USA - Cotton and dairy issues may key into farm bill debate
As the farm bill debate warms up, the issues of the safety net of two farm products that may be the most contentious for producers to witness will be over cotton and dairy. The debate over cotton almost began with the signing of the 2014 farm bill, under which cottonseed was placed under general authority to the secretary of agriculture. In December 2015, the National Cotton Council requested that then Secretary of Agriculture Tom Vilsack should help cotton farmers hurt by low prices by designating cottonseed an “other oilseed” pursuant to that general authority. Other oilseeds typically include smaller acreage crops such as canola and sunflowers. Vilsack responded that USDA lacked the authority to designate cottonseed as an “other oilseed” because Congress had specifically removed cotton from the Agricultural Risk Coverage and Price Loss Coverage programs. A summary review of agency authority to interpret statutes indicates Vilsack’s conclusion was likely the correct one, according to a study by Jonathan Coppess, Gary Schnitkey and Nick Paulson of the Department of Agricultural and Consumer Economics at the University of Illinois, as well as Carl Zulauf of the Department of Agricultural, Environmental and Development Economics Ohio State University. In the 2014 farm bill, Congress removed upland cotton from the list of covered commodities for purposes of the ARC and PLC programs, and converted cotton base acres to generic base acres. That means generic base acres do not receive ARC or PLC payments unless planted to a covered commodity. Contradiction Designating cottonseed as an “other oilseed” would appear to directly contradict the expressed intent of Congress in the statutory scheme for farm program payments by restoring cotton as a covered commodity and cotton base eligible for payments. In effect, the cotton industry was asking USDA to treat cotton lint and cottonseed separately for purposes of the ARC and PLC program payments. “The problem is that the program payments (i.e., statutory scheme) involve base acres and not the harvested crop. The base acreage program is agnostic as to what is planted and harvested on the land, including whether it is cotton lint or cottonseed,” the economists’ study said. “To see the difference, compare this treatment to that of the MAL program which explicitly distinguishes between cotton lint and cottonseed in multiple ways. Loans are made on a quantity of the actual harvested crop and acres are irrelevant, including base acres.” Presuming USDA lacks the authority to designate cottonseed as an “other oilseed” then the only path forward for the cotton industry is an act of Congress, and as things stand now, about the only chance for a change positive to the cotton industry would be through a new farm bill. “If Congress instead adds cottonseed to the list of covered commodities, it would have to also provide a reference price and authority for determining a payment yield but payments would require base acres enrolled in either the ARC or PLC program. The farm bill does not currently provide authority for updating base as a result of adding a new covered commodity,” the study said. “Adding cottonseed to ARC or PLC,” the economists said, “has the potential for recoupling payments to cotton production decisions through generic base acres, unless Congress also remedies that issue. One method would be to prevent any payments on generic base acres, even if they are planted to a covered commodity. “Without clarifying this matter, the presumption would be that farmers could claim generic base acres planted to cottonseed and receive ARC or PLC payments if triggered. Recoupling cotton supports would seem particularly problematic in light of the fact that cotton was removed because the WTO determined previous, decoupled supports trade distorting and in violation of U.S. commitments.” Politically, it would mean that a mere three years after removing cotton because of the threat of retaliation, Congress will have permitted cotton farmers to add cottonseed base and recouple payments to cotton planting decisions, the study said. All of which would be in addition to the assistance they already receive under the 2014 farm bill, including the ability to take out loans on cotton lint. “There are no simple resolutions to the cotton industry request for cotton-based ARC or PLC payments,” the economists said. “It appears that USDA lacks the authority to unilaterally designate cottonseed an ‘other oilseed’ but that Congress taking action presents significant problems as well. Much depends on the final details of any Congressional response but cotton farmers are currently receiving significant assistance from the 2014 farm bill and adding cottonseed may provide a windfall to them, including one recoupled to cotton planting decisions. “Congress, if considering adding cottonseed, may also have to consider further revisions to the 2014 farm bill such as precluding payments on generic base acres for any covered commodities planted on them.” Dairy issues Meanwhile, dairy producers are looking for changes in the Margin Protection Program created in the 2014 farm bill, since many producers say it has failed to deliver the protection farmers need and expect. One such farmer is Darrin Siemen of Harbor Beach, Michigan, who told the recent Senate Agriculture Committee field hearing at Michigan State University’s Saginaw Valley Research Center, at Frankenmuth, that while MPP “remains the right model for the future of our industry, changes are needed if Congress wants to prevent dairy farmers like me from going out of business.” Siemen, owner of Prime Land Farm in Harbor Beach, testified on behalf of his cooperative, Michigan Milk Producers Association, as well as the National Milk Producers Federation, of which MMPA is a member. Siemen said that the MPP is designed to help farmers insure against either low milk prices or high feed costs, but the way the program calculates the relative value of feeds such as corn, soybean meal and hay was “significantly changed” as it was written into law. This change “fundamentally altered the safety net designed by NMPF and other dairy leaders around the country. Unfortunately, as a direct result of these changes, the MPP safety net has failed to deliver the protection farmers need and expect,” Siemen said. Tight times He explained that in the first two years of the program, 2015 and 2016, farmers have paid $90 million in fees and premiums to USDA while receiving only $14 million in insurance payouts, even though margins have been tight during much of that period. This has led to a drastic reduction in the number of farmers paying premiums to selecting higher levels of margin protection. Most are now only paying the minimum annual $100 administrative fee, for which they receive only a low level of insurance coverage. “I am not asking for a program that guarantees a profit, nor do I want a program that will incentivize excess production,” Siemen said. “However, when Congress made changes to the program, rendering it ineffective, dairy farmers like me lost faith in the idea that MPP could serve as a viable risk management tool under its current formulation. If Congress makes changes to ensure that MPP more accurately reflects the actual costs of production for businesses like mine, participation in the program will increase.” Siemen said that in addition to adjusting the feed cost formula and the data sources for the prices of feed and milk, Congress should reassess the MPP’s premium rate structure, and consider expanding access to the Livestock Gross Margin program, a separate risk management tool offered by USDA. The combination of suggested changes to the MPP “will require this committee to make significant and necessary improvements to the program,” Siemen said, so that “it functions as intended and that producers participate in the program. A safety net is not a safety net if no one participates.” The 2014 farm bill expires in September 2018. Source - http://www.hpj.com
