January 10, 2007

3 Min Read

Writing the next farm bill may have just gotten a little more difficult. A few months ago, Rep. Collin Peterson, D-Minn., announced he was introducing legislation to extend the 2002 farm law for one to two years, depending on progress in the World Trade Organization Doha negotiations.

The proposal by Peterson, who has since become chairman of the House Agriculture Committee, made sense, particularly to cotton and rice producers who have come to see the current law as the best thing next to dollar cotton or $5 rice.

But any chances of keeping the current law for another five years appear to be growing slim. First off, grain producers, unhappy because they have mostly been shut out of the 2002 farm bill's counter-cyclical program payments, have begun promoting a new farm bill concept.

The proposal, written by the National Corn Growers Association's Public Policy Action Team, maintains fixed, direct payments but also creates a new program called base revenue protection and replaces the counter-cyclical payment and non-recourse loan programs with a revenue counter-cyclical program and a recourse loan.

How anyone who could book corn for delivery next fall at $3.50 per bushel or higher could be unhappy is difficult to imagine, but the corn growers say the marketing loan and counter-cyclical payments don't help much when you don't have a crop, and they think a crop-insurance-like program would protect against such losses.

When Georgia's Saxby Chambliss was chairman of the Senate Committee on Agriculture, Nutrition and Forestry, cotton and rice producers might have shrugged off such ideas. But with Tom Harkin of Iowa, the nation's leading corn-based ethanol-producing state, chairing the committee, a revenue assurance bill may get a real hearing.

The situation became a little more complicated right before Christmas when the American Cotton Shippers Association announced it would seek “legislative and administrative alternatives” to the Commodity Credit Corp. loan program.

U.S. cotton merchants have never been enamored with the CCC loan. The ACSA fought against the 18-month loan for years before finally getting Congress to reduce the term to 10 months. Merchant pressure helped the marketing loan gain traction in the 1985 farm bill after low prices led to 12 million bales becoming stuck in the regular CCC loan.

Once Congress passed legislation allowing growers or merchants to redeem the cotton at world prices, sales increased dramatically. “We sold a season-and-a-half's worth of cotton in 1986,” said ACSA's Neal Gillen. “We sold it all once. It could come out of the CCC loan at the world price.”

Gillen says cotton shippers are looking for another marketing loan-like tool to help them move cotton out of the loan and back into the market. Cotton producers, on the other hand, will be reluctant to give up a tool that has helped boost prices in times of over-production.

With producers and merchants and cotton and corn facing off, what could have been a cakewalk will probably settle into a real debate.

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