The U.S. cotton industry needs Congress and the administration to designate cottonseed as an “other oilseed” to help producers get through one of the worst economic crises they’ve faced in decades.
That was the message cotton industry leaders delivered during testimony to a hearing on “stress in cotton country” held by the House Agriculture Committee’s General Farm Commodities and Risk Management Subcommittee in Washington Wednesday (Dec. 9).
“With the lowest U.S. cotton acreage in more than 30 years, the smallest exports in 15 years, and cotton prices at their lowest level since the 2009 recession, economic pressure is mounting,” said Shane Stephens, vice chairman of the National Cotton Council and a warehouseman from Greenwood, Miss.
“Cotton demand, 10 percent below the peak observed in 2006, is struggling due to increased competition from synthetic fibers, and government support for international cotton production is increasing.”
Designation of cottonseed as an ‘other oilseed’ would make it eligible for the Agricultural Risk Coverage and Price Loss Coverage programs of the Agricultural Act of 2014. The cotton industry leaders said providing a safety net for cottonseed “is desperately needed to provide stability in the cotton industry.”
Cotton producers speak
Besides Stephens, the hearing panel was comprised of cotton producers Nathan Reed, Arkansas state chairman, American Cotton Producers, Marianna, Ark.; Shawn Holladay, a NCC director from Lubbock, Texas; Kent Wannamaker, president, Southern Cotton Growers, Saint Matthews, S.C.; and Cannon Michael, a NCC director from Los Banos, Calif., and Mike Wright, a Lubbock banker.
Wannamaker said that for producers of multiple crops, the implications of the unified payment limit will be particularly harmful as a portion or all of a producers’ payment limit could be used for marketing loan benefits as the crop is marketed throughout the year.
He urged that USDA be able to operate the marketing loan program as it did prior to the 2008 farm bill – and beginning with the 2015 crop.
Reed said production costs have continually risen over the past decade and that he feared the Mid-South region is at a tipping point with regard to cotton acreage and the remaining infrastructure.
“If some stabilizing policy is not implemented very soon, cotton acres are likely to continue their decline to the point that what is left of our infrastructure cannot survive,” said Reed.
Regarding farm bill implementation, Reed said a significant concern is USDA’s rulemaking to determine whether an individual is ‘actively engaged’ in a farming operation and eligible to participate in farm programs. He urged the Subcommittee “to work closely with USDA to ensure any changes to ‘actively engaged’ provisions adhere to the intent of the farm bill.”
Crop protection chemicals
Holladay pointed to another critical concern to profitable production -- availability of crop protection products and biotech traits. Texas operations also are experiencing cash flow problems and have been undermined by high input costs.
“Successive droughts in Texas, while well documented, are only part of the story,” Holladay said. “Even beyond the severest drought years, yields have continued to be extremely low while at a time when cotton prices have declined. As a result, farmers in our part of the country were totally bled out of liquidity by the end of last year. A great many struggled to get approved for financing for this year, with many forced to sell off land, and still others forced to quit.”
The West Texas producer also stressed the importance of a sound federal crop insurance program as a critical risk management tool. “However, it is important to understand that crop insurance benefits are not profit,” Holladay stated.
Much of Michael’s testimony focused on water management. The California producer stressed that more surface and groundwater storage “remains a critical piece of the solution to water shortfalls. Congress should streamline regulatory hurdles to assist in developing new environmentally sensitive water storage projects and other necessary water infrastructure improvements.”
Wright, executive vice president, Agricultural Lending for City Bank in Lubbock, said the projection of continued declines in market revenue coupled with elevated production costs are causing serious concerns among the lending community.
“The margins in agricultural production have been getting tighter every year due to higher production costs and lower commodity prices,” Wright stated. “Producers need above average yields just to break even. There is no doubt that some cotton farmers will not qualify for financing next year. We are concerned about our ability to continue to meet the lending needs of America’s cotton farmers in years to come.”
For more on the cotton industry, visit www.cotton.org.