April 16, 2009
John Maguire says the money spent on farm bill programs is, by most any measure, a good deal for the American people as well as the U.S. economy and says the National Cotton Council will continue to urge Congress and the Obama administration to implement the 2008 law as it was intended.
“The stimulus package exceeds $4 trillion. In 10 years the farm bill will cost $728 billion. That’s 0.4 percent of the total federal budget,” Maguire, NCC senior vice president for Washington operations, said recently during the Plains Cotton Growers, Inc., annual meeting in Lubbock.
“We’re a bargain at any price,” Maguire said. “We played by the rules in the 2008 farm bill debates and we will remind people of that and urge them to implement the law as it was intended.”
Maguire said cotton and agriculture in general face challenges as Congress wrestles with budgets during a recession. Pressure on farm legislation, including pressure from the Brazil cotton case in the World Trade Organization, also poses challenges.
And agricultural interests must deal with a new set of players in the 111th Congress. “We have to adapt to changes with a Democrat administration, a huge Democrat majority in the House, and a Democrat majority in the Senate that’s close to 60 members, a magic number.”
Maguire said of the 21 members of the Senate Ag Committee, only four are from the Cotton Belt. Of the 21, 12 are Democrat and nine are Republican. In the House, 28 members of the Ag Committee are Democrat and 18 Republican, with 16 from the Cotton Belt and three of those from Texas.
“But we have 19 new members who were not there for the most recent farm bill debate. We have a challenge with turnover,” he said.
Maguire said a big plus in the 2008 farm legislation was preservation of the structure of the cotton program. He also cited a more accurate world adjusted price and regaining storage credits as positive achievements in the last farm program.
“Economic assistance for domestic mills also helped,” he said. “We want to preserve what’s left of our domestic textile industry. It uses 4 million bales of cotton a year.”
Secretary of Agriculture Tom Vilsack’s decision to extend program sign-up for Direct and Counter-Cyclical Program (DCP) and the new Average Crop Revenue Election (ACRE) program until Aug. 14 was a good decision for farmers.
But there are problems and more challenges to face. “Payment eligibility (in the 2008 law) was the most significant reform since 1989. It could have been worse,” Maguire said. “We had to compromise on a very bad proposal.”
He said the administration’s budget resolution “suggested changes to reopen the farm bill and to deny direct payments to farms with a total gross revenue exceeding $500,000.”
Attempts to revisit payment limitations, however, have apparently been thwarted by Congress. “The House and Senate proposal had no provisions for changes in payment eligibility,” Maguire said. “But this will not be the last time we face this fight.”
He’s also wary of cap and trade provisions to regulate carbon emissions. “That proposal could offer some revenue to farmers,” he said. But increased cost of some inputs (energy, for example) could offset any gain. Cap and trade would generate some $650 billion for the government.
Maguire said funding for essential farm programs also may be in jeopardy. “Even with the stimulus, it’s hard to find funds for the Boll Weevil Eradication Program and pink boll worm eradication. We’re just about four years away from eradicating the boll weevil and we need federal cost share to finish.”
He said the cotton industry also needs more funds for the Lubbock Gin Lab to add back a position. “They do important work with air quality and other efforts,” he said. Funding for the Farm Service Agency is also short. “We need resources to upgrade FSA and every administration in recent years has underfunded the agency.”
The same goes for the Foreign Agriculture Service, which provides “incredible resources.”
Maguire said the industry needs commodity market regulations that will prevent last spring’s erratic market movements with no fundamentals to support them. “The Federal Trade Commission needs more authority and the process should be more transparent,” he said.
A proposal has passed a House committee but has to go before other committees before it reaches a floor vote.
Maguire said WTO talks “have been suspended but not ended.” The United States trade representatives did not sign on to the last WTO proposal because they saw “no benefits.”
The Brazil WTO case remains a thorn in cotton industry’s flesh. Following the unsuccessful challenge to Brazil’s case, the United States ended Step 2 and changed the export credit program. But in June 2008, the United States was found not in compliance, even with changes. Last fall Brazil claimed the right to take counter-measures. A recent meeting by an arbitration panel heard Brazil compensation claims of $1.3 billion for US Export Credit Guarantee (GSM), $350 million for Step 2, and $1 billion for market loan and counter cyclical payments.
“Next will be an April or early May ruling on whether Brazil can claim the $2 billion to $3 billion it wants. This puts the focus on cotton at a time of budget pressure,” Maguire said.” And there is more than cotton at stake.”
He said the ruling could allow Brazil to impose a tariff on U.S. imports to recover losses. “But that could hurt Brazil’s own economy, so they may ask to ignore intellectual property rights. If granted, that could affect manufacturers of DVDs, drugs and other products,” Maguire said. “That will bring other industries into the fray.”
He said a big challenge for the United States is that currently arbitrators must make decisions based on the situation up to 2006. “They can’t consider changes in the farm bill, acreage, price, etc.”
He said NCC will go to U.S. trade representatives and request that they ask for the right to consider today’s situation instead of the situation prior to 2006.
He said an environmental issue also poses threats to cotton farmers. A recent court ruling requires anyone applying a pesticide over or near water to have a permit. “This is a far-reaching decision,” Maguire said. “The ruling was made by only three judges and we will ask that all 13 judges review the issue.”
NCC also is watching transportation issues and an immigration regulation that changed H2A requirements. “Ginners are objecting to the change,” Maguire said.
The Consumer Products Safety Commission wants to include testing for lead in children’s clothing, although there is no lead in cotton material or processing. Zippers and other parts may contain lead.
Maguire said the industry must remain vigilant and engaged in efforts to preserve a good farm program.
“The reason we can be effective,” he said, “is the dedication and commitment farmers have to the industry.”
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