When National Cotton Council leaders went to Washington to talk to Agriculture Secretary Ann Veneman the other day, they had a full plate. The NCC group, which included Chairman James Echols and Vice Chairman Kenneth Hood, tried to impress on Veneman the urgency of passing a new farm bill, preferably the House-passed bill.
With commodity prices taking their biggest one-month drop ever in September (9.5 percent), they urged the secretary to get behind one of the several bills that have been introduced.
“The House has developed and passed legislation that is very beneficial to farmers across the United States,” said Echols. “Given the budget situation confronting the government, it is important for Congress to move forward on agricultural legislation this year. Delay will introduce many uncertainties into the process.”
Veneman reportedly said she was willing to work with the cotton industry in developing new farm policy, but did not commit to a specific time frame.
The Council leaders also asked the secretary to keep the 2002 Commodity Credit Corp. loan rate at 2001 levels rather than allowing it to drop from 51.92 cents to 50 cents per pound. For Council leaders, the request amounted to a preemptive strike, putting the administration on notice that its members, many of whom supported George W. Bush, are opposed to anyone at USDA “tinkering” with loan rates under the mistaken idea that it would help exports.
Although the administration has yet to announce a farm bill position, the secretary and some administration officials appear to have bought into the idea that any increase in farm program benefits encourages more production of crops already in surplus.
This idea, which most notably is being championed by J.B. Penn, undersecretary of agriculture for farm and foreign agricultural services and a former Sparks Companies analyst, goes hand in glove with the administration's emphasis on liberalizing world trade — no matter the cost to farmers.
Stepping lightly around this issue, Cotton Council leaders tried to point out the impact lower loan rates would have on the farm economy, especially cotton. “By maintaining the loan rate at the 2001 level, the Department of Agriculture has the opportunity to introduce a degree of stability into a very unstable sector,” Echols said. “Conversely, a reduction would further undermine an already fragile situation.”
While a 2-cent reduction in the loan rate might not seem important, NCC leaders know producers need the loan rate as high as possible to obtain financing for the 2002 crop. A 50-cent loan rate could mean more failures to cash flow and more farm sales this winter.
The House-passed farm bill would set the loan rate for upland cotton at 51.92 cents per pound, but also would create a counter-cyclical payment that would push cotton revenues closer to a 73.9-cent target price. Senate Agriculture Committee Chairman Tom Harkin's bill would raise the loan rate to 54.4 cents per pound.
Either goes against the grain of the administration's philosophy that would cut farm supports and force U.S. growers to try to compete with foreign producers who pay their laborers $2 per day.