Tighter Payment Limits Would Harm Oklahoma Agriculture

OKLAHOMA CITY, OK – Danny Robbins, an Altus, Okla., cotton producer, told Deputy Agriculture Secretary Chuck Conner that the current farm program provides an important safety net for U.S. agriculture in a fiscally responsible manner – and stressed the importance of maintaining  the bill’s current structure for the legislation’s duration. 

Robbins, speaking at a USDA farm bill listening session at the Oklahoma State University – Oklahoma City Student Center on Thursday, said that spending under the farm law is much less than originally projected. He said counter cyclical payments, along with direct payments and the marketing loan program, help protect farmers from fickle weather and commodity markets while allowing farmers to respond to market signals and not distort overall production and prices.

USDA officials also heard from Oklahoma producers Tom Buchanan, Altus, and Bob Collins,  Frederick, who also serves as executive secretary of the Oklahoma Cotton Council. 

“Today, farmers face greater risks than the vast majority of businessmen,” Robbins said. “Many factors are beyond a farmer’s control: a strong dollar, unanticipated oversupply in high production years, depressed prices and destructive natural events that can wipe out an entire crop. An effective farm program is essential for providing stability in production, financing and marketing.

“Looking forward to the next farm bill, it is vital that the U.S. maintain a stable, predictable and equitable farm policy. Such policy supports rural America and permits U.S. consumers continued access to the safest, most affordable and most secure supply of food and fiber in the world. I ask that you continue your support of this important legislation in its current form.”

Robbins also emphasized that Oklahoma’s farmers  would be harmed by more restrictive payment limits. Analysis by the Payment limit Commission indicated that tighter limits on contract payments under the 1996 farm bill would have taken $13 million from Oklahoma farmers.

“If we are concerned about our competitiveness in the global market, then tighter payment limits only lessens that competitiveness by restricting operations to a size that is smaller than is economically efficient,” Robbins said.   

Robbins also countered misinformation being spread by proponents of lower payment limitations.

One argument is that “big” farmers receive the majority of benefits. However, “big” farmers receive those payments only because they are producing more product and incurring greater financial risks. It is important to remember that per-pound or per-bushel support is the same, regardless of the farmer’s size.

Proponents of lower limitations also argue that farming operations have become larger in order to capture farm program benefits.

“While it is true that the average size of farms has increased over time, more restrictive payment limits would not alter that trend,” Robbins noted.

In fact, he said a USDA Economic Research Service (ERS) study concluded that program benefits have not contributed to increases in farm size. 

Advocates of lower limitations also cite farm programs as contributing to inflated land values and correspondingly higher rents, yet an ERS study concluded that farm programs contributed less than eight percent of the increased land value, he said. In a report to the Payment Limit Commission, the Food and Agricultural Policy Research Institute (FAPRI) concluded that tighter payment limits would result in only a two percent drop in land values and corresponding rents.

“Additionally, changes in limitations will likely result in a shift in production to other crops,” Robbins said. “The Commission and FAPRI both concluded that limitations affect cotton and rice farmers disproportionately compared to feed grain, oilseed and wheat farmers.”

Robbins told the Agriculture Secretary that changes in eligibility rules force changes in rental contracts with the possible consequence of forcing landlords to cash rent rather than share rent land. This change, he noted, would adversely affect beginning farmers and small operators who normally are unable to obtain production financing on cash rent operations. 

Robbins also stressed the hope that the current farm program be allowed to remain unchanged - including current eligibility rules and payment limit provisions - through its completion with the 2007 crop. He pointed out several key advantages of the current law, including its provision of planting flexibility to growers, an effective safety net in times of low prices and minimal impacts on overall plantings and prices.

The budget process, Robbins said, should not be used as a vehicle for re-writing farm policy. He said that any required cuts to contribute to deficit reduction should be done in a manner that is equitable across all parts of the farm law and across all commodities.

“As a final point, I hope that we see the continuation of the Step 2 program for as long as possible,” Robbins said. “I understand that the recent WTO ruling found fault with the program. However, the Step 2 program is an integral part of cotton’s marketing loan and the negative impacts of any possible changes should be carefully considered.”

Buchanan stressed the need for support to infrastructure and irrigation projects, while Collins noted the benefits of boll weevil eradication and the importance of continued support for that national program.