The “Killer Bs” could inflict some major welts on the cotton program during the 2012 farm bill debate, according to National Cotton Council president and CEO Mark Lange.
Lange’s soubriquet for the impact of budget, baseline and Brazil could first buzz into Washington on the wings of November elections.
“There is a good chance that Republicans may take the House in fall elections and if they do, there will be a number of ‘budget hawks’ coming to Congress. If that happens, we may be writing a 2012 farm bill with tremendous pressure on ag spending,” said Lange, speaking at the Southern Cotton Ginners Summer Meeting in Memphis.
Lange said there’s also a possibility of a budget reconciliation package in the spring of 2011 “that could catch agriculture right in the midst of the debate.”
But agriculture may also feel a sting if Democrats retain the House, Lange noted. House Agriculture Chairman Collin Peterson “does not like marketing loans.”
Lange noted that given current high prices for corn and soybeans, “the only price support money built into the Congressional Budget Office’s current baseline — beyond direct payments — is for cotton. When Peterson starts his discussion about a revenue package, where’s he going to find the money? The only place to take money is from direct payments or cotton’s price support system.”
Lange said that Peterson’s preference is to use crop insurance to deliver program benefits. “That presents a real problem for us because a lot of us in the cotton industry are not real comfortable with crop insurance. We have our work cut out for us to demonstrate to the Congress why it should not be the vehicle for cotton.”
Brazil could also challenge the marketing loan, Lange says. “I think we’re going to be writing the farm bill with the Brazil case hanging over our shoulder.”
Brazil has suspended retaliation on U.S. goods and services going into the country, but Lange noted that it still has the right to do so. Brazil has said under a framework agreement with the United States that it could reconsider its decision “after the 2012 U.S. farm bill is signed. If Brazil doesn’t believe there has been sufficient reform of the cotton marketing loan and the counter-cyclical payment, they can retaliate.
Retaliation not simple
“On the other hand, retaliation is not all that simple,” Lange said. “It does come with some penalties and problems for the Brazilians. But we’ve never had anyone looking over our shoulder like this while we are evaluating whether cotton is doing enough to reform its program.”
Other issues discussed by Lange included:
Environmental Protection Agency regulation — “There are those in EPA who want to view the nozzle on a spray rig as point-source pollution. If given the opportunity, they will impose point-source regulations on that nozzle. We could get into burdensome and extraordinarily constraining situations dealing with both permitting and practices on your enterprise.”
Lange said the NCC is working with other commodity organizations “to see that there is sound science and common sense applied to the situation.”
Lange added that future legislation being considered by Congress “could be onerous in terms of reporting and regulatory activities that could be imposed on producers and gins. It is a situation that is going to come back again and again. There are a number of organizations with an agenda to let USDA and EPA have direct control over the practices of farming enterprises. It’s going to be a continuous fight.”
Conservation — Producers may find they are leaving as much as $35 to $40 an acre on the table because they are already doing a lot of the things that qualify them to be in the Conservation Security Program, according to Lange.
“I encourage producers to go to the conservation portal on NCC’s website. Former USDA undersecretary Bruce Knight is working with us on how farmers can implement CSP on their enterprises.”
Product registration — “We’re working to insure that we can access as quickly as possible new chemicals to be considered for use on insects. It’s clear we have a big problem managing plant bugs in the Mid-South.”
Trade — Lange noted that the Obama administration’s effort toward signing a free trade agreement with South Korea has support from most of the world. “But we’re a little concerned because South Korea has some good-sized subsidies for its man-made fiber. And they produce some high-quality man-made fiber products that would come into the United States duty-free.”
Crop insurance — Lange says the cotton industry must work toward better insurance rates for Mid-South farmers. “The rates are based on incurring an insured loss once every four to five years, but the loss is really only once every eight years.”
Commodity Futures Trading Commission — The cotton industry “is supporting the efforts for Congress to move financial regulation forward. We must have confidence that all exchange-traded derivatives are being reported.”