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Southern crops rise in farm bill
Nostalgic prints of cotton farming scenes hang from the walls of Danny and Jo Anne Murphy's farm home outside of Canton, Mississippi. In one, families crowd a country road to watch a crop duster swoop over the growing crop. In another, mule-drawn wagons with cotton bales gather at a cotton gin.
The view from the Murphy home is hardly nostalgic. Wheat has headed out in their fields along Pisgah Bottom Road, next to some corn struggling in waterlogged soil. Danny Murphy is the current president of the American Soybean Association (ASA). He hasn't grown cotton since 2006 on his 1,500-acre farm.
Yet, as a Southerner, Murphy understands the challenges facing rice and cotton, crops that remain a significant part of Mississippi's economy. Northern members of Congress who oppose efforts to raise their farm bill subsidies sometimes malign them. Last year's Senate version of a farm bill dropped the counter-cyclical program. This year, with Senator Thad Cochran of Mississippi as the ranking member on the Senate Agriculture Committee, something similar, called the adverse market payments (AMP) program, is back in as part of a bill the committee meets to consider tomorrow. The bill has a slightly less expensive version of agriculture risk coverage (ARC), a revenue protection favored in the Midwest. It also has a stand-alone revenue protection program for cotton in the crop insurance title of the bill.
The Senate's bill doesn't give farmers a choice between AMP and ARC. If those programs wind up in the final version of a farm law, you would be in both. But the new AMP program uses the target prices from the 2008 farm bill for a "reference price" for all covered commodities except rice and peanuts. They get a higher "alternative price." The new reference price keeps the target prices of $2.63 a bushel for corn and $5.80 a bushel for soybeans. For rice, the Senate's bill puts the alternative price at $13.30 per hundredweight, a 27% increase from the 2008 farm law's $10.50 target price. For peanuts, the new alternative price of $523.77 per ton is almost 6% higher than the 2008 loan rate of $495 a ton.
"Really, the target prices are kind of designed for those crops," said Murphy, pointing out that he hasn't gotten a counter-cyclical payment for his crops for eight or nine years.
ASA and some other commodity groups opposed linking target prices to planted acres. Instead, the Senate bill ties them to a crop's historical base acres.
"We were really happy to see it was not tied to planted acres," Murphy said. The concern was that in some years when prices are depressed, farmers might decide what to plant partly to get adverse market payments.
Soybeans "have really benefitted from freedom to farm," said Murphy, referring to the 1996 Farm Bill that decoupled payments.
The national crop base for soybeans is about 50 million acres, Murphy said, but this year the planted acreage is 77 million. "It may be more with the weather," he added.
Rice is trending the other way. In Mississippi the historical rice base is between 400,000 acres and 500,000 acres, Murphy said. "It was probably the number two value crop in Mississippi in the mid-1970s and 1980s."
Last year growers in the state planted 126,000 acres of long grain rice, and this year's planting intentions report puts the crop at 110,000 acres.
"The rice people say it's a really political crop," Murphy said. Governments around the world intervene in rice markets. So does the U.S., with Treasury Department restrictions on credit sales to Cuba hurting U.S. exports. "That's a huge natural market for the United States," Murphy said.
As U.S. domestic cotton milling has fallen to foreign competition, the cotton industry has become more dependent on exports to China, India, and Pakistan. Some 80% of the U.S. crop is now exported. China also has large stocks of its own cotton in storage.
In Mississippi, cotton remains an important crop, but growers there are planting 270,000 acres, just over half as much as last year. Nationally, cotton planting could be off 19% from 2012, to 10 million acres.
"There's a reason we've grown cotton in Mississippi for 150 to 175 years," Murphy said. "Our climate is well adapted to it, but it's an industry with a cost of production we've had to move away from."
Because of a World Trade Organization challenge to U.S. cotton programs by Brazil, cotton has its own separate program in the crop insurance title of the Senate bill. Called the Stacked Income Protection Program, it's a shallow loss revenue protection program, written to attempt to avoid more WTO challenges from Brazil. It is essentially the same as a cotton program in a bill released by the House Agriculture Committee last week.
The Senate retains its ARC revenue program aimed at other commodities, but it drops the band of protection from 79% to 89% of a revenue benchmark to 78% to 88%.
"Statistically, maybe that's enough difference that they save a billion (dollars) or two," Murphy said, referring to the government's projected 10-year savings from the bill.
The entire Senate bill is projected to save some $23 billion over a decade, vs. the House bill, which will save a projected $39.7 billion.
Last year's House bill had a target price program, which will be introduced in its updated version of a farm bill when the committee meets on Wednesday. Although the commodity titles of both bills appear to be closer than a year ago, they are further apart in the nutrition title, the most expensive portion of the five-year authorization for USDA spending. The House Agriculture Committee proposes cutting food stamp spending by $20.5 billion over a decade, five times as much as the Senate.
If the ag committees approve farm bills this week, as expected, the full House and Senate will debate them this year. If both bills pass, then the House and Senate ag committees will have to resolve big differences in such programs as food stamps when members of both committees meet to draft a final bill.