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Risk Management Essential

The 2012 farm bill development process is escalating, so the National Cotton Council is weighing in at every opportunity and urging expeditious farm bill reauthorization.

By Chuck Coley
NCC Chairman
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What were the NCC’s latest activities?

The Senate Agriculture, Nutrition & Forestry Committee’s chairwoman and ranking member accepted my letter of record stating that conservation efforts in the farm bill are critical to a strong economy, healthy/productive rural lands and vibrant communities – and the NCC applauds their efforts to simplify these important programs.

Later, at that Committee’s hearing on risk management and commodity provisions in the 2012 farm bill, I testified that the U.S. cotton industry believes a revenue insurance product that supplements existing insurance products would provide an important and affordable tool – especially given the weather uncertainties and risks. Examples mentioned were the prolonged drought in the Southwest and in my area of South Georgia and the severe flooding in Mississippi and Arkansas. Cotton producers must have access to crop insurance, risk management tools and even emergency assistance programs to survive and recover from these natural disasters. However, it was made clear that the availability of effective risk management tools like crop insurance is important even in so-called normal years because producers need to recover a portion of lost revenues if their crop is damaged after they have invested in the inputs, technology and equipment necessary to produce and market a crop. In those areas where cotton producers have not had access to adequate coverage, we want to continue working with USDA, the companies and Congress to improve and increase the available products.

What additional points were made in the NCC’s testimony?

The increasing market volatility and marketing risks, particularly with cotton, were noted. In cotton’s case, the traditional marketing assistance loan provides important collateral for production loans with only minimal net costs to the government and no disruption of market signals. I emphasized that using the loan for short periods also provides producers an opportunity to make rational, market-driven marketing decisions – as market signals at planting may be vastly different by harvest. Details also were provided on U.S. cotton’s Stacked Income Protection Plan (see last month’s column) and the Senators were reminded the proposal is in line with NCC’s commitment to work with Congress/Administration to find a permanent resolution to the longstanding U.S.-Brazil WTO case. Ranking Member Pat Roberts (R-Kan.) complimented the industry’s proposal during the hearing, noting the cotton industry was “leading the way.” The testimony reiterated the NCC’s view that effective farm policy must maximize participation without regard to size or farm income. Artificially limiting benefits is a disincentive to economic efficiency and undermines the ability to compete with heavily subsidized foreign agricultural products.

Assistance for U.S. textile manufacturers has been a resounding success by promoting increased productivity, efficiency and new employment and should be continued in the new farm legislation. There also was a call for continuation of an adequately funded export promotion effort, including the Market Access and Foreign Market Development programs.

Chuck Coley is a Vienna, Ga., cotton producer who serves 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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