Loan Plan Brings Plunge in Rice, Cotton Surpluses

The nation’s huge surplus of rice and cotton, two of California’s leading export crops, has plunged during the first nine months of a controversial federal loan program, farm leaders said Tuesday.

“Never has the rice industry been so affected in one year as it has this year,” said Michael Cook, chief executive of West Sacramento-based Rice Growers Assn. of California, at the annual meeting of the American Farm Bureau Federation in Anaheim.

At the close of the 1985-86 marketing year last summer, Cook said, 77 million hundred-pound sacks of rice clogged storage facilities in California and the Southern rice states along the Gulf of Mexico. Since the so-called marketing loan program took effect April 15, however, the surplus has fallen by about 30 million sacks.

Comparable figures were not provided for cotton supplies. But Sam Reeves, president of Dunavent Enterprises, a Texas cotton dealer, said there now is a four-month inventory of cotton, which he described as an optimum level, down from more than a year’s supply in April.

Reeves characterized the loan program, which was authorized by the five-year farm law enacted in 1985, as “cotton’s salvation.”

The loan program provides rice and cotton farmers with subsidized loans whose rates fluctuate with world prices. Unlike price support programs that inflate the cost of other basic farm commodities, the rice and cotton loan program allows the two crops to sell at prevailing world prices.

Farm leaders said the program, by holding prices down, has spurred increased consumption of U.S.-grown rice and cotton. Cook said worldwide rice consumption climbed 11% in the first nine months of the program.

Larry LaTouf, executive vice president of Bakersfield-based Calcot Ltd., a cotton cooperative, said cotton consumption increased by the same amount during the period, while consumption of man-made fibers climbed only 4.3%.

But farm leaders expressed concern that the marketing loan program may be politically vulnerable because it is new, applies only to rice and cotton and carries its heaviest costs in the first two years of the five-year farm program.

Newman predicted that in five years the rice program’s $758-million cost will be more than offset by benefits to consumers and the rural economy.

“The bill has largely been paid,” he said. The only loser, he said, is the storage industry.