U.S. Cotton Growers to Bush: Keep Farm Subsidies in Place
California cotton farmers don’t really cotton to the idea of government farm subsidies being lifted. But African farmers do.
During his recent five-nation African tour, President George W. Bush was urged by West African farmers to do away with the federal farm subsidies given to U.S. cotton growers. African cotton producers complained the subsidies put their businesses in jeopardy by giving American farmers an unfair advantage.
But California cotton growers see the subsidies as a safety net for a risky business that depends on such variables as fickle weather and the world economy.
“The past few years have been difficult,” said Mark Bagby, a spokesman for Calcot Ltd., a grower-owned marketing cooperative in Bakersfield, Calif., that represents 1,639 cotton farmers in California and Arizona. “If subsidies were taken off, that would force the growers to switch to other crops like fruits or vegetables. The drawback to that is you don’t shift from one crop to another after you’ve made a $250,000 investment in a cotton-harvesting machine. And it doesn’t take much in California to sink the price of tomatoes or watermelons if you shift to that crop and add to the supply.”
With 700,000 acres currently planted in the San Joaquin Valley, California is the fourth-largest cotton producer in the United States. California growers produced 2.5 million of the 18 million bales produced in the United States last year. Sixty percent of the United States’ cotton is exported, making the nation the world’s largest exporter of the commodity.
While cotton farming is big business in California, fluctuations in weather and the economy make it a risky endeavor. That means local cotton growers depend on the farm subsidies outlined in the 2002 Farm Bill passed by Congress.
The maximum subsidy the government will give a cotton grower is $360,000 a year. The average American cotton grower receives a $50,000 subsidy each year to bridge the economic gap that occurs when cotton prices fall below production costs. Those price supports disappear when cotton prices rise.
“This is a different business than manufacturing automobiles,” Bagby said. “You line up your financing in December. You do your groundwork in January. You plant in April, and nurse it until October, when you harvest. It is like a movie that has been in production for a year, and now you don’t know if anyone is going to buy a ticket or for how much you can sell a ticket.”
Cotton prices have fluctuated wildly in the last two years. They nose dived to about 28 cents a pound in the fall of 2001 because of a bumper crop of 21 million bales in the United States. Normal U.S. production averages 17 million to 18 million bales. Also the economy, which had started to stutter, almost came to a standstill after the Sept. 11 terrorist attacks.
While U.S. cotton farmers were hard hit that year, they were saved by farm subsidies, which have been in effect since the 1930s.
Currently, cotton is selling for about 59 cents per pound, which is still not what farmers would like to see. It costs California farmers about 68 cents to 70 cents a pound to produce the Pima and Acala cotton for which the region is known. The cost to grow cotton is slightly higher in California than it is in other regions because land costs are higher in the state and rain is scarce during the summer.
“Nobody I know wants the farmsubsidy program,” Bagby said. “You would rather have market prices that are profitable. But either an oversupply of cotton or a downturn in the world economy affects prices.”
On the manufacturing side, elimination of cotton subsidies could be devastating for U.S. textile mills. In June, the country’s textile mills lost 2,400 jobs, bringing total employment down to 270,800 workers, according to the U.S. Department of Labor.
“U.S. textile mills have been in a difficult position due to the surge of imports from China,” said Mark Lange, president and chief executive of the National Cotton Council in Washington, D.C. “If cotton subsidies were lifted, the end result would be the textile mills would face a good deal of uncertainty and higher prices.”
China produces nearly onethird of the 90 million bales of cotton produced yearly worldwide. The United States is the world’s second-largest producer, followed by India.
