When the marketing loan was included in the Food Security Act of 1985 (the 1985 farm bill) it only applied to cotton. None of the other commodity organizations understood it and basically said they didn’t want any part of it.
Fast forward 30 years, and the marketing loan has become one of the cornerstones of U.S. farm policy. Other commodity organizations fought to get it in the 1990 farm law, and its provisions have helped growers continue the orderly marketing of their crops while keeping them out of bankruptcy.
It’s also one of the few provisions of the old farm law that remains for cotton producers, and the U.S. cotton industry is determined to make sure that it continues to function as intended, according to Sledge Taylor, the new chairman of the National Cotton Council,
Taylor, a producer and ginner from Como, Miss., was a speaker at the 2015 Mid-South Farm and Gin Show in Memphis, Tenn. His speech included a reference to testimony by another NCC leader before the Senate Agriculture Committee a few days before the Gin Sow.
“The Council’s testimony emphasized that the payment limit that applies to multiple farm bill programs is an impediment to the proper function of the marketing loan,” said Taylor. “We further urged the Committee to work with USDA in finding a workable solution to the unintended consequences of this provision so the marketing loan program functions as intended.”
In the 2008 farm bill, marketing loan gains or loan deficiency payments as they are also known were not included in the payment limit cap on farm program benefits. For most of the life of the 2008 law, little use was made of the marketing loan because prices of most crops remained far above their marketing loan rates.
Since February, 2014, cotton prices have declined by roughly 25 percent, triggering some use of the marketing loan for the 2014 crop last October and November and increasing the probability growers will make more use of it in 2015.
The problem is that under the Agricultural Act of 2014, marketing loan gains and loan deficiency payments will count against the $125,000-per-entity payment limit, as will payments from its Agricultural Risk Coverage or ARC or Price Loss Coverage or PLC programs.
“We’ve been in discussions with USDA, and they’re working on a methodology to try to track how many payments, how many marketing loan gains or loan deficiency payments are attributing to a producer’s individual limit,” says Gary Adams, president and CEO of the NCC.
“But it’s a challenge because this is the first time we’ve had a combination of events occur: It’s the first time where we’ve had a limit apply to the marketing loan gain and LDP at the same time we’ve had direct attribution. So taking all of those payments back to the individual is a real challenge particularly when you have marketing loan gains and LDPs occurring on a real-time basis.”
Council leaders have said it may take changing the law to bring about a solution to the problem, and NCC delegates passed a resolution at their annual meeting asking Congress to reauthorize the use of marketing certificates to provide a remedy..
Taylor said the Senate Agriculture Committee testimony by NCC board member Ronnie Lee also indicated the Council plans to work with the USDA’s Risk Management Agency to expand Stacked Income Protection Program or STAX coverage to all cotton producing counties in 2016.
“We’re also asking RMA to provide additional flexibility by allowing STAX purchases by producers to be completely independent for irrigated and non-irrigated practices,” said Taylor.
Implementation of the new farm bill has been an ongoing task for the National Cotton Council, he noted. Not long after its passage in February of 2014, USDA began drafting language for such farm bill provisions as the cotton transition payment that occurred last fall.
“Early on, we were also successful in convincing policy makers of the importance of getting the bill’s insurance provisions implemented with the 2015 crop,” he said, after USDA announced that Actual Production History or APH would not be calculated for some producers in time for 2015. USDA officials later announced they would complete the calculations in time for this season.
Taylor said the Council conducted 74 meetings attended by 6,400 industry members across the Cotton Belt to help educated producers about the many facets of the new farm bill.
“The first round of meetings focused on the basics in the new farm law, while the second set of meetings provided an update on new provisions and laid out concrete examples to help producers make decisions on how to structure their coverages,” he said. Taylor said producers were told cotton’s safety net has undergone fundamental changes. “It is important to recall that cotton was the only commodity facing the consequences of an adverse ruling in the WTO, even before the 2014 farm bill was being developed.
“Brazil’s WTO case against the U.S. cotton program created enormous challenges for maintaining the countercyclical payment and marketing loan programs. In addition, the political and budget environment in Washington made it difficult to maintain the direct payment. The Council proactively responded to these pressures by advocating for STAX in the 2014 farm bill.”
For more information about the Council and the new farm bill, visit www.cotton.org.