In the News -
November 2007
Outlook for rice and cotton in Farm Bill debate
LITTLE ROCK - Today's rice and cotton farm business setting has changed
radically over the last few years for many reasons far beyond the control of
producers. It has left producers exposed to many risks, and there is little
evidence that anyone really understands their predicament, says Dr. Bobby Coats,
agricultural policy analyst for the University of Arkansas Cooperative Extension
Service.
Coats said the problems rice and cotton producers face are tied to several
factors, including:
- The instability of the new global economy, which continues to
produce huge swings in commodity prices and staggering production
cost increases.
- Arkansas producers, like many in the U.S., have had repeated
damaging drought events over 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 puts our producers at a major disadvantage in the export
market.
- Food and fiber protectionism in country after country around
the world exists and will exist for decades to come.
- Farm government program support is not indexed, which means our
producers are focused on increasing their productivity and achieving
low cost production.
"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 rapid and dangerous pace," Coats said.
He urges caution in weakening the farm safety net. Policy that accelerates
change should be considered carefully since the financial and structural
consequences to producers, supporting infrastructure and regions are unknown,
Coats said.
Globalization has made the rice and cotton farm business environment far more
dynamic, fluid, and fragile, he said.
"This is why the new farm bill debate has become very strained and
confrontational," Coats said.
Meanwhile, he said strong commodity prices at some point would decline.
Extremely high 2007 crop wheat future prices may have already peaked, he
said, and be in the process of starting a multi-year decline. Corn, soybeans,
rice and cotton will probably top in the next three months to 15 months and
start their decline unless there is a major catastrophic global event somewhere
in the world, he said.
By 2010 or 2011, the global economy may be showing equity and commodity price
weakness similar to the 2000 and 2001 period, which is why a strong safety net
should be maintained in the new farm bill.
"If Congress passes a five-year Farm Bill, commodity prices could easily be
going through a painful correction during part of the life of the legislation,"
Coats said. "This type of global slowdown also has the potential to dramatically
lower oil prices and stress, and slow the growth of the ethanol industry and the
alternative biofuels movement."
Looking forward, Coats said the future for commodity prices after a
multi-year correction looks bright. "I expect, assuming continued strong global
growth continues, that our food and fiber commodity prices will exceed previous
highs as we finish the bull market cycle in commodities," he said.
Podcasts and transcripts by Coats on the Farm Bill are available by going to
www.uaex.edu and selecting a link at the
bottom of the page. The Cooperative Extension Service is part of the U of A
Division of Agriculture.
November 16, 2007
Media Contact: Lamar James
Extension Communications Specialist
U of A Division of Agriculture
Cooperative Extension Service
(501) 671-2187 or (501) 753-0207
ljames@uaex.edu
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