western industry would be involved in the new farm bill discussions. “We will strive to get whatever you want, but rest assured we will not settle for less than what you need,” he pledged.