Changes needed to strengthen cotton New farm legislation should include "a realistic safety net" for U.S. cotton growers, says the world's largest cotton merchandiser, William Dunavant.
It should also include a marketing loan provision to make American cotton competitive, a marketing certificate program to make it competitive in export markets, a certificate program for the U.S. textile industry to help them compete with imports, and "a slight increase in the loan level - as long as we continue the marketing loan concept."
And, he told a standing room audience at the Beltwide Cotton Conferences at Anaheim, Calif., the current crop insurance program for cotton "must be restricted and more carefully managed."
Dunavant, whose company is located at Memphis, Tenn., said, however, that a problem with raising the loan level is that "it sends the wrong signal to other producing countries. Even though we have the marketing loan, boosting the loan level can increase additional foreign cotton production - and that we don't need.
"In fact, in the past when loan levels have been raised, it has encouraged increased production at home and abroad. All of this is extremely important, because the playing field has not been level."
Noting differences in payments to producers as a result of the POP provisions of the farm legislation, Dunavant said "there is something wrong with a farm program when a grower gets less for his cotton when the futures price is five cents to eight cents higher than the previous year. Lower prices giving higher returns makes no economic sense to me - and this must be addressed."
Calling for reform of the present crop insurance program for cotton, Dunavant said, "I cannot believe anyone who is an efficient and aggressive cotton producer can support such a program the way it is currently structured.
"We are, in my opinion, encouraging the over-production of cotton because of this program's provisions. We cannot, and will not, obtain consistently higher prices for U.S. cotton with a faulty insurance program. I support a program that will give American cotton producers protection when protection is needed."
Noting that the cotton industry "has struggled the past three years," Dunavant said "I truly believe our future today is brighter than it has been in a number of years, but we must have sound farm legislation in 2002 that will reward the efficient - regardless of which industry segment is involved."
"I clearly see the vision for my company and U.S. cotton: We must continue to be the most technologically efficient and we must be on the cutting edge of every new form of technology that will benefit the seven segments of the industry. To be successful, we must change ahead of the times, rather than with the times."
Despite wide-ranging problems over the past three years, the U.S. cotton industry has been fortunate, Dunavant said, that the Congress "has recognized the serious difficulties you faced and took measures to improve the awful situation (through added payments).
"Now that we have a new Congress and a new President, it remains to be seen if your problems continue to be serious, or if we once again will be able to prevail on the Congress. I believe we will be successful, because the cotton producing sector is critical to the success of the U.S. cotton industry."
The U.S. needs "to be on a level playing field," Dunavant said, "and if we can't be, then our government needs to take measures that will give the producing sector and textile industry a level playing field.
"I think they have worked to do that for the producing sector, but they have not accomplished very much with our domestic textile industry, and with the advent of China entering the World Trade Organization in 2001, I see a continued potential deterioration of U.S. cotton consumption. I would urge the U.S. government to restrict illegal cotton and man-made textiles from coming into our country."
While there are currently some positives in world cotton consumption, "the reverse is true in the U.S.," he said. "Polyester prices have strengthened over the last year because of the rise in oil prices. Cotton has been a beneficiary of this moreso in the world than in the U.S.
"If there is any good news, it is that North American cotton consumption (Mexico, Canada, and the U.S.) has not suffered as much in total, because Mexico and Canada have picked up some of the decline in the U.S. The picture is not quite as dismal for North America as a whole as it is for the U.S."