Cotton Looks to Farm Bill for Profits

February 1, 2001

National Cotton Council President Robert McLendon says that NCC delegates' consensus on specific farm program provisions will help restore profitability to the cotton. McLendon, of Leary, GA, said that delegates to the NCC's annual meeting are focusing on specific program provisions to complete already agreed upon agricultural policy principles.

Congress will conduct farm policy deliberations in February and March to gather input that could be used for possible amendment or rewriting of current farm law, which doesn't expire until 2002. During the first couple of years of the FAIR Act, its fixed, de-coupled payment system served U.S. cotton well, McLendon said, but "the subsequent free-fall of prices has exposed the FAIR Act's Achilles' heel, which, of course, is a completely inadequate income safety net."

The farm price for cotton has declined over the course of that law from 75 cents in 1996 to 48 cents in 2000. He told delegates that special emergency relief packages authorized, not by farm legislation but by annual appropriations measures, were a "a precarious way for farmers to stay afloat." He noted, however, that while the economic outlook and the congressional mind-set look somewhat more promising this year than in 1996, enactment of good farm policy will not be easy.

"It's one thing for Congress to dig deep into the federal treasury to authorize what they see as necessary 'emergency' spending to avoid widespread agricultural bankruptcies," McLendon said. "It's yet another thing for them to commit to a longer-term farm program safety net that could cost as much as they've been authorizing for emergency spending in annual appropriations bills."

McLendon reminded delegates that the NCC worked to sustain a "lifeline" for U.S. cotton, including marketing certificates for loan redemptions, supplemental Agriculture Marketing Transition Act payments, crop insurance reform and1999 emergency assistance and 2000 crop disaster assistance which included an unprecedented federal cost-share level for the boll weevil eradication program.

Step 2 payments, which had been reauthorized in the agricultural appropriations bill that was passed in October 1999 continued to be made every week during the 2000 calendar year, McLendon said. "I shudder to think what U.S. mill consumption and exports would have been without these payments, which averaged more than 5 cents per pound during the year."

He said Step 2 payments were unusually important this past year because they helped move some quality-impaired cotton to market that otherwise would have accumulated in carryover stocks to further depress new-crop prices. He noted the Step 2 program most likely will return the same benefits this year, and for the same reason.

McLendon said defending Step 2 as a central aspect of domestic cotton policy and getting Congress to write World Trade Organization-compliant income support provisions into new farm law are major NCC goals.

"We expect to build on the (farm) policy principles we've agreed on by reaching consensus on a number of more specific provisions here in San Diego," McLendon said. "We expect, for example, to reach industrywide consensus on a WTO-compliant benefit delivery system that offers the best prospects for improving our income safety net while retaining planting flexibility."

Other upcoming challenges facing U.S. cotton, McLendon noted, include: 1) ensuring China will comply with its commitments under Permanent Normal Trade Relations legislation to prevent harm to the U.S. textile sector, 2) building on the NCC's Quality Task Force initiative to find answers for improving cotton yields and quality and 3) utilizing Cotton Council International's market-building programs to capitalize on opportunities created by Caribbean Basin Initiative Parity legislation.