U.S. Lawmakers Ask Trump to Extend Cotton Payments, Citing China

July 18, 2017 03:12 PM
 
Bloomberg Cotton

U.S. lawmakers are arguing that a one-time-only subsidy to cotton farmers meant to help with low prices should be made permanent, given the aid foreign producers receive in other countries, according to a letter sent to President Donald Trump Tuesday signed by 109 members of Congress.

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 that were battling lower incomes and receiving less government aid under the 2014 farm bill.

Narrow Range

Subsidies to farmers in China, India and other nations make it necessary to maintain U.S. assistance to give domestic growers a chance to compete, according to the letter, an effort led by House Agriculture Chairman Michael Conaway. Bigger crops worldwide are curbing the outlook for American exports just as a move away from corn and toward cotton in the southern U.S. is boosting domestic production of the fiber.

“We can’t continue ignoring the economic turmoil of U.S. cotton farmers.," Conaway, a Texas Republican, said in an emailed statement. "While countries like China and India are pouring billions of dollars into subsidies for fiber production each year, America’s cotton producers have been struggling to scrape by without a safety net to help them."

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 percent of all 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 study.

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. Then-Secretary Tom Vilsack refused to do so, citing legal advice. 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.

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