President Bush's 2006 budget proposals unfairly target Sunbelt crops and could reduce the gross income of farmers in the region by 10 to 30 percent, the chairman of the National Cotton Council said in a speech at the Mid-South Farm and Gin Show in Memphis, Tenn.
Woods Eastland, a producer and cooperative executive from Doddsville, Miss., said that if the proposals had been in effect for the 2004 crop, about one-half of the cotton produced in the United States would have been ineligible for the marketing loan.
“Farmers always have been and continue to be willing to do their share,” said Eastland. “In this regard, they will gladly take part proportionally in spending reductions. However, this burden should be proportional between farmers and other citizens, and specifically within the farming community among all program crops.”
Although USDA has not released any numbers on marketing loan redemptions or loan deficiency payments for the 2004 cotton crop, the dollars could be substantial since spot cotton prices have been 8 to 10 cents below the loan rate for most of the 2004-05 marketing year.
Producers of all program crops can redeem cotton from the CCC loan or request loan deficiency payments for the difference between the loan rate for their grade and staple and USDA's adjusted world price up to the payment limit for an individual operation.
The Bush administration's budget proposal would lower the payment limit cap for individuals from $360,000 to $250,000 per year, eliminate the three-entity rule and base a farmer's eligibility for marketing loans on 85 percent of an operation's direct payment yield.
Many farmers' payment yields, which were frozen at 1985 levels in the 1991 farm bill, are 40 to 50 percent of their current yields, according to National Cotton Council analysts. All of a farmer's production is eligible for marketing loans under the 2002 farm bill.
The president's budget would also reduce direct payments to program producers and dairy payments by 5 percent and reduce subsidies for crop insurance premiums and reduce costs to deliver the program.
“If all of these proposals were adopted, the result would be significant to all producers and devastating to many,” said Eastland. “Unfortunately, they are unfairly targeted toward Sunbelt crops. They would result in a 10 percent to 30 percent cut in farmers' gross incomes.”
He said producers of cotton, rice and peanuts would be affected more than other farmers because of the substantial yield increases in those crops in recent years and the reduction in payment limit caps that would affect higher-input operations.
Eastland said the National Cotton Council will be working with Congress and the administration during the current session.
“We'll be delivering the message that the farm bill is a multi-year contract that provides stability for U.S. agriculture and U.S. consumers, covering the 2002 and 2007 crop years,” said Eastland. “Relying upon the representation that it would last through the 2007 crop, many producers made investments and business plans and incurred risks confident that its terms would be unchanged.”
He urged Council members and other farmers to contact their Congressional representatives and urge them to sign onto letters that are being sent to the chairmen and ranking members of the House and Senate budget committees.
“These letters — which are available in the members' only section of the Council's Web site — urge the committees to stand by the commitment made to this nation's farmers by maintaining the baseline for agriculture,” he said. “If you have not contacted your member of Congress, I urge you to do so.”
Eastland said he and members of the Council staff were still reviewing the decision by the WTO appeal panel in the case Brazil brought against the U.S. cotton program. The ruling was made March 3, the day before Eastland spoke at the Farm and Gin Show.
“Our initial review of the findings indicates that it upheld the original panel's decision in most respects, including its determinations concerning the export credit guarantee program, cotton's Step 2 program, classification of direct payments and serious prejudice,” he said. “Obviously, we are disappointed with the ruling.”
Council leaders stress there will be no immediate changes in the U.S. cotton program because of the March 3 ruling.
“The only date — and it was in the ruling by the original panel — was July 1,” said Gary Adams, vice president of economics and policy for the NCC. “The first panel that heard the case said the United States should implement changes by July 1.
“But it's up to the government of the country that's the subject of the ruling to decide when it will implement any changes.”
Adams cautioned growers about paying too much heed to comments that the ruling means the end of the U.S. cotton program. “There will still be a cotton program,” he said. “We will be looking at what adjustments need to be made, but we will continue to have farm programs.”