Touched by changing subsidies and markets, cotton farmers feel growing uncertainty

Chris Porter drives along a dirt road next to his farms in Catron, a town in Missouri’s Bootheel with a population of less than 80. Planting season has just passed. A sprawling landscape of lush green cotton fields is dotted with only a few creamy yellow buds.

Porter, 40, is a third-generation Missouri farmer running 3,800 acres of land that grows soybeans, rice, corn and cotton. He regularly works 12-hour days and said farming is in his blood and part of his life. Extreme weather and grueling work hours don’t intimidate him. The biggest challenge, he said, is to “stay under budget.”

Chris Porter is a 18-year farmer in Catron, Missouri. He runs 3,800 acres of farm that grows corn, rice, soybean and cotton. | Photo courtesy of Liying Qian
Chris Porter runs 3,800 acres of farmland in the Bootheel that grows corn, rice, soybeans and cotton. | Liying Qian/Missouri Business Alert

Missouri cotton prices dropped roughly 16 percent from 2010 to 2014, and low cotton prices led to a production decline. Missouri cotton planting acreage dwindled about 20 percent, and the value of production slid about a third, according to the U.S. Department of Agriculture.

These changes, added to the high cost of cotton operations, have put cotton farmers in Missouri — and across the country — under pressure. Although the federal government has provided subsidies to ease farmers’ pain, the support is far from enough.

These cotton subsidies offer farmers only a slight respite from overall cotton market woes, said Patrick Westhoff, director of the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri’s Department of Agricultural and Applied Economics.

Sluggish demand and slashed subsidies

Missouri’s cotton production decline provides a snapshot of the national and global cotton market. Cotton acreage in the U.S. has dropped by nearly a half, to less than nine million acres, in the past five years, hitting its lowest level in decades in 2015. Westhoff points to the sluggish demand for cotton as a main cause.

Scott Gerlt, a U.S. crop market and policy analyst with FAPRI, agrees. It boils down to one thing, he said: China. The world’s No. 2 economy used to be the largest destination for exported U.S. cotton, but a few years ago the Chinese government cut its U.S. imports by more than half. This cut provoked a storm of changing global demand. China has held a large amount of cotton stocks in reserve and released many of them into the global market. Consequently, cotton prices went down, discouraging U.S. cotton producers from producing more, and forcing many of them to liquidate equipment and land to pay off loans, according to the National Cotton Council.

The subsidy decline started with a cotton dispute between the U.S. and Brazil over American cotton subsidies in the early 2000s. Brazilian cotton farmers disagreed with the amount of subsidies American farmers received from the government because those subsidies drove down the price of U.S. cotton and enhanced its competitiveness.

Ultimately, the U.S. government eliminated domestic subsidies to cotton farmers in the 2014 Farm Bill. Instead of getting direct payments regardless of if they grow cotton, farmers received cotton crop insurance such as the Stacked Income Protection Plan, which Westhoff said wasn’t very popular among farmers.

Today, cotton producers are “suffering a serious decline in market revenue partly due to heavily-subsidized foreign competition, with no signs of the commodity prices reaching the level needed to offset their production costs,” American Cotton Producers Chairman Mike Tate said in a National Cotton Council release.

A drop in the bucket

In early June, the USDA launched the Cotton Ginning Cost-Share Program, which will offer an estimated $300 million to U.S. cotton producers in order to share their ginning cost during 2016 ginning season. This one-time payment is based on each producer’s 2015 cotton acres multiplied by 40 percent of the average ginning cost within each production region. (The mid-South region, which includes Missouri, has the second highest average ginning cost per acre, $56.26.) The program will grant up to $40,000 to each producer whose three-year average adjusted gross income does not exceed $900,000.

Westhoff said ginning, a process by which cotton lint is separated from cotton seed, is one of the most expensive parts of cotton production. Financial support for the ginning process “may help farmers get a better price or make ginning cheaper,” Westhoff said, but he doubts the one-time payment, which gives about $36 benefit per acre, will be a huge boost to cotton business.

“Average direct payment per acre was about $33 in the past, but, in the past, cotton farmers had other subsidies,” he said. “This provides some help, but not much. Many cotton farmers will probably be losing money at current prices anyways.”

An uncertain future

One-time arrangements such as last year’s Cotton Transition Assistance Program and this year’s Cotton Ginning Cost Share program won’t ease much of cotton farmers’ financial stress, growers say.

To address the market downturn, Westhoff stressed the importance of Congress’ legislative action.

Tate of the American Cotton Producers has expressed similar sentiments. “The industry will continue to work with Congress and USDA to seek long-term policy solutions that will provide stability for the cotton industry,” he said.

Read more: Bootheel farmer Charles Parker reflects on five decades in the cotton business.

According to a January 2016 projections by FAPRI, nationwide cotton production in the next 10 years will remain relatively stable with very slight recovery. Overall, the future is uncertain.

Porter said there was very little safety net for his cotton business.

“You never find financial security. … Every time you start budgeting, you get the insecurity in your stomach,” Porter said. “I can put everything on paper, but reality is always something different. So that’s why I go to the (Farm Service Agency) office and do as many programs as I can.”

Porter attained most of his financial support from farm loans. He purchased crop insurance, but didn’t benefit much from it. As for subsidy programs, there weren’t many for cotton, he said.

A full-time farmer for 18 years, he was recently elected as the president of Cotton Producers of Missouri. Despite the cotton downturn, he is planning to plant a little more cotton acreage and hoping for strong yields.

“It’s one of my goals to bring cotton back, make people more aware of what’s going on, and support the local farmers,” he said. “We have been through a long downturn. Now it’s time. And consumers want cotton.”

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