Inside or Outside the Box: That Is the Question

April 13, 2000

The feed and grain industry wants Congress to "think outside the box" when developing new farm policy with legislation that increases trade and improves the transportation infrastructure. But farm groups, such as the National Cotton Council, call for Congress not to abandon agriculture to a global environment of trade and production "distortions" caused by other governments’ involvement in agriculture.

In testimony before the House Agriculture Committee on farm policy, Duane A. Fischer, president of The Scoular Co., Omaha, NE, speaking on behalf of the National Grain and Feed Association, said there is a direct link between increased agricultural exports and net farm income improvement. That reality makes in imperative that Congress approve permanent normal trade relations with China, he said.

"When trade opportunities grow and producers have the flexibility and production capacity to take advantage of it, producer income also grows," Fischer said. He noted that during 1965-75, agricultural exports tripled and net farm income nearly doubled.

Fischer also cited USDA projections that show farm income would increase by an average of $1.5 billion for crops and $1.2 billion for livestock each year during 2000-2009 under the U.S.-China trade agreement that takes full effect if Congress approves PNTR for China.

NCFA also believes the 1996 farm law has worked "exceptionally well" in providing a farm income safety net while providing planting flexibility needed to allow farmers to make rapid adjustments in response to domestic supply conditions while earning additional net farm income with alternative crops.

National Cotton Council Vice President Robert W. Greene said the 1996 farm law did not cause the current low commodity prices but proved inadequate to effectively protect agriculture during a sustained, low-price cycle.

The cotton industry, said Greene, is studying proposals that include a plan to supplement farm income when prices are low. Greene said the cotton industry opposes targeting benefits based on a farm’s size. "This policy ignores the need for efficiency in operations in order to meet competition," he said.

John R. Block, former Secretary of Agriculture and now president of Food Distributors International, indicated a supplemental income program for farmers when prices are low did not appear to be needed when marketing loan and loan deficiency payments are considered. Those payments reached $6.9 billion in 1999 and are expected to total $7.9 billion this year. "Based on those figures, we would suggest that the 1996 farm (law) provides significant benefits to producers during times of low prices," he said.

If program benefits are tied to market prices and current production, he warned, "powerful incentives will exist for the government to limit its cost exposure by reducing production and limiting farmers’ planting alternatives. This would hurt U.S. farmers and rural communities while providing a tremendous advantage to our competitors."

David Graves, president, National Council of Farmer Cooperatives, touted the NCFC’s belief that farmers should form cooperatives to improve income, manage risk and compete more effectively in the global marketplace.

Farmer cooperatives "are farmer owned and farmer controlled," Graves said. "They exist for the mutual benefit of their membership. Earnings derived from such activities are returned to the farmer owners of these cooperative businesses on a patronage basis and therefore help strengthen farm income."

Such cooperatives "must have in place policies and programs, including adequate tax incentives, to help attract needed capital and investment," he added. Current loan guarantee programs should be expanded to provide financing for both new and existing farmer cooperatives seeking to become more involved in value-added activities. "Other initiatives should also be considered to further meet capital requirements," said Graves.