On the Square

Agriculture's Biggest Threat

By Steve Verett
Plains Cotton Growers

Agriculture’s supporters in Congress have accomplished what many thought was nearly impossible in the face of reduced budgets, new demands and unprecedented opposition. They made sweeping reforms, kept virtually every major component of the highly successful 2002 Farm Bill safety net intact, and managed to gain more than enough support to override a Presidential veto.

Now that we’ve had time to say “Thank You” to Congress and Mother Nature for all they did to protect us from the vagaries of the market, it is time to look ahead to our industry’s next major challenge.

If you are familiar with the finer details of the newly passed 2008 Farm Bill, you know what it can do to help when the market or the weather goes from bad to worse. Unfortunately, we’re also becoming increasingly aware of what the bill won’t be able to do.

A Different Kind of Risk
Despite record prices for many crops, increased production expenses are taking a growing share of a farmer’s potential profit.

From an income perspective, we know that when the market falls – and it undoubtedly will – the 2008 Farm Bill safety net will be there to protect us beyond a predetermined set of price and yield trigger points.

Unfortunately, our crop inputs – especially those impacted by energy prices – are much higher than they were when our safety-net triggers were originally set.

Today, a fairly significant drop in prices for most commodities might not trigger assistance from our current, income-oriented safety net. Such a drop, however, would be more than enough to tip the balance from profit to devastating loss for many producers. This is especially true for cotton where we’ve seen the same cost increases, but have seen only a fractional improvement in price.

It’s clear that agriculture’s biggest threat has moved to the cost side of the ledger, while our primary safety net is designed to protect us against yield and price risks that manifest themselves only through reduced income.

When it comes to the financial risk associated with increased energy costs, however, we have to ask ourselves a very hard question: can we hang on long enough for our income-oriented safety net to kick in?

Solving the Energy Puzzle
Agriculture has been on the leading edge of the escalating energy price wave for several years. We believed – dare I say prayed – that the wave would crest and that energy costs would peak and then recede to a more manageable level.

That hasn’t been the case and it appears that a significant change in our nation’s energy policy may be required to reverse our current course.

For decades, advances in technology have allowed U. S. farmers to grow more with less impact on the environment.

Similar advances have also been made in the energy sector. If allowed into areas that are currently deemed off-limits, these advances could permit us to safely harvest more of our own abundant energy resources with only marginal environmental impact. Common sense says that is exactly what we ought to do.

In the end, we’re going to look to the same people who worked so hard on our behalf during the 2008 Farm Bill debate and ask them to take on the even more daunting task of tackling our nation’s outdated energy policy.

The energy crisis that engulfs our nation is finally invading every American pocketbook. For the sake of your farm and mine, let’s do all we can to ensure this situation provides the political momentum Congress needs to bring our nation’s energy policy into the 21st century.

Unfortunately, our crop inputs – especially those impacted by energy prices – are much higher than they were when our safety-net triggers were originally set.