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Stabilize...Not Weaken

By Mark Lange
NCC President/CEO

An Obama Administration budget proposal would weaken production agriculture’s important safety net that is contained in the new farm law.

What is the specific concern?

The commodity title of the Food, Conservation and Energy Act of 2008 was crafted under pay-as-you-go rules and took two years of intense debate to complete. It is very troubling to see that President Obama’s 2010 budget fails to recognize Congress’ work. The budget proposes to phase out direct payments over three years to producers with annual sales revenue greater than $500,000 and establishes a limit of $250,000 on all program benefits.

To say the least, the proposals will have the effect of undermining confidence in a stable farm policy. It penalizes the farms that are responsible for the majority of U.S. food, feed and fiber production. According to the 2007 Census of Agriculture, farms with sales of $500,000 or more accounted for almost three-fourths of all agricultural products sold. Also important to note is that sales above $500,000 do not equate to a measure of profitability. Today's family farms bear extraordinary short-term and long-term expenses. Given the current uncertainty in credit markets, the direct payments are critical to their ability to secure financing. In addition, direct payments, which are not tied to price or production, are compliant with efforts by the World Trade Organization to move agricultural support away from trade distorting programs.

How is the NCC responding to the Obama budget proposal?

Initially, the NCC joined 10 other agricultural organizations in a letter to Agriculture Secretary Vilsack stressing the importance of direct payments. We reminded him that farm bills are written for the longer term and that the 2008 bill’s safety net should not be withdrawn, reduced or in any way diminished even during those periods when commodity prices are high. After the President’s budget proposal was released, the NCC immediately issued a statement reminding the Secretary and the Administration that the new farm law introduced significant commodity program and budget sensitive changes but maintained an important safety net – one that needs to be left intact.

Was another budget concern conveyed?

Yes. The 2008 farm law mandates that USDA cover a portion of upland cotton Commodity Credit Corporation (CCC) loan storage costs during periods of low prices. The farm law legislates what had been an administrative practice by USDA for the past 20 years, but does so at a reduced rate. The Administration’s 2010 budget proposal, though, would eliminate upland cotton storage credits. It ignores crucial differences between commodities. Our statement noted that unlike other commodities, baled cotton lint is an identity-preserved product that requires off-farm storage in CCC-approved facilities. Further, CCC loan eligibility for upland cotton is dependent upon compliance with a substantial array of regulations governing quality, bale storage and packaging.

Mark Lange is president and chief executive officer for the National Cotton Council of America. He and other NCC leaders contribute columns on this page.

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