NCC Gears Up for Fight Over Obama’s Budget Cut Proposals
June 9, 2009 The National Cotton Council (NCC) is mounting a concerted effort to thwart President Obama’s proposed reductions in direct payments, including cotton storage credits. In a recent letter to Capitol Hill, the NCC set forth the industry’s case to stand pat on the provisions of the 2008 Farm Bill. The letter stated that:
“We are writing to convey the strong opposition of the U.S. cotton industry to the cotton policy changes and budget cuts proposed by the Administration in its 2010 budget request and to urge you to oppose any efforts to include amendments to the 2008 farm law in the FY10 appropriations measure. The Administration’s budget proposal calls for nearly $16 billion in cuts to several farm programs that were recently authorized in the Food, Conservation and Energy Act of 2008-legislation that was two years in development and designed to comply with strict pay-go rules.
“Many of the proposed cuts will directly affect cotton producers by adversely affecting the competitiveness of the U.S. cotton industry when it is most vulnerable. The policy changes necessary to implement the budget proposal would require reopening the 2008 farm bill, undermining farmers’ confidence in consistent, predictable farm programs. Further, many of the proposals contained in the budget submission have previously been considered and rejected by Congress.
“Of specific concern to the U.S. cotton industry are the recommendations to institute a new cap on total farm program benefits, to institute a new arbitrary eligibility test based on gross revenue, and to terminate cotton storage credits. We urge you to reject all of these recommendations.
“Even though Congress just completed a thorough reform of payment limitations and eligibility provisions as part of the farm bill, the Administration is proposing an ill-advised new cap on total benefits in order to limit the marketing loan benefits available to producers when prices are low. Marketing loan benefits are of critical importance to all farmers and are provided only when prices are very low — the very time when producers need the assistance most. The Administration’s proposal would greatly increase the risk associated with lower prices and could significantly affect the ability of producers to obtain financing for their operations.
“Likewise, the Administration’s recommendation to institute a new eligibility test for direct payments based on gross revenue is inconsistent with the new, lower gross income tests enacted in the 2008 farm law. Gross revenue of a farming operation is not a measure of net profitability and cannot be any indicator of economic need. The proposed gross revenue limit is so low that it will negatively impact many family farming operations — even though those operations may be losing money or barely breaking even. It is a measuring stick that bears no relationship to the variable it purports to be measuring. The proposal to terminate cotton storage credits should also be rejected. The 2008 farm law contains provisions designed to improve the flow of cotton and to ensure that U.S. cotton is marketed competitively. The farm bill already provides for steady reductions in cotton storage credits over the life of the law. Unlike most bulk commodities,cotton is stored identity preserved, must be stored in approved warehouses, and must be stored using approved packaging materials. Cotton storage costs are substantial and can significantly undermine the competitiveness of U.S. cotton. Cotton storage credits are necessary to promote orderly marketing and discourage cotton forfeitures in years when prices are low. The storage credits are only provided in years when cotton prices are low.
“Cotton producers are also concerned about the Administration’s proposals to increase the costs growers must pay for federal crop insurance. Crop insurance is a key part of a grower’s financial risk management plan. In many parts of the Cotton Belt, crop insurance is a prerequisite for securing production financing. It is important that no changes be made that weaken the effectiveness of this important risk management tool.
“Finally, we are also concerned that the Administration is proposing to cut funding for the Market Access Program (MAP) by 20%, even though this program is WTO consistent and is central to our efforts to maintain and grow U.S. export markets.
“It is important that farm programs be predictable, logical, and helpful to producers when prices are low and they need help the most. Many of the recommendations contained in the Administration’s budget submissions violate these principals. We urge you to oppose any re-opening of the 2008 farm law and to reject the harmful policy changes proposed by the Administration…”
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