US Secretary of Agriculture Tom Vilsack testifies during a House Committee on Agriculture hearing regarding the state of the rural economy on Capitol Hill Feb 24 2016 in Washington DC A day earlier Vilsack stated he was confident that Congress will pass the TransPacific Partnership a multination trade agreement between the United States and 11 other countries Drew AngererGetty Images

: U.S. Secretary of Agriculture Tom Vilsack testifies during a House Committee on Agriculture hearing regarding the state of the rural economy, on Capitol Hill, Feb. 24, 2016, in Washington, D.C. A day earlier, Vilsack stated he was confident that Congress will pass the Trans-Pacific Partnership, a multi-nation trade agreement between the United States and 11 other countries. (Drew Angerer/Getty Images)

Ginning cost-share idea floated as potential cotton economic solution

Vilsack: "Or we could work collaboratively together on a cost-share program with reference to ginning that you and I talked about, Mr. Chairman, which we are still willing to do if the industry is willing to accept this and provide the information we need to initiate the program.”   

Agriculture Secretary Tom Vilsack remains adamant in his conviction that Congress did not give him the legal authority to designate cottonseed as an “other oilseed” for farm program purposes in the 2014 farm bill.

But the secretary, testifying before a Committee on Agriculture hearing on the State of the Rural Economy Wednesday (Feb. 24), also seemed to be open to other avenues of assistance to cotton producers, including a cost-share program to pay for part of a producer’s ginning costs.

In two hours of testimony that was marked by some heated exchanges, Vilsack said he could not grant the request of more than 100 members of Congress that he designate cottonseed as a program crop because “I have taken an oath to uphold the laws and Constitution of the United States.”

Those laws, he said, include language in the Agricultural Act of 2014 (farm bill) that said cotton was no longer a program crop – a decision resulting from a ruling against the U.S. cotton program in the WTO case brought by Brazil in 2004.

“That decision basically made it impossible for me to do what you’re asking me to do,” said Vilsack, responding to the opening statement by Committee Chairman Mike Conaway, R-Texas, and a leader in the ongoing congressional effort to secure the “other oilseed” designation for cottonseed.

“Certainly Congress could reopen the farm bill and address it then,” said Vilsack, “Or Congress could remove the prohibition that currently exists in the agricultural appropriations bill that was passed by Congress that prevents me from using the Commodity Credit Corp. Act to provide assistance and help.

Cost-share for ginning

“Or we could work collaboratively together on a cost-share program with reference to ginning that you and I talked about, Mr. Chairman, which we are still willing to do if the industry is willing to accept this and provide the information we need to initiate the program.”

Both Vilsack and Rep. Conaway agreed that low prices are hurting cotton producers although they differed on the degree of pain that is being felt in the countryside. Conaway also took issue – again – with the agriculture secretary’s interpretation of whether the 2014 farm bill tied his hands on the cottonseed-as-an-other-oilseed issue.

“I wasn’t in those rooms (when the farm bill was being debated), but I don’t believe there was any reference to cottonseed, period,” Conaway said. “So to rely on something that didn’t happen, I think you’ve been misled. I don’t think cottonseed ever came up in those negotiations.”

While cotton does not have Agricultural Risk Coverage or Price Loss Coverage as other commodities do in the current farm bill, Vilsack said 14 percent of U.S. cotton was covered by the Stacked Income Protection Plan or STAX in 2015, and $300 million in underlying crop insurance policy indemnities has been paid to date (STAX indemnities will be calculated later this spring).  

Cotton farmers also have the marketing loan and USDA has approved the use of marketing certificates for use in redeeming cotton from the CCC loan.

Conaway said 14 percent was nowhere near the amount projected for shallow loss coverage in cotton. “It’s not working, and so the cottonseed thing came up late last year as a potential way to put seed under the program, and not lint. I don’t think you’re arguing that seed and lint are the same thing, but this idea there was negotiation on seed specifically during the farm bill deliberations, I believe, is incorrect.”

‘Not in farm bill discussion’

Other committee members also insisted cottonseed was never specifically discussed in the farm bill negotiations. One, Rep. Austin Scott, R-Ga., chided the secretary for not showing the same consideration for farmers USDA has shown other constituents.

The two-year drop in net farm income that occurred from 2013 to 2015 marks the second largest drop on record, behind only the drop that occurred from 1919 to 1921, Chairman Conaway said in his opening statement.

“Moreover, the three-year drop in net farm income from 2013 to 2016 marks the third largest on record behind the drops from 1918 to 1921 and 1929 to 1932, two of the worst periods in U.S. agriculture history,” he said. “Over the three-year period from 2013 to 2016, net farm income is expected to drop by even more: a whopping 56 percent.”

He also noted acres planted to cotton are at their lowest levels in 108 years, excluding one year in the early 1980s when the government forced set-asides. “We also know that this is not due to bad management on the part of farm families. This is due in large part to the actions of the Chinese and Indian governments over which our farmers have absolutely zero control.”

Several times during the morning, Vilsack said that if Congress would remove the restrictions on the Commodity Credit Corp. or CCC Act that were included in the 2016 and earlier agricultural appropriations bills, he could act more freely to provide help to cotton producers.

‘Support and facilitate marketing’

“I think the secretary’s staff has also been looking at what authorities still exist under the CCC Act to see if there are tools there that could help the industry,” said one industry leader. “And one of those deals with providing support and facilities to help facilitate the marketing of commodities.

“The legal rationale, as we understand it from USDA, is since cotton has to be ginned for you to be able to market it, they could provide a cost-share option to producers to help pay for part of their ginning costs so that’s the legal basis USDA has come up with.”

Vilsack said the details of such a program need to be worked out, including having the cotton industry provide the numbers on ginning costs and the amount of cotton being ginned annually. The secretary mentioned a figure of $300 million with $150 million being made available to cotton producers to help offset ginning costs.

Based on the amount of cotton ginned in either the 2014 or 2015 crop year, the actual ginning cost could run around $800 million with USDA providing $400 million if the 50-50 cost share percentage were put in place by the secretary, according to sources in the cotton industry.

“We’re encouraged that both the secretary and Chairman Conaway both seemed to be prepared to work together to arrive at a solution to the problem,” the industry leader said. “Chairman Conaway repeated that desire in his closing remarks.”

For more on the hearing, visit http://agriculture.house.gov.

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