The National Cotton Council is asking Congress to pass a farm bill that will provide “meaningful” changes to reference prices and other areas of the farm law that could help producers and the country’s few remaining textile mills survive.

“This year’s crop is covered by the one-year extension approved by Congress and signed by President Biden late last year,” said NCC Vice Chairman Patrick Johnson, speaking at the opening Ag Outlook Session at the Mid-South Farm and Gin Show.

“However, as we have stressed to Congress, simply extending the current bill does not provide an adequate safety net given today’s costs of production,” he said. “It is critical that we have a new farm bill that increases reference prices to a more meaningful level. We are also asking it to remove the prohibition between purchasing STAX insurance and enrolling in the PLC program.”

Johnson, a producer from Tunica County, Miss., delivered the National Cotton Council update speech traditionally given by its new chairman because this year’s new chairman, Joe Nicosia, executive vice president of Louis Dreyfus Company LLC, also, traditionally, speaks on the “Outlook for U.S. and World Cotton” at the Gin Show.

Low demand

While New York cotton futures have improved in recent days, Nicosia and other analysts have been depicting a cotton industry that is beset by low demand for apparel products and production costs that have not come down much from the highs set in the 2022-23 season.

Congress, meanwhile, has taken almost no action to address the problems facing agriculture or other segments of the economy; a situation that is unlikely to change as members begin campaigning for re-election.

“The Council is also advocating for improvements in the marketing loan program,” said Johnson. “These include both increases in the loan rate and several adjustments to the repayment provisions for the marketing loan. It is also important to extend marketing loan provisions to extra-long staple cotton loan.

“Finally, we are seeking to restore the textile mills’ economic assistance rate to its original value of 4 cents, up from the current 3 cents per pound.”

Over the past year, Johnson said, Council staff and industry leaders have met with congressional offices in and out of the Cotton Belt to convey the industry’s recommendations for what would have been the 2023 farm bill and is now more likely to be the 2025 farm bill.

“I want to commend the work of the Council’s Washington, D.C.-based staff for their work in solidifying political support for the industry’s priorities,” he said. “However, finalizing an effective farm bill that works for all the cotton industry remains a formidable challenge.”

Budget resources

One of the main hurdles facing the Senate and House Agriculture Committees is the lack of additional budget resources. While increasing reference prices, marketing loan rates and textile mills economic assistance will take more money, House leaders have been pushing for across-the-board spending cuts in most government programs.

“In addition, it will be difficult for the Agriculture Committees to move forward until the House and Senate reach agreement on government funding for the remainder of the fiscal year,” Johnson noted. “If those negotiations drag further into March, the calendar becomes even more problematic since there will be fewer legislative days remaining prior to this fall’s elections.”

He said the Council expects the House Agriculture Committee to move legislation at some point over the next two or three months, while action in the Senate Agriculture Committee might not occur until summer.

“Council staff will remain engaged at every step of the process, but we must acknowledge that this process could extend into 2025,” he said.

On a more positive note, congressional leaders have passed legislation avoiding a partial government shutdown that would have included the U.S. Department of Agriculture on March 1 and were working on an extension that would keep the remainder of the government open after March 8.

“Questions regarding a shutdown bring great uncertainty to our industry as the functions of the marketing loan program would not operate in the event of a shutdown,” he said. “The Council is urging congressional leaders to provide certainty to federal agencies and to our industry by funding the government through the remainder of Fiscal Year 2024.”

Tax reform

Johnson said the Council is also concerned about stakes for Congress taking action on tax reform prior to 2025 when some of the major provisions of the Tax Cuts and Jobs Act of 2017 are set to be phased out.

Unless Congress acts this year, farmers and other members of the agriculture sector could see a 50% reduction in the estate tax exemption, continued phasing down of bonus depreciation, elimination of the 20% tax deduction on pass-through business, corporate tax rates rising by 14% and income tax rates rising by at least 1% to 4% for all brackets.

“The Council is supporting legislation by House Ways and Means Committee Chairman Jason Smith and Senate Finance Committee Chairman Ron Wyden who recently crafted a bipartisan tax reform package pairing an expansion of the child tax credit with business tax benefits, including 100% bonus depreciation and immediate Section 179 expensing,” he said.

“However, while the Smith-Wyden bill passed the House of Representatives, it is unclear whether it could pass the Senate. If nothing happens in 2024, tax reform will be critical next year and will be heavily influenced by the make-up of the new Congress.”

Johnson also outlined several regulatory and trade issues the Council is following, including a recent U.S. District Court decision vacating the label of over-the-top applications of dicamba on herbicide-resistant crops and an experimental Endangered Species Act Workplan that could have a “severe impact” on growers’ ability to access and use crop chemistries.

“The Council is urging the EPA to appeal the district court ruling,” Johnson said. “We very much appreciate EPA granting growers a flexible existing stock order that will allow growers to access dicamba already in the retail supply chain.”