The Dallas Morning News | August 1, 2001 | By Steven H. Lee
WALL, Texas - On another in a long string of searing 100-degree days here in the Concho Valley outside San Angelo, the prospect of continuing drought is filling farmers with a sense of dread.
Not just over the possibility that a promising cotton crop could wither, as prices have done since the start of the year. The producers who've shuffled into the Westside Gin for a weekly meeting are also concerned about how folks far away will view one more multibillion-dollar emergency bailout.
The farmers would rather not need it.
"If we keep going with these disaster programs, finally the city people will get enough of that and just shut us off," said Johnny Schwartz, 63, who raises cotton and grain. "And when they do, we'll be out of business."
Farmers have more at stake with the next farm bill than just the assurance of federal support for the next 10 years. With more budget surpluses unlikely, Congress' - and the public's - appetite for granting unbudgeted emergency assistance year after year will be gone.
In the last three years alone, Congress has approved almost $ 25 billion in aid to farmers battling droughts, depressed prices and the effects of lost export markets - on top of about $ 15 billion already provided under the current farm bill.
A new plan
Supporters of a new 10-year, $ 168 billion farm bill approved last Friday by the House Agriculture Committee say that the measure, coupled with crop insurance reform, finally could end the annual ritual of emergency payments. This week, for example, the Senate could vote on $ 7.5 billion in additional aid for the 2001 crop, rejecting a House proposal of $ 5.5 billion.
The new House farm bill retains the more popular tenets of the current farm law, such as allowing farmers the flexibility to plant whatever crops they choose, in addition to fixed payments and so-called "marketing loan" provisions that set a floor for prices.
But it brings back the concept of "counter-cyclical payments" originated with the 1985 farm bill - and axed with the current program in 1996 - that provides more of a safety net by adjusting for depressed market prices.
"I think that this accomplishes most of the goals of what most people told us over the last year and a half," said House Agriculture Committee Chairman Larry Combest, R-Lubbock, referring to results of a series of nationwide hearings on the farm bill.
"What farmers always said was they wanted market protection when prices are low," Mr. Combest said. "I think this will provide a steadier stream of assurance to lenders."
Under the new bill, Congress would set "target" prices for each program crop - cotton, corn, wheat, rice, grain sorghum, barley, oats and soybeans. If the higher of market prices or the combination of the marketing loan rate and fixed payments fall below that target price, farmers would get additional compensation.
For example, the market price for cotton is about 40 cents a pound - well below the cost to produce it. But under the House bill, farmers would receive a floor price of 51.92 cents a pound (equal to the marketing loan rate) plus a fixed payment of 6.67 cents a pound. And since the sum would be lower than the target price of 73.6 cents a pound, farmers would receive another payment to make up for the difference on most acres of production.
In years when the market price exceeds the target price, farmers would receive the market price.
In all, the measure would cost $ 73.5 billion more than what the current farm bill would cost if it were extended for another 10 years. The increase, a more than 75 percent jump, was the amount allotted under the new federal budget.
It also would provide more than $ 4 billion in additional net income to farmers each year, according to an analysis by the Agricultural and Food Policy Center at Texas A&M University.
"It does put a substantial amount of money on the table in bad times, more than what we see with the current program," said Dr. Abner Womack, the center's director. "It really is designed for the kind of situation we're in right now."
Freedom's failure
The plan is a clear response to what many policy-makers see as the failure of the 1996 farm bill, otherwise known as the "Freedom to Farm" act.
The current program removed the requirement that farmers plant specific crops to receive government payments, but it also did away with target prices and the mechanism that guarded against price drops.
Instead, it provided annual fixed payments that gradually decreased - and theoretically would drop to zero after 2002.
The measure was intended to wean farmers of government assistance and nudge them toward the free market. The fallacy, many experts say, is that there is no free market.
U.S. producers must compete on the world market against farmers who are heavily subsidized by their governments. When farmers abroad overproduce, depressing prices here at home and erasing key export markets, the safety net is gone.
"I was very skeptical that we could unilaterally disarm our farmers, and this proved that we couldn't," said U.S. Rep. Charles Stenholm of Abilene, the ranking Democrat on the House Agriculture Committee who crafted the new bill with Mr. Combest.
The problem was compounded for Texas farmers who fought severe drought conditions in four of the last five years, leaving them to deal with dramatic reductions in both production and prices while expenses soared. Losses statewide exceeded $ 5 billion.
"I think 100 percent of the farmers here would much rather get their prices from the marketplace," said Kenneth Dierschke, 59, who farms near Wall. "But the current situation just doesn't allow us to do it."
Easing the situation
Some say that last year's crop insurance legislation, which makes higher levels of coverage more affordable, could ease production drops. And the new farm bill could counter depressed prices.
Dr. Pat Westhoff, an economist with the Food and Agricultural Policy Research Institute at the University of Missouri, said he believes that "The combination would at least make emergency payments less likely."
"There are very few groups of farmers who would come out behind," he said.
And Donald Patman, a Waxahachie cotton, grain and livestock producer, agrees.
"I don't think it addresses all situations," said Mr. Patman, who's president of the Texas Farm Bureau, the state's largest farm organization. "But when you talk about price, and the target prices that go back to the last farm bill, I think that would be beneficial to the farmer."
Although the new bill is enjoying support from most farm groups, the National Farmers Union says it still wouldn't provide an adequate safety net. The organization represents mainly smaller family farms and ranches.
"It falls far short of increasing these terribly low prices," said Wes Sims, a wheat and livestock producer from Sweetwater in West Texas, and president of the Texas Farmers Union. "If something isn't done to lift the confidence of bankers, I think we'll see the big one this fall - and by that, I mean foreclosures."
And a few economists question the absence of provisions that could curb overproduction.
Before 1996, the farm program provided incentives for farmers to set aside some acreage from production to control.
"This program without set-asides will leave us with a tremendous imbalance - more supply than usage, driving prices low over time, and keeping producers on the low end incomewise and government payments high," said Dr. Carl Anderson, a cotton marketing economist with Texas Cooperative Extension.
Mr. Combest said he hasn't heard much support for government-dictated set-asides. Moreover, he argues, set-asides don't reduce production because farmers can find ways to produce more crops on fewer acres.
The current farm bill extends through Sept. 30, 2002, but Congress could approve a new 10-year program effective this Oct. 1, with the start of the next fiscal year.
Ready for change
Back at the Westside Gin in Wall, farmers say a replacement bill couldn't come too soon.
Bringing back target prices has "almost got to be a must, I think," said Michael Block, 51, who raises cotton, grain and cattle. "By doing something like that, we could plan every year.
"If we know kind of where our gross income is going to be," he said, "then we can try to adjust our expenses to meet that."
Mr. Block said that when he started working his grandfather's farm 30 years ago, he sold cotton at 25 cents to 35 cents a pound. He recently sold what little cotton he held from last year at 31 cents a pound. He needs at least 60 cents a pound to break even.
"We've been able to survive by trying to get more efficient and working more land, at less profit per acre," Mr. Block said.
"And I assure you, we would much rather survive by making it ourselves, rather than having to look for a check in the mailbox," he said.
"To the general public, it looks like all they're doing year after year is giving us a handout. And that doesn't look good."
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