The 2002 farm law offers Western cotton producers a lot to like, according to the National Cotton Council.
“This is an excellent bill,” says Craig Brown, vice president for producer affairs with the National Cotton Council in Memphis, Tenn. “We are very pleased with the bill. It fits very closely with what our original recommendations were when the farm bill process started.”
Among the provisions recommended by National Cotton Council delegates, and included in the six-year legislation, are a direct payment, a counter-cyclical payment, and a marketing loan program.
“I think the continuation of a fully functional marketing loan is very important with the use of certificate loan redemptions of key importance to the large cotton farming operations in the Western part of the Cotton Belt,” Brown says.
The Farm Security and Rural Investment Act of 2002 sets the fixed payment for cotton at 6.67 cents per pound, the target price for counter cyclical payments at 72.4 cents per pound, and the base loan rate for cotton at 52 cents per pound. According to the National Cotton Council, it also makes both the fixed decoupled payment and the counter cyclical payment based on 85 percent of the enrolled program base acreage.
What that means, according to an analysis by the National Cotton Council, is that assuming a cotton grower has program yield equal to actual yield, the least a grower should expect to receive on an “average” pound of cotton is 69.9 cents.
While several provisions of the law are favorable to growers across the Cotton Belt, Brown says some aspects of the legislation are especially beneficial to Western cotton growers. “All of the provisions that are good for other cotton farmers are just as good for those growers in the West.
However, there are some provisions that stand out for cotton producers in California and Arizona,” Brown says.
Brown says, “The market assistance funds are particularly important to Western cotton growers because of their reliance on exports. The continuation of both the Market Assistance Program and the Farm Market Development Program will help promote our exports.”
According to the soon-to-be enacted legislation, Market Access Program (MAP) spending is increased to $200 million annually by 2006. Spending on the Foreign Market Development Cooperator Program (FMD) is increased from $27.5 million to $35 million per year, with a continued significant emphasis on the importance of the export of value added agricultural commodities into emerging markets.
Under the new legislation, Pima cotton growers will continue to enjoy a measure of planting flexibility. The bill passed by both the House and the Senate decouples upland provisions from the Pima program.
In addition, Pima growers are likely to be pleased to see not only the continuation of the ELS program, but the ELS loan rate has been frozen for the life of the farm law.
“The fact that the ELS loan rate got locked in at 79.77 cents, and can't be reduced, is particularly important to Pima growers,” Brown says. “Also, the ELS Step 2 program was continued as an entitlement for the length of the law.
The legislation suspends the 1.25 cent price differential threshold for Step 2 marketing payments through July 31, 2006.
“The elimination of that 1.25-cent threshold makes exports and domestic manufacturers more competitive because it allows users of U.S. cotton to get closer to the world price,” Brown says. “This is especially important to Western growers due to their reliance on export markets.”
Another important issue, Brown says, are payment limitations. “Payment limitation provisions were basically unchanged except for the means test. So in essence, what didn't happen in that area is good, because of the large size operations in the Western United States,” he says.
The legislation reduces the limit on direct payments from $50,000 to $40,000. It reduces the limit on counter-cyclical payments from $75,000 to $65,000. It reduces the limit on Loan Deficiency Payments (LDP) and Marketing Loan Gains (MLG) from $150,000 to $75,000; and retains the current rules on spouses, three-entities and actively engaged parties. The law adopts a $2.5 million adjusted gross income cap on eligibility for participation in farm programs; retains the use of generic certificates in the loan program, and sets a total dollar limitation of $360,000.
Brown says, “Reasonable payment limitations are important to cotton farmers, along with a fully functional marketing loan, better income support, and the continuation of planting flexibility.”
“This represents a tremendous improvement in the safety net for cotton growers. With the president's signature, our nation's cotton growers can regain a measure of optimism as they go about the planting of their 2002 crops,” says NCC chairman Kenneth Hood.
Brown adds, “The fact is there is now a better safety net against low prices with the target price approach. This is a long-term bill that maintains and improves the competitive provisions needed, while also providing the financial security needed by producers and their financiers.”