Monday, October 18, 2010;
THIS IS A GOOD time to be a cotton farmer. The price of cotton is up 86 percent over last year and exceeds $1 per pound for the first time in 15 years. The Agriculture Department expects growers to reap cash receipts of $5.3 billion for 2010. Taxpayers benefit as well: In August, the Agriculture Department projected that the high prices will reduce the cost of a program that protects cotton farmers from cyclical downturns from $1.17 billion in 2009 to $243 million in 2010.
However, cotton farmers will still be eligible for direct payments, which don't vary with the business cycle. And on top of that, the Obama administration announced last month that it will shower about $630 million in special aid on Southern agriculture, much of it destined for cotton growers. Ostensibly, this is to make the farmers whole for losses they suffered during an unusually rainy 2009 harvest season.
But even the farmer-friendly Senate never accepted that dubious rationale. As was abundantly clear to all concerned, the actual purpose is to help the political fortunes of the senator who crusaded for it, Blanche Lincoln (D-Ark.). Unable to get the money through the normal legislation, Ms. Lincoln held a separate bill hostage until she extracted a promise from the Obama administration to come up with the cash from an existing executive branch account. The source chosen was Section 32, a heretofore obscure Agriculture Department program whose usual purpose is to support child nutrition. If there's a saving grace here, it is that Ms. Lincoln originally demanded $1.5 billion, and the administration refused to go quite that far.
This lavish payout would have been wasteful under normal circumstances; it becomes that much more grotesque at a time when cotton is doing better than most other sectors of the economy. What's also noteworthy here is the source of cotton's explosive recent growth: foreign demand. Buoyed by the cheap dollar, cotton exports are up 29 percent over last year. A third of the shipments go to China, where the fiber is turned into clothing for U.S. consumers. This trend is likely to continue, further undermining the case for the cotton program. In the distant past, when America's own textile industry represented cotton producers' largest market, farmers were disproportionately subject to the vagaries of that one market. Now, robust demand from a variety of emerging markets makes their business less risky -- and taxpayer support even harder to justify.
The United States controls 80 percent of the growing world market for cotton. Letting American farmers compete internationally without aid from Washington is fairer to our trading partners and better for the government's already distressed finances.