Mark Lange didn’t sound like a man on the cusp of retirement when he addressed the second annual Red River Crops Conference recently in Childress, Texas.
Lange, who retires as president and CEO of the National Cotton Council at its annual meeting Feb. 7-8, was occasionally animated in voicing his frustration with USDA and other government agencies for what he sees as a failure to protect the U.S. cotton industry.
Particularly vexing, he said, are questions about how payment limits will affect revenue from cotton marketing loan gains, definition of “actively engaged,” and lack of activity in pursuing grievances before the World Trade Organization against unfair cotton price support from both China and India.
Lange also encouraged farmers to look closely at new farm bill programs and evaluate the best options for their farms.
Payment limits, set at $125,000 per entity in the new farm law, may be a patch of weeds for cotton farmers. “This is one that bites,” Lange said, “especially if cotton prices drop from current levels. It could be painful.”
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He said the problem for cotton is that most growers will not know what their marketing loan gain (MLG) will be until long after the crop has been sold. Cotton producers have several marketing options, including selling at harvest but also selling through cooperatives and through other vehicles.
He warned that cotton producers could collect an MLG on top of payment from the Price Loss Coverage (PLC) or the Agricultural Risk Coverage (ARC) programs and exceed that payment limitation. “They may not know until March of 2016 if they were overpaid, and if so they have a limited time to pay it back.”
Market disruption possible
Lange said the way the payment limitation is structured could disrupt the way cotton farmers sell their crops. “We are trying to convince USDA that payment limitations could change how growers market cotton,” he said. “We don’t want USDA to treat growers differently because of the way they market their crops. We are not sure how USDA will correct this situation. “
It should not be that difficult, he added. “We are frustrated. This issue can be solved if they sit down with someone with computing skills.”
Lange also said the NCC is “working on a legislative solution,” but adds, “that will not be easy.”
Getting a final definition of “actively engaged,” and “eligibility” also causes frustration, Lange said. “USDA has said they will provide this definition ‘soon.’ But we are not certain if a definition will be in place for 2015.”
Trade issues and the government’s failure to pursue relief also create consternation in the cotton industry. “China is providing extraordinary support to cotton farmers,” Lange explained. “Support is more than $1.40 a pound. The Council is trying to get the U.S. government to go after China through the WTO to have them honor their obligations to notify WTO of domestic support.”
China has failed to do that for many years. In China’s 2001 WTO agreement, they pledged that support would not exceed 8.5 percent of the value of the product. Lange said that level currently surpasses 30 percent.
He noted similar issues with India, which has also failed to notify the WTO of domestic support for several years. “It takes action by the U.S. government to address these issues,” he said.
Lange said an anti-dumping claim by the Turkey government also threatens to undermine an important market for U.S. cotton. That issue, he explained, “is politically motivated,” and stems from an anti-dumping claim from the U.S. against Turkey concerning steel. He said the NCC is working with Turkish mills to help solve the problem. “Turkish mills are good customers,” he said, “and they want the Turkish government to stop.
Rule of Origin
“We also need a Rule of Origin in place in the Trans Pacific Partnership trade agreement,” Lange added. Without that, potential for U.S. cotton exports could be severely damaged.
The Council will follow numerous other issues this year including tax reform, immigration reform, farm bill implementation, regulatory issues and support for pest control programs such as boll weevil and pink bollworm eradication. The Council also urges USDA to maintain funding for the three cotton gin research labs remaining in the Cotton Belt.
Lange said the pollinator and neonicotinoid issue will continue with an effort to switch emphasis to the state level and away from federal oversight. “Each state has different issues,” he said, “and a state-by-state program allows producers and pollinators (including beekeepers) to be more active in finding solutions. This has proven successful.”
The Council is working with other farming coalitions to “get reasonable rules out of the Environmental Protection Agency regarding Waters of the United States.” He said the industry would like to see a “more reasonable approach on pesticide restrictions” in the Endangered Species Act.
The council supports federal oversight for GMO labeling.
Lange said tax reform and immigration reform may be legislative priorities but difficult for the 114th Congress. He also noted that the Council will have a new educational opportunity with a lot of new players in Congress.
“With 58 new members in the House, we have an education opportunity and a lot of work,” he said. “In the Senate, only one Democrat represents the Cotton Belt and is not on the ag committee.”
On the House side, Lange said Rep. Colin Peterson, ranking member of the House Agriculture Committee, “understands production agriculture.” He said Sen. Pat Roberts, Chairman of the Senate Agriculture Committee, “has no trouble talking about payment limits and eligibility.
“We have good friends on the Senate Ag Committee from the Cotton Belt, and we have good support in the House from cotton states; we also have some Democrats in the House from the Cotton Belt.”
Lange said the agenda for the 114th Congress will include budget concerns although “the deficit is shrinking. It may not be as bad but it is still an issue. The budget goal is to balance within 10 years.”
For the National Cotton Council, “regulatory relief will be a top priority,” in Congress. He concedes that even with Republicans in charge of both houses, regulatory reform will remain difficult and subject to veto.
Farm bill priorities
Lange said cotton farmers should be working diligently in the next few weeks to evaluate farm programs and to determine how to use the new cotton safety net—either the Stacked Income Protection Plan (STAX) or the Supplemental Coverage Option (SCO), both insurance-based programs that supplement regular crop insurance plans.
“Under the new farm law we no longer have cotton base,” Lange said. That means cotton is no longer a covered commodity and does not have the same safety net as covered crops. Old cotton base acres are now “generic base,” and provide farmers with flexibility. “Take time to understand how that flexibility works on the farm,” he said.
In what was one of Lange’s last presentations as president and CEO of the National Cotton Council, he pulled no punches in pointing out the frustration the industry feels regarding regulation, trade imbalance and sometimes unfair treatment of cotton in issues such as payment limitations.
Cotton representatives from Oklahoma and the Texas Rolling Plains showed their appreciation for Lange’s devotion to their industry and his long tenure with the Council by presenting him with a bronze statue of a cowboy saddled up and riding “hell-bent for leather,” into some unknown challenge.
Lange’s presentation seemed to indicate that riding peacefully into the sunset was not on the agenda.