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| A Cotton Rose by any other name would still smell as sweet. |
Cotton Organizations
One of the things that comes with being a cotton farmer are the great cotton organizations that exist across the southern states. One of the best is the National Cotton Council, (NCC) who "serves as the central forum for consensus-building among producers, ginners, warehousers, merchants, cottonseed processors/dealers, cooperatives and textile manufacturers. The organization is the unifying force in working with the government to ensure that cotton's interests are considered." The regional organization here is the Southern Rolling Plains Cotton Growers, (SRPCG) who are members along with other regional groups of the Texas Cotton Producers, Inc. (TCP) Our very good friend and fellow Concho Valley cotton farmer is currently the president of TCP. These organizations have spent the past couple of years developing a program for cotton producers called STAX, Stacked Income Protection Plan for Upland Cotton.
STAX and the WTO
STAX is an additional crop insurance product that can be purchased in addition to the regular crop insurance policy. It helps to cover the large deductibles that the regular crop insurance policy has and works as an area-wide type of a product instead of basing coverage on a farmers individual operation and yields. Many of the aspects of the STAX program were developed to answer the issues that are unique to cotton due to a World Trade Organization dispute that Brazil raised against features of the U. S. cotton program. In March, the Delta Farm Press stated, "Besides providing a much-needed safety net for an industry that is reeling from a greater-than-50-percent reduction in cotton prices over the last two years, policymakers also face the challenge of ultimately settling the WTO case filed by the government of Brazil nearly a decade ago."
Direct Payments Eliminated
The STAX program has been embraced by most policymakers who are involved in creating the new Farm Bill currently being put together in Washington, D. C. As it was originally designed, STAX in combination with the elimination of direct payments, SURE disaster program and counter-cyclical payments would reduce spending in the cotton program by an estimated 46%, a number that is much greater than many other commodities are proposing for their spending reductions.
Strong Safety Net
The supply of food and fiber are a vital part of our national security. The natural disasters of the past two years have brought our food and fiber supply under attack, reenforcing the need for a strong, stable and affordable safety net with crop insurance serving as it's backbone. As the new Farm Bill looks to eliminate most of cotton's program funds, support for the STAX program as an affordable option for the portion of their risks that currently have no coverage is basically unanimous among cotton producers across the cotton belt. Organizations like the NCC, SRPCG and TCP are working hard to represent the cotton farmers, like the one I Kiss, from all across the cotton belt as our policymakers develop a Farm Bill that will have sweeping changes and much needed spending reductions.
I can see the importance of crop insurance. What I don't understand is why the US taxpayer should pay any of the bill.
ReplyDeleteThanks for reading! Here is why crop insurance is such an important item to taxpayers. If Family Farmers can't stay on the farms, that farmland will eventually be taken over by giant food corporations who don't need a safety net in order to stay in business when disasters hit and crops fail. Those giant food corporations would then raise the food and be able to hold it hostage for the price they want. Family Farmers raise the food and take what the market gives them, not the price they set, keeping American's food one of the most affordable in the world. If giant food corporations are allowed to be in control of the farmland and what is produced from it, your food prices would skyrocket. To keep the abundant and affordable food supply safe and operating is a matter of national security. So your money is much better spent keeping Family Farmers on the farms than paying later at the grocery store for giant food corporation ransom. Also, Family Farmers care for and about the land, these giant food corporations would not worry about keeping in compliance with conservation practices or other regulations that Family Farmers must comply with in order to remain eligible for programs. Giant food corporations wouldn't need programs or insurance, so they would not worry about complying. Hope this helps answer your concerns.
DeleteI can see the argument, but I have to think that if family farmers are upset with the price being offered, they shouldn't take it. Now, it could be argued that in some ways, they don't have a choice. I would argue that that if family farmers do not have a choice in what or where they sell, then they aren't particularly independent at all, and the giant corporations are already in control of the farmland. In fact, the giant corporations may prefer it that way- de facto control of the farmland, without any of the accountability. They've got it pretty sweet now- family farmers like yourself absorb the production risk, somewhat offset by crop insurance, and they get relatively cheap inputs. From a Cargill standpoint, what's not to like?
ReplyDeleteBut from a taxpayer standpoint, all we have is fairly vague assertions that without crop insurance we'd have more expensive food and fiber. Hard for me to see why we don't just ban corporate ownership of farmland- that doesn't cost the taxpayer anything, and would keep the giant food corporations from owning the land.
Banning something is never a very good idea, in my opinion. When something is taken out of the equation, then the formula is forever changed. As the system stands, yes, it is good for Cargill, it is good for the Family Farmer, and it is good for consumers. Cargill gets their product at a reasonable cost and can make a profit, providing thousands of jobs. Family Farmers get a fair price for their commodities and make a profit on their farms that allow their families to live and continue to operate their business. Consumers get the one of the most abundant and affordable food supplies in the world. It is a system that to date is working well.
ReplyDeleteAnother point that needs to be made about crop insurance is that the risk is so great, there is not a company or firm in the world that can assume all that risk. The system is the most successful Public-Private enterprise that has ever been developed. Private companies and agents deliver a publicly assisted & regulated product. Our system of crop insurance is so successful that other countries are basing their crop insurance systems after ours. It is also so successful, that for the first time in decades, no disaster assistance payments are being made to farmers after the worst drought in decades just ravaged the country. Crop insurance was there and farmers are getting to plant again this spring without the disaster payments of the past.
Keep in mind that farmers paid $4.1 billion dollars to buy their crop insurance in 2012. The private companies and re-insurers also take part of the burden and cost. To learn a lot more about crop insurance, please check out Just The Facts at http://www.ag-risk.org/AboutCropInsurance/default.htm It's a great resource. Also check out my blog about crop insurance http://kissedafarmer.blogspot.com/2012/06/it-will-be-circus-without-safety-net.html
If there isn't a company or firm that can insure the risk, then the risk is too great, and the market should force the system to change. The crop insurance system seems, to me, to be preventing a true risk assessment. And doesn't crop insurance mostly insure things like corn, soybeans, wheat, and cotton? I eat very little of that. Mostly I think it goes to feeding animals (I suppose meat would be a little bit more expensive if crop insurance didn't exist) and ethanol. It looks like the rest of agriculture, which provides most of the food we actually eat, is getting along just fine without crop insurance. Why is the taxpayer paying to subsidize cotton but not broccoli? Sounds like more of a historical accident than any sort of well-thought out government program.
ReplyDeleteAnd as far as disaster payments go, I'm not totally opposed. But there is nothing wrong with requiring those sorts of payments to be justified each time they are made. Otherwise, we're just setting a sending a steady stream of taxpayer dollars out the door without asking why, or whether we can still afford to do so. Seems like a lot of places have disasters year after year after year. Maybe those places just aren't good places to grow crops, period.
The abundant and affordable food supply argument is one that never ceases to amaze me. Food, in my opinion, is too cheap. I can look at my own waistline and tell that food is too abundant and affordable. I don't understand how it helps the farmer to provide cheap food. Making money helps the farmer (and the rural community).
What this country needs to do is embrace the free market in agriculture. There may have been a good rationale for having the government involved in agriculture when half the country was farming. But that isn't the case any more. Cheap food isn't that cheap when we start to take into account all the other costs involved. Crop insurance is being used to obscure the true price we should be paying for our food. Those costs need to be reflected on the receipt at the cash register, rather than my income tax bill.
You can go to the USDA RMA website and scan the actuarials for the crops that are covered by crop insurance. Here is just a few of them, starting with corn, soybeans, wheat and cotton, along with grain sorghum, dairy cattle, feeder cattle, swine and lambs they also offer insurance for: ruby red grapefruit (I start with this because they are my favorite!), almonds, apples, avocados, bananas, blueberries, cabbage, canola, cherries, chili peppers, clams, coffee, cranberries, rice, beans, oranges, flax, apricots, peaches, sweet corn, tomatoes, nectarines, grapes, green peas, mandarins, lemons, limes, macadamia nuts (another weakness!), mangoes, tangelos, mint, mustard, oats, onions, OYSTERS!, papaya, peanuts, pears, pecans, peppers, plums, potatoes, prunes, cucumbers, raisins, pumpkins, raspberry, blackberry, rye, safflower, strawberries, sugar beets, sugar cane, sunflowers, sweet potatoes, walnuts, watermelons, winter squash. Most all are available to insure as organic and non-organic. There are other specialty policies that cover other crops and practices as well.
ReplyDeleteI'll just have to agree to disagree on food needing to cost more. But that's what great about this country, we can do that! Thanks so much for the comments. It's not often that I get such great questions.
I appreciate the engagement, and agree on the need to "agree to disagree". I have to say, as someone who spent a lot of time living in rural Nebraska, and whose family still farms, it is difficult for me to see the crop insurance program as a positive force. I've had too many discussions with farmers where they want to be big businesses, trading grain futures and managing multi-million dollar operations, and want the government "off their backs". Frankly, if you want to be a big business, fine. Be a big business. Manage your puts and calls, and gamble your money every spring. But don't expect the US taxpayer to back you up. We've got too big to fail banks in this country, and if we keep it up programs like crop insurance, we're going to have too big to fail farms (or, more accurately, a too big to fail farming system). Farms just keep getting bigger and bigger, and fewer and fewer people are living in the countryside. There are some things I think we ought to do about that, but our elected representatives don't seem to be interested in helping. Ultimately, that's on all of us.
ReplyDeleteNow is the time for us to transition the government out of farm programs, over a reasonable period of time. Just like the Republicans said they were going to do in the 96 farm bill. Somehow, farmers (including people I love dearly) are still looking for that safety net, rather than seeing that the safety net is trapping them into dependency on a system that will eventually put them out of business. That's too bad, because I see that killing the rural areas I appreciate so much. Right now, the day is coming when every piece of equipment will be driven by robots, guided by satellites and owned by cash rent operations farming tens of thousands of acres. I guess that's the future, and I'll just listen to my Bob Wills CDs and reminisce. But it drives me nuts to think that my taxpayer dollars are helping to bring that future a little closer. I do believe that if we got rid of the government programs, we'd be better off. But I've been wrong before. Thanks again, best of luck this year.
Puts and calls don't work so great for cotton. That's a big problem when so many farm operations in the US are grain and they work exceptionally well for them. This is why the crop insurance and the STAX program are vital to cotton farmers. I know it's hard for other types of farming operations to understand that there are many very large differences in cotton vs grain. We do raise some wheat and milo, and yes, the puts and calls work for them. And the difference in trying to farm out here next to the largest desert in North America vs a place where you actually drain water OFF your farms makes a very big difference as well.
ReplyDeleteIf you like Bob Wills, please click on all the links on my other blog Green Snakes on the Ceiling. You will love the music!
There are no payouts for anyone dealing with large commodities except the farmer. For example: one bad year in the cotton fields means the gins have a hard time making ends meet. Who pays them? No one. Its the same for elevators and wheat crops.
ReplyDeleteI am glad direct payments have stopped, and I realize that STAX seems to be a better alternative. HOWEVER, why is it that farmers feel they are owed something by taxpayers when their business fails? I think that it is time to get the farmer off their welfare system - I realize they work hard, but so do many other people in the country, and there are no bailouts for them.
Thanks so much for stopping by and reading! No one knows better about how hard a bad crop season hits the cotton gins than this daughter of a second generation cotton ginner. However, keeping the cotton farmers in business to start again the next year is vital to the gin.
DeleteAs far as anyone in the country feeling that they are "owed" something by taxpayers, I won't start listing all the programs out there for other hard working folks, I wouldn't have room on this blog for all of them. As I have said many times on this blog, if we didn't have crop insurance to keep the Family Farmers on the farms, then who would take over the farm land? Huge food corporations, because they don't need a safety net. Then they can hold your food hostage for any price they want to make you pay. Family Farmers raise food and sell it for what the market offers. They can't afford to hold it hostage. The Crop Insurance program allows farmers to pay a premium to buy insurance on their crops so that when crop failures occur, they don't go out of business and can keep producing your food that is the most affordable food supply in the world.
A note on the STAX program is that it is a group product. Payments would only be made if the entire large area was affected. These types of policies normally collect much more in premiums than they ever pay out, making them a positive back into the taxpayers system to help offset the costs of the regular crop insurance program.
I understand where you are coming from on your comment about the number of welfare programs for people. Personally, I think most of those programs are broken.
ReplyDeleteI also feel that farmers play a vital role in feeding the world, but I think that, for all the feeling that they are down home people who feed the country, they still have that attitude that "well, didn't make it this year. Thank goodness for crop insurance." You state that farmers pay a premium for crop insurance, but the premiums are fairly low compared to the large payouts they receive in case of peril.
I will never understand the argument that you need to make money on a crop that didn't produce. NO ONE else gets any kind of insurance for business failure. What am I supposed to do if the company I work for goes out of business? There is no insurance available for this kind of thing. I might be eligible for unemployment based on many factors, but the amount I would get paid is still much less than a regular paycheck. I honestly think that this system is really messed up. I will never believe that in this day and age the farmer is in it for the country - I have seen the million dollar equipment they purchase to harvest crops or to cultivate, etc.
My husband owns a grain elevator. If farmers don't bring him wheat because it didn't make, well that's just too bad. We have a bad year and hope next year is better, and for some people, the business is done for. The farmer makes it all back and then some and just starts over the next year. I fail to see the equity in this. Farming has turned into big business because of this program.
I realize that farmers do work hard - I do. I just don't think its right for the taxpayer to have to pay for it. And we pay for it twice - once from insurance payouts and then again at the grocery store. If its a bad year for a certain crop, like peaches, you are going to pay out the nose for that in the store. But the farmer who grew them (or tried but they didn't make)makes a profit anyway. That, to me, throws out your argument that the prices would be held hostage if there weren't any Family Farmers growing that crop. That happens ANYWAY...depending on the circumstances.
You actually said the main part of the crop insurance debate yourself, "in case of peril." Many years farmers pay premiums and have no losses. Most years, the premium to payout ratio is below 100%, which means that more money was paid into the program by farmers than was paid out to other farmers. Many farmers in the corn belt have paid premiums for 10 years or more with no payout, until last year.
ReplyDeleteAlso, keep in mind that the history is a ten year AVERAGE. So bad years as well as good years are all averaged equally. So the yield used on the policy is only an average, not the highest potential of the farm. Then each policy has a deductible. Most farmers in my area have a 30% deductible. So, on a total disaster year, like 2011 was here, they collect 70% of an average crop. Most farmers don't profit at those types of payouts, but are at least able to keep in business, with the help of good bankers.
I see farming a lot differently than you, being a cotton ginner's daughter and a farmer both, in that I think farming has turned into big business because of good business men and women running good independent businesses. I have a friend who hates all farmers and is seriously jealous of them. However, that friend has never been in business for herself having everything at risk each year. I don't try to convince her otherwise, as a jealous person usually has their mind made up.
You and your husband should check into some of the new weather based products that are out on the market that can help you manage your risks. The Climate Corporation would be a good place to start.
He's already doing what he can to leverage against loss, including starting a program for people to grow sesame, since its a more versatile option in drought.
DeleteWe will just have to agree to disagree on farming as a big business being a good thing, as well as our opinions on crop insurance. One question, though - how did your father feel about farmers disastering their cotton when it was still a good quality because the insurance payment was more than their profit would be had it been ginned? We see this all the time - and its disappointing, because you hear constantly how the farmer is in it for the world, and they want to take care of everyone. It seems contrary to that agenda when they get rid of a decent crop for insurance.
Unfortunately, my dad died over 30 years ago, before crop insurance was in use. Back then, the farmers went to town and got jobs to keep them going through the bad years, and he got jobs running his truck to get us through. I expect that he would have got jobs with his truck to get through any type of bad year, nature or man made.
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ReplyDeleteI just checked back and saw your last comment. I am sorry about your dad - and I am sure the world lost a good man when he passed on. It is unfortunate that a lot of people now don't feel like they have to do something "else" to get by, if need be. Thankfully, I am married to a man who, even though he owns an elevator, also uses his trucks year-round to get through lean times. I enjoy your posts....just felt like I had to agree to disagree on this one!
ReplyDeleteThankfully I am also married to a man who does what ever is necessary to get past the lean years! He has been a life insurance salesman, FSA employee, custom harvester, crop insurance adjuster, cattleman, and who knows what else! Hope you keep reading, I love having all veiwpoints here at Kissed A Farmer.
DeleteI think that these measures are a great way to insure that our cotton is still being grown without completely hindering and killing our cotton farmers. Cotton is a huge staple needed in the country and around the world, and if we have no farmers to produce this cotton then we would lose that major staple. It is a privilege that our tax money goes to farmers that are helping clothe America and the world. To not have insurance and money going to cotton farmers it would be like asking teachers to provide the building, the desks, all of the school supplies, and the food for each student that they teach. This is just looking at something completely different but has just as much importance if not more than education. Cotton farmers need support and these organizations and companies are helping provide that support for them. It is the right and best thing to do for the farmers.
ReplyDeleteNobody mentioned how much it cost to farm. Most (over 90%) farmers have to get loans to farm. You cannot get a loan without insurance from any bank in america, and don't forget, the bankers want everything you own as collateral, including equipment paid for when farmers make crops and paid premiums.But you don't have to go that far, because you will not get a loan without insurance and that is fact.
ReplyDeleteWith just about all the other types of payments and disaster assistance gone, crop insurance is all that is left as the safety net. I believe it will now be even more critical to bankers that farmers have crop insurance before trying to secure a loan. The STAX program for cotton will be a great addition to the crop insurance program.
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