OMAHA (DTN) -- In the push to draft the 2014 farm bill, leaders in the cotton industry agreed to pull cotton out of farm-bill commodity programs only to quickly discover that was a grave mistake for the industry.
Increased stocks in countries such as China dragged down U.S. cotton prices and acres, especially in 2015. The industry is still dealing with low prices with nearly 20% of cotton farms considered "highly or extremely highly leveraged" last year.
While rice and peanut farmers told members of a House Agriculture Subcommittee on Tuesday on Capitol Hill that the farm bill's Price Loss Coverage program works for them, the chairman of the National Cotton Council stressed the importance of getting cotton recognized again as a crop for farm program payments.
Ronnie Lee, a Georgia farmer and chairman of the National Cotton Council, told the Subcommittee on General Farm Commodities and Risk Management that farmers such as himself, "remain completely vulnerable" to changes in the cotton market.
The House Agriculture Committee is moving through a rapid clip of hearings in preparation for drafting a new farm bill. Since mid-February, the committee has held 16 hearings for the full committee or subcommittee, including two on Tuesday. Beyond hearing from farmers about commodity programs Tuesday morning, another subcommittee also heard about credit programs in the afternoon.
Lee told Rep. David Scott, D-Ga., that the National Cotton Council has a plan to work through the appropriation process to convert generic acres to cottonseed base acres or base acres for other commodities. That would get cotton back into the commodity title before the next farm bill is written so cottonseed has a baseline for payments. Generic base was granted to cotton producers as one of the tradeoffs for losing cotton as a commodity in the last farm bill. It allows cotton farmers to sign up those acres among other commodities the farmer is growing that year.
"We need to convert generic base back to cottonseed base," Lee told the subcommittee.
Scott assured Lee, "We will move to make that happen."
Former Agriculture Secretary Tom Vilsack had rejected calls by the cotton industry and Southern congressmen to designate cottonseed as an "other oilseed" under the farm bill to open up cottonseed for PLC payments. Lee's testimony indicated the industry will get a provision in USDA's annual appropriations bill to make that designation occur.
Rep. Jodey Arrington, R-Texas, whose district is the largest cotton-producing area in the country, stressed that cotton producers are facing a real disaster. "I want to implore my colleagues to please get cotton back into the farm bill," Arrington said.
The testimony did not examine the costs of bringing cottonseed back into the commodity programs or where money would come from to pay for that added safety net.
While the farm bill might not have worked for cotton producers, another Georgia farmer, Tim McMillan, representing the Southern Peanut Farmers Federation, told lawmakers that the peanut provisions have kept farmers like him from struggling even further. The peanut industry is unified in wanting to maintain the PLC payment provisions for peanuts, as well as the separate payment limit and storage payments for peanut growers.
"Without these base acres, the current struggling economy would be much worse," McMillan said. "It's been the bright spot on our farm, the peanut program. We've been forced to get out of our rotation and plant peanuts just to survive."
McMillan emphasized the $530-a-ton reference price in PLC has helped his farm, but he also argued that the supply and demand of peanuts remains in balance. In the three years since the farm bill passed, peanut acreage has gone up, but production per acre has gone down.
"We do not plant based strictly on the farm policy," McMillan said. "It's the market, and the demand and the supply is in good shape right now."
Unlike a similar hearing last week, crops represented in Tuesday's hearing leaned far more heavily on the PLC program than the Agricultural Risk Coverage program. Blake Gerard, a Missouri farmer and chairman of the USA Rice Federation, told lawmakers that roughly 99% of long-grain rice farmers chose PLC, as did 94% of medium-grain rice farmers. "The reference price is a known number. It is something we can bank on."
Gerard, however, raised concerns that payments are made a full year after harvest and some rice growers in California have to wait even longer for PLC payments. "The bills on our input costs ahead of planting season do not wait until after the crop is harvested before coming due," Gerard said, adding the issue is a problem working with bankers on operating loans.
Gerard also added the USDA rule capping payments for three managers in a farm operation also hurts rice farmers. He said a broader exemption for farm families is needed.
With most of the commodities in the hearing choosing PLC -- the program championed in the House during the last farm bill debate -- Rep. Frank Lucas, R-Okla., stressed to farmers the need to keep choice in farm programs. "It's important that we have that ability to pick what's in our best interests," Lucas said.
Lucas also asked farmers if they were seeing more challenges getting loans for their operations. Robert Rynning, a Minnesota farmer and president of the U.S. Canola Association, talked about his situation. We just had our meeting with our banker and he informed us it's taking them double the time for them to review their notes and to go through it with farmers and explain things," Rynning said, "And some of them are being refused. So, es, it's a critical period right now."
Responding to a question from House Agriculture Committee Chairman Mike Conaway, R-Texas, about the importance of farm programs to maintaining domestic food security, Rynning noted that just three or four years ago,most farmers were ready to give up farm programs altogether.
"The growers themselves have of course seen the light, blaringly, in the last two or three years," Rynning said. "The trouble is getting that across to the general public as to how essential these things are."
While most commodities want improvements to ARC or PLC, the American Sugar Alliance wants to keep its program in place that largely focuses on restricting imported sugar. Jack Roney, director of economics and policy analysis, told congressmen that the world market for sugar remains distorted as countries such as Brazil and India increase domestic subsidies for their sugar growers. Roney warned it would be "economic suicide" if Congress were to open up the U.S. to more imported sugar.
"Countries are getting more aggressively about subsidizing," Roney said.
Chris Clayton can be reached at Chris.Clayton@dtn.com
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