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Predictability And Potential


By Larry McClendon
NCC Chairman

The National Cotton Council’s continuous interaction with cotton organizations and other U.S. agricultural groups resulted in sound policy being incorporated into the recently approved farm law.

How will U.S. cotton benefit?

The Food, Conservation and Energy Act of 2008 includes many of the cotton industry’s recommendations and priorities – which will improve market orientation, competitiveness and flow. The new law maintains an effective safety net for producers and its provisions have the potential to enhance producer income in times of low prices. It provides important financial assistance to domestic textile manufacturers to spur investment in that sector so it can continue utilizing U.S. raw cotton. Also included are important improvements for conserving our natural resources and important incentives for energy production not dependent upon foreign oil.

Does the new farm law represent reform?

Yes. Despite what some critics have said, it makes significant reforms in the areas of payment limitations and program eligibility. The three-entity rule is eliminated, and spouses are provided greater equity. Redemptions of loans with certificates no longer will be necessary, and limitations on marketing loan gains are eliminated. Cumulative limits on direct and counter-cyclical payments are maintained at current levels, resulting in a 50 percent reduction for some growers due to the termination of the three-entity rule. The agreement significantly tightens an income means-test first enacted in 2002, by providing that individuals with three-year average adjusted non-farm income exceeding $500,000 will be ineligible for program benefits, and those with three-year average adjusted farm income exceeding $750,000 will be ineligible for direct payments.

These and other modifications to eligibility standards will help ensure program benefits are directed to true farmers. It is one reason why this new farm law does not add to the federal budget deficit. The new law is compliant with the World Trade Organization as all modifications to the cotton program are paid for by a reduction in the target price for cotton. In fact, less money will be spent on this commodity title than would have occurred with a simple extension of the 2002 bill. Further, changes to the payment limitations and adjusted gross income provisions are estimated by the Congressional Budget Office to reduce payments by $620 million over 10 years.

What’s the next step?

The NCC just concluded 45 meetings across the Cotton Belt to explain the key provisions of the new farm law to its members. A summary of the key farm law provisions can be accessed from the NCC’s home page, www.cotton.org (from the ’08 Farm Bill icon). During Farm Bill development, the NCC and its members devoted considerable time and displayed a unified effort in working with Congress to avoid damaging amendments and preserve a fundamentally strong farm program structure. The NCC’s next objective, over the next several months, will be providing input to USDA on the rules and regulations that will implement this farm legislation.

Larry McClendon is a Marianna, Ark., producer and ginner currently serving as chairman of the National Cotton Council of America. He and other NCC leaders contribute columns on this Cotton Farming page.

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