A World Trade Organization ruling Thursday that U.S. cotton subsidies are illegal could lead to future challenges of crop subsidies that have delivered billions of dollars to Minnesota farmers in the past decade.
The Geneva-based WTO upheld a panel's 2003 finding that $2.7 billion a year in U.S. cotton subsidies to farmers and businesses are illegal. In September 2002, Brazil had challenged U.S. farm aid, claiming that it encouraged overproduction and depressed the world market for cotton.
On Thursday, the WTO also said that many U.S. farm programs include illegal payments or export subsidies that are higher than permitted by the world trade rules.
Agriculture officials and businesses say the repercussions could ripple through domestic farm policy, as well as ongoing trade negotiations.
Al Christopherson, president of the Minnesota Farm Bureau, said he doesn't expect immediate ramifications for the state's farmers. He predicted that the United States will have time to respond to the decision.
"There's going to be changes in the next farm bill, I'm certain of that," Christopherson said.
Government farm payments translate into big money for Minnesota's economy, where agriculture and food industries rank as the No. 2 employer.
Government subsidies and assistance to Minnesota farmers, mostly for corn and soybeans, totaled $348.2 million in 2004, said Warren Pommier of the U.S. Farm Service Agency in St. Paul.
And last year, Minnesota sugar farmers received nearly $24.2 million in disaster payments for losses in 2002 or 2003, he said.
From 1995 through 2002, Minnesota received nearly $7.52 billion in farm subsidies for commodities, disasters and conservation programs, according to Environmental Working Group, a nonprofit watchdog that runs a database.
More than half of about 80,000 farms in Minnesota received subsidies in 2002, according to EWG.org. The majority went to the biggest farms.
It had been anticipated by all quarters, said Minnesota Agriculture Commissioner Gene Hugoson, that the 2007 farm bill would address contentious subsidy issues.
"It's regrettable that this has come now," Hugoson said of Thursday's ruling, "because it will probably make the next WTO negotiations that much more difficult."
He speculated that if other farm subsidies are challenged and found to be illegal, the fallout could force down prices of farmland for both owners and renters. That's because those land values are tied to crop prices, he said. The subsidies kick in when market prices drop below certain levels, providing a safety net for farmers.
Christopherson, however, said he's not so sure of that connection. Land prices are affected by a number of factors and have risen even with the same farm policy in place since 2002, he said.
Officials at CHS Inc., a farmer's cooperative based in Inver Grove Heights and a global grain trader, have voiced concern over the uncertainty that such a trade ruling brings to commercial grain handlers.
So have officials at Cargill Inc., which operates in 67 countries and is based in Minnetonka. Cargill, a cotton trader, ranked fourth-highest among U.S. agribusinesses receiving cotton subsidies from 1995 through 2002.
Cargill received about $87 million during that period, according to the Environmental Working Group.
Overall, from 1995 through 2003, U.S. taxpayers spent $131 billion on federal farm programs, according to the database.
In Brazil, where soybean production is surging ahead of other nations, farmers and trade officials have been complaining about U.S. soybean subsidies. Now many in the United States are watching to see if Brazil and other countries will follow the cotton case with challenges to other U.S. farm programs.Star Tribune
