NCC: Farm Programs Must Provide Income Support

The National Cotton Council outlined farm policy concepts it could support but urged Congress to continue cotton’s three step competitiveness provisions and the marketing loan program, including the issuance of marketing certificates.

February 15, 2001
Contact: Marjory Walker
(901) 274-9030

The National Cotton Council outlined farm policy concepts it could support but urged Congress to continue cotton’s three step competitiveness provisions and the marketing loan program, including the issuance of marketing certificates. "These provisions have enabled our industry to compete worldwide under most market conditions and have helped prevent excessive stock accumulations," Robert McLendon, a Leary, GA, producer, testified before the House Agriculture Committee. "We urge their continuation in new farm policy."

McLendon presented NCC’s farm policy recommendations for upland and Extra Long Staple (ELS) cotton to that panel here today. While not offering an industry consensus on the loan rate, he said the NCC believes its leadership will be able to provide a timely recommendation with respect to loan formulas and/or rates during the course of new farm bill discussions.

McLendon, who chairs the NCC’s Executive Committee, told the panel the NCC could support a farm policy that relies on a combination of coupled and decoupled payments. He said this combination, which would feature improved support levels, was needed to provide adequate income support in a cost-effective manner and meet U.S. cotton’s international trade commitments at the same time.

"Our goal is income support from programs and the market that will provide cotton producers with a return equivalent to what they have received in recent years from all sources, including emergency assistance," he testified. "With the sharp jump in input and production costs we have seen recently, it is even more important that we craft an improved safety net for cotton farmers."

He said that the NCC encourages as much reliance on decoupled, AMTA-like (Agriculture Market Transition Act) payments as feasible. Additionally, the NCC recommends some type of counter cyclical income support that is as coupled and as commodity-specific as practical without exceeding the support ceiling agreed to by the U.S. in the World Trade Organization (WTO).

Specific concepts NCC members can support, he noted, include crop-specific payments that are triggered when 1) the price of a covered commodity falls below a specified threshold or 2) when revenue for a covered commodity falls below a specified threshold. If necessary to comply with U.S. obligations under WTO, he said, the NCC could support a market-basket approach, whereby payments are triggered when gross revenue for a specified number of commodities falls below a threshold level. He said, though, the NCC has more concerns with this approach, which could see years in which the revenue for an individual commodity would be out of sync with the commodity market basket.

"All of these programs share the important common advantages of cost effectiveness as compared to a purely fixed payment program and predictability as compared to the emergency assistance packages Congress has approved during the past three years," McLendon said. "I want to stress that we support a coupled approach to support as an addition to the current AMTA mechanism – not as a complete replacement for it."

McLendon also encouraged the lawmakers to retain as much cropping flexibility as possible and to continue assistance to offset low cottonseed prices. He also urged elimination of payment limits, or – at a minimum – retaining the three-entity rule and provisions for Commodity Credit Corporation loan redemptions with marketing certificates and providing for separate and reasonable limits for each category of benefits.

"The National Cotton Council remains opposed to payment limits in any form," he said. "They are both counterproductive and discriminatory. Limiting farm program benefits on the basis of size tends to disadvantage the larger, more efficient farming units, causing them to be broken up into smaller units that are less efficient and less capable of surviving in a global market when, and if, subsidies are discontinued."

McLendon stressed that until amendments to long-term agricultural policy are enacted, it is important that Congress continue to address producers’ immediate, short-term financial needs. He urged a continuation of relief similar to the emergency assistance enacted during the last three marketing years.

He also provided NCC’s recommendations regarding ELS cotton policy: 1) continuation of the ELS non-recourse loan program without amendment, 2) continuation of the ELS competitiveness provisions authorized in the FY 2000 Agricultural Appropriations Bill – but with full funding for that program and 3) the establishment of some form of counter-cyclical payments commensurate with those that may be established for upland cotton.