Cotton Harvester enio_q/ThinkstockPhotos

Lawmakers ask Trump to extend cotton subsidies

Cotton Ginning Cost Share Program was billed as temporary measure.

by Alan Bjerga 

U.S. lawmakers and rural businesses are arguing that a one-off subsidy meant to support cotton farmers should become a permanent fixture because of the aid countries including China and India provide to their own producers, according to letters sent to President Donald Trump Tuesday. 

The so-called Cotton Ginning Cost Share Program gave producers $300 million last year to help them cover fiber-processing costs, with each farmer receiving $8,100 in aid, on average. It was billed as a temporary measure to help producers who were battling lower incomes and receiving less government aid under the 2014 farm bill.

Subsidies were cut because of a World Trade Organization ruling against the U.S. cotton program, which lawmakers will need to tiptoe around while creating new aid. Still, farmers facing low prices need assistance because of how other governments help their producers, said House Agriculture Chairman Michael Conaway, who led 109 House lawmakers in signing the letter from that chamber.

“Cotton farmers have experienced three, four years of really hard times," Conaway said in an interview. "We’ve got to find a way to heal them up." 

Similar letters were sent to the president by a group of 26 senators, cotton groups including the National Cotton Council, and more than 1,000 rural banks and businesses.

It’s been a tough few years for U.S. farmers, with a worldwide glut of major crops. The surpluses are curbing the outlook for American exports just as some farmers in the south move away from growing corn in favor of cotton, a trend that’s boosting domestic production of the fiber.

Farm Aid

U.S. cotton producers aren’t projected to receive any government farm payments in the current fiscal year, according to a Congressional Budget Office estimate last month. That’s tied to changes made in the last farm bill, approved in 2014, that drastically reduced subsidies as part of a settlement with Brazil over a World Trade Organization case the U.S. lost. In contrast, producers of corn, the biggest U.S. crop, may receive $4.2 billion in aid this year.

Globally, the fiber is a heavily subsidized crop, with 71% of world production receiving direct aid, according to a 2016 report from the International Cotton Advisory Committee. Aid worldwide for the 2015-2016 marketing year was estimated at $7.2 billion, down from a record $10.7 billion the previous year, according to the study.

China is the world’s biggest subsidizer, giving $5.3 billion in aid during that time, according to the report. India’s aid is less direct, coming in the form of subsidies for farmers to cover fertilizer, electricity and other costs.

China has been cutting back on price supports over the past three years, reducing production incentives and creating opportunities for exporters including the U.S., Brazil and Thailand. Even with those changes, "the support still isn’t zero," Conaway, a Texas Republican. said. "As long as that’s out there, I don’t want to force our folks to do without something in anticipation of what China decides to do or not do."

Brazil Agreement

Still, with Brazil and the WTO watching for any U.S. farm-program changes that might upset the agreement, the government must tread lightly in efforts to aid growers.

"We’re assessing what the nature of these proposals are, and we will continue to assess whether or not these programs fit within the parameters of the 2014 agreement," said Mark Langevin, director of BrazilWorks, a consulting firm that has Brazil’s cotton association as a client. Chinese officials weren’t immediately available for comment outside of regular business hours.

An industry push to make cottonseed oil, a byproduct of the ginning process that’s used in cooking, eligible for farm aid has foundered over legal concerns from the U.S. Department of Agriculture, which would have to add the designation. Former Agriculture Secretary Tom Vilsack refused to do so, citing legal advice. His successor Sonny Perdue, who as governor of Georgia led the second-biggest cotton producing state, has taken the same position.

The cost-share program has fared better. The House Agriculture Appropriations bill approved in committee last week recommends re-instituting that program this year.

--With assistance from Marvin G. Perez.

To contact the reporter on this story: Alan Bjerga in Washington at abjerga@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net

Jim Efstathiou Jr.

© 2017 Bloomberg L.P

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