Cotton Bawl

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Vilsack to cotton industry request: No.
Vilsack to Congress: No, but I’m telling others my decision first.

Cotton bawl. By now you have no doubt heard what was widely expected to happen: USDA Secretary Tom Vilsack, or more accurately, the Obama administration, said it could not do what farm-state lawmakers and cotton producers wanted: use discretionary authority in the 2014 Farm Bill to authorize cottonseed be eligible for the farmer safety nets – the Price Loss Coverage or Ag Risk Coverage (ARC) programs.

No authority, says Vilsack. The Ag secretary said if Congress wanted to help cotton producers, lawmakers would have to open up the farm bill (a no-no for farm bill winners, and a yes-yes for farm bill haters). He told reporters of “his” decision first (a no-no protocol move since lawmakers were waiting his decision).

Vilsack said Congress would have to authorize USDA to make cottonseed an “other oilseed” and make it eligible to qualify for assistance. With the other oilseed reference price being what it is, it’s easy to say cotton producers would have chosen PLC. You would not even have to pay certain Land Grant universities millions of dollars to analyze that one.

USDA already has the authority. Period. Any reading of the farm bill by someone other than an Obama-paid lawyer would say cottonseed is already authorized by the farm bill. Lawyers in government say what they are told to say.

What should really happen but probably will not is for the House Ag Committee’s able chairman, Mike Conaway (R-Texas), to have an oversight hearing on this USDA decision. Get the lawyers or whoever made that decision. Go behind the scenes. And get whoever drafted that provision in the 2014 Farm Bill to blow up the language and get an English teacher to communicate what it means.

Vilsack added another stipulation. Something rarely heard in Washington lately – there must be budget offsets. He said Congress would have to find funding to offset an estimated $1 billion per year costs in payouts. Funny how it is easy to find money for ethanol blender pumps and other things like an algebraic equation when you support something, isn’t it?

“We want to help,” Vilsack said. “We understand the challenge, but right now we’re a bit stymied by the barriers.”

Barriers? Come on, this is Washington, where billions of dollars can be found on the spur of a moment… if you want to.

The barriers Vilsack is referring to in this case are those relative to providing assistance via the Commodity Credit Corporation (CCC) as USDA has been prohibited from using CCC funds since Fiscal 2012 to provide emergency disaster assistance. “The question is whether or not there is any desire on the part of Congress to remove the barrier within the farm bill or to remove the barrier within CCC,” Vilsack said.

A bit of history on the CCC request and the CCC. The CCC is like an ATM machine for USDA… if you want to. But some Republicans in Congress got mad when USDA worked with then Senate Ag Committee Chairwoman Blanche Lincoln (D-Ark.), who just happened to be running for reelection, to tap the CCC to help fund a disaster program that, well, helped producers in Arkansas and some other farm states. It didn’t help Lincoln win, but the money was paid out.

The CCC angle gets more interesting because when Vilsack first became Ag Secretary he was very upset about the tapping of CCC for the drought aid, and how it was done.

Back to the authority issue. Conaway in a statement said he would “simply underscore that US farm policy absolutely hinges on Washington showing the same level of empathy for farmers and ranchers around the country irrespective of where they farm or what they raise.” While commending Vilsack for taking the time to consider the request that he and 100 other lawmakers have made, Conaway said, “The Department has not only the legal authority to designate cottonseed as an ‘other oilseed,’ but the responsibility to act, and I trust that the Secretary is sensitive to the situation and shares my commitment and the commitment of so many others that this matter must be meaningfully responded to in a timely way.”

Conaway didn’t stop there. “The heavy subsidies and protectionist policies put in place by China, India and other major players have deeply depressed the global cotton market and now seriously jeopardize the livelihoods of thousands of American farm families and an important sector of our nation’s economy.”

Again, a plea here for Conaway to call an oversight hearing. Let’s get all the facts out on how the Obama administration made its decision. One source told me, “I can imagine someone from the Office of Management and/or the White House saying, ‘How many Democratic lawmakers do we have in cotton states?’” Hmm.

Enter the National Cotton Council (NCC). The group said they were “extremely disappointed in Agriculture Secretary Vilsack’s comments … that USDA believes its legal interpretation of the farm bill does not provide the authority to make the cottonseed designation. We continue to believe, like a broad group of Members of Congress, that USDA clearly has this authority as described in the current farm bill. Our industry remains committed to pursuing a cottonseed designation and policy to help provide long-term stability to the industry.”

NCC said they are appreciative that Vilsack recognizes the need for assistance for the industry “given the current economic circumstances and his willingness to explore ways of providing meaningful and timely assistance to the industry.”

But where were then NCC lobbyists and top officials during the writing of the 2014 Farm Bill? Did they not know or do any economic analysis that would have shown cotton producers with no safety net if cotton prices fell to current levels? Or, as some charge, was NCC blinded by coming up with a program that satisfied Brazil so the World Trade Organization (WTO) case would go away?

It didn’t stop there. NCC and a major farm group lobbyist nixed the cotton reference price in the cotton program eventually included in the farm bill. That was another mistake, apparently because Brazil insisted the reference price must be deleted.

NCC then listed the sorry state of the cotton industry, noting cotton acreage was at the lowest point in more than 30 years, exports the smallest in 15 years and cotton prices at their lowest since 2009. NCC added, “Economic pressure is mounting in the industry.” Further, they noted that cotton demand is 10% below the 2006 peak and is struggling due to increased competition from synthetic fibers, and foreign governments’ support for international cotton production is increasing. To help address the current economic climate, we will continue working with Congress and USDA to find ways to help address the significant challenges facing the US cotton industry,” NCC said.

US cotton industry representatives have indicated they side with Conaway in terms of the question of whether Vilsack has the authority. In addition, they estimate the cost to be $300 million to $700 million per year as there would be some savings generated in the process of converting generic base over to a cottonseed base.

Bottom line: The question of authority to make the move is one the cotton industry believed was addressed in the 2014 Farm Bill and if there was any question on congressional intent, industry contacts say that’s why they generated the letter of support signed by 100 lawmakers – to signal congressional intent. Other long-time industry sources note the level of support mentioned by Vilsack of $1 billion annually would still be only around half of what cotton producers received over the last decade or so. While it’s always hard to compare payments among commodities, the level talked about for cottonseed would still be well below the level provided for other commodities on a percentage basis.

The U.S. cotton industry is hurting. If the Obama team really wanted to help, a way would have been found. There’s a clear history of that.

NOTE: This column is copyrighted material; therefore reproduction or retransmission is prohibited under U.S. copyright laws.