Farm Bureau Policy Development Fact Sheet No. 4 — 2012 COTTON PROBLEMS AND ISSUES FERTILIZER PRICES 2012 has been another year of volatile fertilizer prices. Price seems to have little relationship to the cost of production (for example: natural gas price levels are hovering between $2 and $3 per 1,000 cubic feet – well below 2008 when price exceeded $10) but are set relative to what the traffic will bear. Prospects of huge corn plantings were a warning for strong nitrogen demand. Yet price did not appear to be related to short supplies, because there were ample supplies of nitrogen but not where it was needed, when it was needed. Industry consolidation has left a few companies in control of not only production in the United States, but seemingly in control of imports as well. As few as three companies control 60 to 80 percent of all the fertilizers. Additionally these companies market worldwide and can export fertilizer to other major using areas at price levels generally lower than in the United States. New production is coming on board, not with new people, but an expansion of existing producers. High startup costs and a network of permitting seem to be restricting new companies entering what appears to be a very lucrative business. Strong profit potential should attract new business. Related Policy: Fertilizer N-338 1. 2. 3. 4. 5.
What should be done to change this? Is it a matter of collusion, or antitrust? Is it a matter for a Department of Justice inquiry? Is it a congressional or legislative issue? What about a study of the fertilizer industry and pricing practices by a national blue ribbon committee?
WEED RESISTANCE Weed resistance continues to be a major problem for cotton producers. More preemergence residual type herbicides are being used. However, there has been little work done for some time to develop new weed control chemistry. Related Policy: Cotton research 104 1. What can be done to stimulate more work on new weed control chemistry?
DICAMBA and 2,4-D RESISTANT COTTON Dicamba and 2,4-D resistant cotton varieties are in a development stage. There are concerns about how this could impact non-resistant cotton varieties and other nonresistant crops. Related Policy: Cotton 103, Cotton research 104, State Plant Board 137, Chemicals 143 1. Should these varieties be released? 2. If released, how should the Arkansas State Plant Board regulations be changed, or should they? 3. What can be done to protect non-resistant crops? FARM PROGRAM New farm program legislation is being debated currently in the Senate. Budget considerations have been the driving force and have resulted in a move away from traditional farm legislation to a “crop insurance� approach. The cotton industry has further restrictions as a result of the Brazilian World Trade Organization case ruling. This left few choices for cotton which has a special farm program feature called Stacked Income Protection Plan (STAX), which layers in above other insurance programs. It is designed to cover losses as low as five percent, and is a revenue type program with the price determined by the average December futures close between January 15 and February 14. This price is multiplied times the county yield to establish a reference income. Premiums will be subsidized up to 80 percent and it is believed producer portion of the premiums will be somewhere between $7 and $14 per acre. One problem is how much coverage will be if price is low during the January-February time period. Related Policy: National Farm Policy N-239 1. 2. 3. 4.
Are there other alternatives for the cotton industry? Should we support the STAX program? Should the Adjusted Gross Income levels be lowered? Should there be payment limits on marketing loans?
BOLL WEEVIL ERADICATION Boll Weevil Eradication is nearing completion with no live catches within the last three seasons. A move was made by the BWE foundation board to create a more positive approach to completing and maintaining the program. New management was hired and more extensive quality control programs for trapping has been implemented. Staff has been reduced, existing debt has been reduced, and interest costs cut. Related Policy: Cotton 103, Cotton research 104
1. Are there other things that can be done to complete the program and pay off the existing debt? COTTON PROFITABLILTY Sharply rising cotton values in 2010 have created major issues for producers. The high price levels have cut demand and resulted in the loss of fiber market share to manmade fibers. In 2011 world cotton production rose 7 million bales while world use declined 9 million bales, and ending stocks soared to over 67 million bales. Stocks are projected to rise to 74.5 million bales in 2012 and 2013 as cotton use remains well below peak use of past years. Cotton has been unable to turn the tide and regain market share. In the meantime, producers have seen price sag and profitability decline as input costs (fertilizer and fuel) rise. Related Policy: Cotton 103, National Farm Policy N-239 1. What can be done to restore profitability to the cotton industry? 2. Could research increase yields or reduce costs enough to increase profitability? 3. Can more promotion help restore cotton’s market share?
[If you need additional information on these and other issues concerning the cotton division or if you desire assistance with your county policy development meeting, contact Gene Martin, Cotton Division Coordinator at (501)228-1330 or via e-mail at gene.martin@arfb.com.]