Lawmakers on the House Agriculture Committee spent the morning of Feb. 15 staking out priorities for the 2018 farm bill.
It didn’t take long for Arkansas Rep. Rick Crawford to bring up Mexico’s potential reaction to the Trump administration’s continued flirtation with a Border Adjustment Tax.
“There’s some talk about retaliatory measures (by Mexico),” said Crawford. “We’ve heard reports they no longer will buy U.S. corn but rely exclusively on Brazil and Argentina. That may just be talk in the heat of the moment, and I expect it is. But the reality is, it could happen, correct?”
“Yes,” said Pat Westhoff, director for the Food and Agricultural Policy Research Institute at the University of Missouri. “There have been discussions in Mexican circles on what they might do to try and get people’s attention. What’s very important is to remember we have a global corn market and have a lot of advantages in selling our corn into Mexico. That’s very important to our industry.
“It’s also true that if you just rearrange trade patterns, the effect on the corn market may not be all that huge. … It’s very important to watch this discussion as it goes forward.”
Crawford, who represents a huge rice-growing district, pointed out Mexico is the largest customer for U.S. rice. “While they made that statement about corn, it’s safe to say they could extend that to U.S. rice industry, as well. Agreed?”
“Certainly,” said Westhoff.
Crawford continued. “We’ve seen a precipitous loss of farmers but we haven’t talked about the infrastructure associated with that production base. I’m concerned about what impact this might have on our equipment dealers, our bankers, processing and other components of the ag sector.”
“We’ve seen a lot happen already,” said Westhoff. “Farm equipment sales are far off from peak levels, and that’s having implications across rural America. Those things are very real, and if the pressures continue, there will more of that in front of us.”
Cotton and Cuba
Cotton was the next commodity tackled.
“The cotton industry hasn’t been a pretty picture in recent years,” said Crawford. “A lot of that had to do with China stockpiling cotton, some of it’s weather-related. We had a steep decline in cotton acres in my district — some 40 percent year over year.
“In the 2014 (farm bill), we opted for the STAX program, which has performed much worse than expected. How will farmers cope with that? What kind of policy recommendations would you make in light of how the STAX program has performed?”
Joe Outlaw, professor and Extension economist at Texas A&M, said, “One of the ways of the ways farmers have coped is they’ve used a generic base to plant other crops that might have more potential for them. That’s been a very big positive, having the generic base available.
“Really, all these crops need some sort of price protection. Not having it makes producers and their lenders, who have a partnership, look at other commodities a bit stronger than cotton.”
Cotton’s infrastructure is “very unique,” Outlaw said. “When it moves out of a community, it’s very difficult to get it back. There has to be some sort of price protection afforded to cotton producers … in the next (farm) bill.”
Why is the cotton outlook a bit brighter?
“On the cotton side, China had built up significant stocks — as much as 60 percent of the world’s global stocks were held by China two years ago,” said Robert Johansson, USDA chief economist. “They’ve been unwinding that stock position as well as moderating their domestic support policies for their cotton producers. So, we’re seeing an increase in the amount of auctioning of their stocks. They’re down about 10 million tons since last year and are holding about 48 percent of the global stock.”
What about the viability of trade in Cuba?
Initial analysis done at the USDA “suggests we can triple trade to Cuba under certain conditions,” said Johansson. “Certainly, it’s been noted that improving market access and expanding trade is key for U.S. agriculture. As we continue to see increased productivity, as we did last year, we need to find places to sell that overseas.”
H-2A, more cotton
Even with his state in drought, water isn’t the top issue with his California farmer constituents, said Rep. Jimmy Pannetta. “At the top of the concern list is labor. What else can be done when it comes to the H-2A program?
Johannsson was gun shy. “I’d defer any policy responses until we get confirmation of the new secretary (of agriculture, Sonny Perdue). I will note that over the past several years, Congress has contemplated adjustments to the H-2A program to make it more workable for farmers so they can get a more stable supply of labor. I think in the various bills there are ideas that could work.”
Georgia Rep. Rick Allen was also worried about cotton. “In my home state, agriculture is the Number One industry. According to the Georgia Cotton Commission, in 2014 Georgia planted around 1.38 million acres of cotton with an average yield of 900 pounds. My farmers and ginners, the equipment dealers, have great concerns about the economic future of cotton. Is there a fix? Something we can do?”
Not much, said Johansson. “Volatility in commodity prices in general would be expected, going forward, to be less volatile than we’ve seen. That’s both on the up side and down side. Our projection is for relatively flat prices going forward…
“Looking out 10 years, we do forecast the United States to be the Number One cotton exporter and China to be the top importer. To the extent we maintain a good trading relationship with our top customer, our outlook for trade is stable.”
Outlaw was queried on the best ways to help young farmers with the new farm bill. “The programs that were put in the previous farm bill seem to work very well,” he said. “I’ve received quite a bit of feedback from young producers we work with saying they really appreciate the consideration provided with lower interest rates and things like that.
“Agriculture is a very capital-intensive occupation. If you want to control land, where you control being able to find it every year, you must buy it. Anything you can do to try and help alleviate some of that cost will be appreciated.”
What did the panel think about cattle prices?
“We’re seeing cattle prices pressured downward,” said Johansson. “Nonetheless, we’re expecting to see record production next year. Part of that is lower feed costs.”