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Agricultural and Food Policy
 Agri Outlook
Radio
Number 92
Policy: Part 5. Key Points - Rice and Cotton Sector Considerations As the Senate Debates the New Farm Bill (3:41 minutes)
Audio/Video Script:
Dr. Bobby Coats
Extension Economist
University of Arkansas, Division of Agriculture
Part 5, concludes the series on rice and cotton sector considerations as the
Senate debates the new farm bill with a list of key points. I’m Bobby Coats
Extension Economist University of Arkansas Division of Agriculture.
Today’s farm policy trend of transitioning rice and cotton producers toward
responding to global market signals is happening at a rapid clip.
Consider:
Today’s rice and cotton farm business setting has changed radically
from the past, due to the following:
The instability of the new global economy
Huge production cost increases since 2002
Repeated damaging drought events of the past several years
The increasing trend in U.S. agricultural policy for our
producers to produce for the global market without a global trade
agreement
Food and fiber protectionism in country after country around the
world
Farm government program support is not indexed
Under current farm legislation, given the current economic, farm and
trade policy setting, change and reform to the U.S. rice and cotton
sector is occurring at a very dangerous pace. The consequences of this
rapid change is unknown; therefore policy that accelerates change should
be considered wisely since the financial and structural consequences to
producers, supporting infrastructure and regions is not known.
The reality is the rice and cotton farm business environment, due to
globalization, is far more dynamic, fluid, and fragile than is
understood. This is why the new farm bill debate has become very
strained and confrontational. The future unknowns rice and cotton
producers’ face, far exceed knowns.
What is the future of strong commodity prices? Wheat prices may have
already topped and be in the process of starting a multi-year decline.
Corn, soybeans, rice and cotton will probably top in the next 3 to 15
months and start their decline. By 2010 or 2011 the global economy may
be showing equity and commodity price weakness similar to the 2000 and
2001 period. If this is a five year farm bill, commodity prices could
easily be going through a painful correction during part of the life of
the legislation, before the commodity price cycle turns back up, which
speaks volumes for the current legislation with logical adjustments.
This type of global slowdown also has the potential to dramatically
lower oil prices and stress, and possibly severely damage, the ethanol
industry and the alternative biofuels movement.
A significant amount of acreage on rice and cotton farms in Arkansas,
the Mississippi River Valley Delta, the rice and cotton producing states,
or the south will remain in some type of production, so the question
worth considering is as follows: Is the possible rapid expansion of the
U.S. rice and cotton farms into grain farms and confinement operations
and/or fruit, nut, and vegetable operations good farm policy?
Finally, there is very little evidence that the risk exposure rice
and cotton producers are facing is understood.
This has been Bobby Coats Extension Economist University of Arkansas Division
of Agriculture.
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Food Policy Radio
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