What is in this article?:
- Racing the calendar for cotton programs in the new farm bill
- Addressing trade pressures
“The later we go into the year, the more difficult it will become to implement crop insurance and other cotton programs in the new farm bill,” says Gary Adams, National Cotton Council vice president of economic and policy analysis. “We’re now well beyond two years since the passage of the Budget Control Act kicked this farm bill debate into high gear, and we still don’t have a bill,” he said at the annual meeting of the Mississippi Agricultural Economics Association at Mississippi State University.
GARY ADAMS, right, National Cotton Council vice president of economic and policy analysis, Memphis, visits with Dave Sites, left, Mississippi State University Extension agricultural economics research associate, and John Johnsey, MSU agricultural economics network administrator, at the annual meeting of the Mississippi Agricultural Economics Association.
Addressing trade pressures
Farm bill passage is also needed in order to address trade pressures, Adams says.
“For the past 11 years, we in the cotton industry have lived with the ramifications of Brazil’s complaint to the World Trade Organization about the U.S. cotton program.
“In 2002, Brazil filed a complaint against all portions of the cotton program, as well as our export credit guarantee program. Generally, the WTO panel found in favor of Brazil on countercyclical payments, marketing loans, and cotton’s Step 2 provision. They also found in favor of Brazil on our export credit guarantees. The only things they didn’t find any direct fault with were direct payments and the crop insurance program.”
A 2010 framework agreement between U.S. and Brazilian governments, Adams says, provided that Brazil would hold off on trade retaliation if the U.S. would make changes to the cotton program as part of the new farm bill, and make administrative changes to the export credit guarantee.
“The U.S. government further agreed to pay Brazil $147 million each year until these policy changes were made as part of the farm bill.”
But, he says, “Secretary of Agriculture Vilsack announced some time ago that as we moved into fiscal 2014, there would be no more payments by the U.S. to Brazil under the WTO framework agreement. With the government shut down, as of October 1, as far as we know, no more money has been paid to Brazil.
“If there are no further payments, we don’t know the reaction and actions of Brazil. We worry about the possibility of trade retaliation — they could impose higher tariffs on products outside agriculture. They could deny intellectual property payments and take action against patent rights, software development, pharmaceuticals, the motion picture industry — many potential impacts because of the cotton case. These aren’t pressures we need or want, not just for the cotton sector, but for the U.S. business community.
“With the year running down, we’re also awaiting a decision on a countervailing duty case with Peruvian government on imports of U.S. cotton into Peru. This is now in the final stages of investigation by the Peruvian government. They could choose to impose countervailing duties.
“Then there’s the December WTO ministerial, where cotton will be a focus. The lack of a new farm bill and associated policy changes continues to keep pressure on U.S. negotiations with the WTO.” (The new WTO director general is a Brazilian, who was the primary attorney who argued the case against U.S. cotton.)
A new farm bill is also needed in order to avoid another extension of the current law, which could jeopardize changes important to the cotton sector, Adams says.
“As popular as the current programs have been in the industry, an extension would be, for cotton, a continuation of policies that were found to be in violation of our trade commitments —and Senate Agriculture Committee Debbie Chairwoman Stabenow (D-Mich.) has indicated she doesn’t favor continuing direct payments for another year.”
Another important consideration, Adams says: “I think we need a new farm bill to take the ongoing uncertainty about this legislation off the table for U.S. farmers — to give them the ability to plan going forward, with some assurance about what farm programs are going to be.
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“Farmers are facing a lot of challenges, a major one is their rising cost of production. For cotton, there’s the challenge on the demand side of competing with polyester and on the supply side competing for acres with corn and soybeans.”
An ongoing undercurrent of worry, he says, is the 45 million bales of cotton being held by China.
“Right now, they’re supporting global cotton prices, but at some point that’s going to change — they can’t keep building stocks and holding them off the market forever — and we’re concerned about the potential impact of that transition on the market.’