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Payment Limits panel hears rest of the story

It was a long time coming, but commercial agriculture finally got its day in court in the form of a workshop held by The Commission on the Application of Payment Limits to Agriculture.

While there was only one reference to the dreaded E-word, it was clear from the outset that row crop farmers and their organizations saw the meeting as a chance to respond to the months of anti-row crop farmer propaganda from members of Congress and the Environmental Working Group.

“Let's face it, that Web site is the reason we're having this meeting today,” said Roger Johnson, commissioner of agriculture for North Dakota, referring to the EWG Web site that listed raw data on millions of dollars in farm program payments to farmers.

The daylong event was the only public hearing scheduled by the 10-member Payment Limit Commission, which was established as part of a compromise worked out on more stringent payment limit language in the 2002 farm bill. The commission is expected to issue a report on its findings in July or August.

National Cotton Council President Mark Lange, the hearing's lead-off witness, told commission members that the current law's payment limits “are sufficiently restrictive and burdensome to U.S. agriculture.”

Lange noted that the new farm bill tightened payment limits beyond those in previous farm acts and added an adjusted gross income test designed to deny program payments to individuals with off-farm income exceeding $2.5 million.

“Any further restrictions would be tremendously destabilizing to a sector that is only in its second year of recovery from the lowest commodity prices observed in 40 years,” he said. “More arbitrary restrictions on program benefits will also negatively affect U.S. cotton producers' ability to compete globally.”

The commission heard testimony from representatives of two producer-owned cooperatives who explained how their organizations rely on commodity certificates to market members' crops. Legislation proposed by Sens. Charles Grassley of Iowa and Byron Dorgan of North Dakota would eliminate the use of commodity certificates.

David Stanford, vice president for marketing at Lubbock, Texas-based Plains Cotton Cooperative, outlined the intricate procedures and communications required with USDA to ensure that none of its 28,000 shareholders exceed their individual payment limits.

Describing the Riceland Foods cooperative's marketing pool operations, Riceland President and CEO Richard Bell said the cooperative's ability to place commodities under CCC loan and redeem on behalf of members using certificates “is fundamental to the successful operations” of the marketing pools.

North Dakota's Johnson was the only witness who spoke in favor of tighter payment limits, arguing that the continued negative publicity over farm payments could further damage farm programs.

Views from the West

More stringent payment limits could have unintended consequences, John F. Bennett, a producer from Fresno, Calif., told commission members.

“In Fresno County, the typical cotton grower could hit the payment limits at around 400 acres if tighter restrictions were applied,” said Bennett. “Those growers will be forced to go to other crops and will hurt those as well.”

Bennett said it's not just farmers who would feel the impact of more restrictive limits. “My family members would lose, but, in our operation, you would have 50 other people, our employees, and their families losing.

Several producers and cotton merchants talked about the issue of changing the payment regulations two years into the seven-year Farm Security and Rural Investment Act of 2002.

“Most California cotton producers are already impacted by payment limits,” said Bruce Allbright, president of Fresno-based Allbright Cotton Co. “Many have made substantial investments based on the current farm bill. California agriculture is already on the wane, and changing the payment limit rules would do even more harm.”

Riverdale, Calif., cotton producer Mark McKean said the uncertainty over the passage of the 2002 farm bill caused him to delay the purchase of a new GPS system for his farming operation for two years.

“I finally bought the system last winter because I could figure in the payments under the new farm bill,” he noted. “I won't have the opportunity to go back and refigure the payments on that system if the payment limit regulations are changed.”

Responding to comments by economists that farmers might be able to rent out part of their land to reduce the sting of tighter payment regulations, McKean said such reductions would wipe out the efficiencies that producers have tried to build into their operations and make them less able to compete with cotton producers in countries like Uzbekistan and Australia.

“It would also be difficult to explain to your banker why you were suddenly planning to take 2,000 acres out of your operation,” he noted.

Trying to sell lenders on making loans under tighter payment limits could definitely be a challenge, said Ernie Schroeder Jr., of Jess Smith & Sons Cotton Co. LLC, in Bakersfield, Calif.

“We provide financing as part of our service to our cotton producers,” said Schroeder. “Tighter payment limits would definitely have an impact on our ability to make loans, and we tend to be more ‘farmer friendly’ than some non-agriculturally oriented lending institutions.”

Cotton producer Tom Teixeira told the commission members that his San Joaquin Valley farming operation has more payment limits because of the involvement of his two brothers and his father, but that they still “max out at around 400 acres per person.”

“Each of my partners and I are taking a huge financial risk by continuing to farm,” he noted. “We need higher limits, not lower limits if we are to continue taking those types of risks.”


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