4

ALL GOD’S DANGERS AIN’T THE SUBSIDIES

ALONE ON THE FARM BUT TOGETHER IN TOWN

 

 

 

The remarkable improvements in cotton production that Nelson Reinsch has witnessed—the machines, the chemicals, the GM technology—have occurred alongside equally remarkable advances in business practices. Just as Nelson gradually overcame his powerlessness against the Texas elements, he has overcome his powerlessness against the world markets as well. And, ironically, while advances in production methods have left Nelson out in the field by himself, advances in business organization, marketing, risk sharing, and political influence have led west Texas cotton farmers to band together as a united front against the markets that once dominated them. Little by little, as the farmers became more alone on the farm, they banded together in town.¹

The journey of the Reinsches’ cotton to China begins with a trip just a few miles down the road, to the Citizen’s Shallowater Cooperative Cotton Gin. Though the number of cotton gins in the United States has been falling steadily since observers began to count, they are still located next to the cotton fields. It was not so long ago that growers were at the mercy of the local gin, which stood like a roadblock between farmers and their cash. Only a few gins served hundreds of farmers, so the economic power was with the gins rather than the farmers, and farmers desperate for cash lined up at the gin and waited and waited for a turn to pay whatever the ginner wanted.

On the surface, the power structure looks even more lopsided today. The market for cotton ginning is even more concentrated: From 1900 to 2004, the number of gins in operation in the United States fell by over 95 percent, from 20,214 to 896, and the capacity of the typical gin has risen by a factor of 40.² Cotton gins are big and profitable businesses now, driven to be larger and more productive by advances in gin technology and economies of scale. But as the gins became bigger and more profitable businesses, something else changed, too. Today, Nelson and Ruth are no longer at the mercy of the gin; instead, they own it. The Reinsches, along with about 300 other farmers, own the Shallowater gin, and their income from selling cotton is augmented by dividend checks from the cooperatively owned gin.

Backward to Seed and Forward to Denim: Farmer Profits at Every Step

Cotton growers have also shown an astounding ability to coax value out of cotton production by throwing nothing away and finding somebody, anybody, to eat it or buy it. Out of the 22,000 pounds of cotton that leave Nelson’s farm in the module truck, only about 5,300 pounds is the white lint that will be turned into T-shirts. Everything else on the truck looks like garbage, and it was once garbage, but not anymore. Even the garbage produced by the garbage is now sold. The reusing, recycling, and repackaging that take place in Lubbock’s cotton industry today would shame the thriftiest Depression-era housewives. And often, for Texas cotton farmers, the garbage is the difference between red and black at the end of the year. As with virtually all other aspects of cotton farming, substantial assistance has been provided by the U.S. government. While much agricultural research has been devoted to increasing the quality and quantity of cotton production, the USDA at the same time has been actively involved in research to find creative and profitable uses for everything else that arrives in the module.³

In addition to the 5,300 pounds of the module’s contents that are destined to be spun into cotton yarn (which in turn could produce about 13,500 T-shirts), the module also contains 9,000 pounds of so-called gin trash—bolls, stems, leaves, and dirt—that have been sucked in along with cotton by Nelson’s stripper (see Figure 4.1). Once a little molasses is stirred in, much of this trash becomes cattle feed, trucked just a short distance to the feedlots dotted among the cotton fields. The gin trash is also being converted into briquettes (to be burned for fuel), building materials, fertilizer, and ethanol. With typical resourcefulness, the growers have turned a waste disposal problem into a revenue.⁴

Figure 4.1 Content of Seed Cotton

Source: USDA, National Cottonseed Products Association.

Eight thousand pounds of the snowy white module is cottonseed. The cottonseed, like the bolls and leaves, once had an unprofitable fate as trash, dumped into gullies and streams, or burned in gigantic piles. The volume of cottonseed garbage during the 1800s became so problematic that a number of states passed laws to regulate its disposal.⁵ But while the bolls and leaves were still trash, in the early 1900s, the seed began to move up the value chain to be used as fertilizer and animal feed. The cattle loved it, just raw, and cottonseed was soon found to improve the butterfat content of milk. After their cotton had been ginned, farmers would keep some of the seed for next year’s planting, plow some into the ground as fertilizer, and use the rest to feed their cows. Now, however, the bolls and leaves are used as feed, but because the GM seed is not allowed to be replanted, it is off to the city to meet its own global market.

The tallest (actually, the only) mountains in the Lubbock area can be seen from miles around: In harvest season, the mountains at the Plains Cooperative Oil Mill (PCOM) contain about 20 tons of cottonseed apiece. The PCOM was born in the late 1930s as a desperate act of self-defense by west Texas cotton farmers, who at the time could hardly give their seed away. The west Texas seed had a reputation for poor by-products, and therefore brought low prices. Furthermore, the marketing of the seed was fragmented, with individual gins trying to negotiate with the likes of Palmolive, Wesson Oil, and Ralston-Purina. PCOM gradually proved to customers that west Texas seed by-products were in fact superior, not inferior, to those of its competitors, and also gradually consolidated the marketing efforts of the region’s gins.⁶

The oil from the seed, about 16 percent of the seed’s weight, is sold to buyers in Lubbock. It comes back into the Reinsch house in Snickers bars, Ragu spaghetti sauce, Peter Pan peanut butter, Girl Scout cookies, Certs breath mints, and almost any kind of crispy snack food (the biggest buyer of cottonseed oil in the world is Frito-Lay). CRISCO shortening (named for the acronym for Crystalized Cottonseed Oil), has come full circle back to cottonseed. Created in 1911 by Proctor and Gamble as hydrogenated cottonseed oil, CRISCO was reformulated with different ingredients over the years, but now once again contains primarily cottonseed oil, which is trans-fat free.

Cotton growers have also benefited recently from their competition from corn oil (which is getting more expensive due to demand for ethanol) and peanut oil (which is allergenic to many). Connoisseurs agree that when it comes to frying chips, cottonseed oil is best. In fact, gourmet chefs increasingly tout the benefits of cooking with cottonseed oil. The National Cottonseed Products Association (NCPA) offers recipes such as “Chocolate Banana Bread Pudding with Mascarpone Caramel Cream and Banana Beignets” to anyone who might be interested. In the sporting goods stores in west Texas, large jugs of cottonseed oil are positioned next to the turkey fryers. Cottonseed oil is also the primary input in the production of Olestra, a frying fat that glides through humans without leaving a trace of fat or calories, and is also an important source of vitamin E for pharmaceutical producers. And finally, the oil is also processed into “soap stock” that turns up in soaps and detergents of all kinds. Colgate-Palmolive is also a major customer. (See Figure 4.2.)

But while Nelson’s cotton is exported worldwide, his cottonseed oil often gets stopped at the border. When the oil is intended for human consumption, or is contained in Pringles or Snickers, it becomes a food, and in many countries, particularly in Europe, U.S.-produced cottonseed oil is a genetically modified food, subject to myriad restrictions and labeling requirements. U.S. cottonseed oil exports to Europe have fallen from 5 million kilograms in 1989 to virtually zero for the 2004-2007 period.⁷

Figure 4.2 Products Containing Cottonseed Oil Displayed at the Plains Yazoo Cotton Oil Offices in Lubbock. (Author’s Photo.)

The meal of the cottonseed constitutes almost half of the seed’s weight. It contains high-quality protein and is now used to feed not just cattle, but as Dave Kinard of the NCPA told me, “just about any critter at all,” including horses, hogs, chickens, turkeys, sheep, and mules. Ralston Purina is another major customer for cottonseed meal. And recently, researchers in aquaculture (fish farming) have discovered that cottonseed meal makes a high-quality fish food.⁸ Catfish, in particular, appear to love cottonseed meal, and will eat it even when offered fish meal instead. Because fish stocks throughout the world are falling, driving up the prices of fish meal, and cotton production is rising, driving down the price of cottonseed, feeding cottonseed to catfish works for farmers of both cotton and catfish. And it’s convenient, too, as the catfish farms in the South are close to the cotton fields. Dr. Lance Forster, a scientist at the NCPA, predicts that fish farms may soon consume 10 percent of the production of U.S. cottonseed meal.⁹

And humans are critters, too. If current research in genetic engineering pays off, cottonseed flour will turn up in the bakery aisle in breads, cakes, and cookies. Even today, it is possible to produce a baking flour for human consumption from cottonseed meal. The problem, however, is that the cottonseed varieties that produce high-quality flour do not produce high-quality lint. As a result, farmers are unwilling to plant the flour varieties. As plant genetics research advances, however, industry scientists hope that it will be possible to breed cottonseed that produces superior flour, high-quality lint, and oil, so that almost every ingredient in a birthday cake can be produced with the leftovers from Nelson’s cotton production.

Approximately 30 percent of the cottonseed’s weight is in the hull, or outer covering. Like the cottonseed meal, the hulls show up in animal feed. But they are also used in the production of fertilizer, garden mulch, and soil conditioner. And in some regions, cottonseed hulls are processed into oil-drilling mud, a sticky, industrial-strength type of Play-Doh that is used to plug leaks in oil wells.

And finally, a ton of cottonseed will contain about 150 pounds of “linters,” which are tiny bits of cotton fuzz that are stuck to the seed after ginning. The oil mill scrapes off the tiny fuzzy bits with microscopic saws and turns them into big bundles of fuzz to be sold. The fuzz turns up again in throw pillows, automobile upholstery, mops, candlewicks, blankets, mattresses, twine, rugs, and medical supplies. Linters are also used in the production of cellulose and viscose, which turns up in toothbrushes, ballpoint pens, picnic cups, and almost any item made of hard plastic. The cellulose from the linters is also found in cheaper brands of ice cream, where it is used to improve texture and reduce ice crystals. Linters are also used in hot dog and sausage casings, as well as writing paper, and in most countries, paper currency. And for those with sensitive skin, an environmental conscience, or both, “tree-free” toilet paper made from cotton linters is now available. The toilet paper, according to entrepreneur Willy Paterson-Brown, is “reassuringly expensive.”¹⁰

In October 1999, PCOM merged with the Yazoo Cotton Oil Mill and the new entity, the Plains Yazoo Cotton Oil Mill (PYCO), markets about one-third of the cottonseed oil produced in the United States.¹¹ The Plains Cooperative Mill in Lubbock is the world’s largest cottonseed oil mill, receiving about 1,200 tons of seed per day from the region’s gins, and churning out the makings for peanut butter, soap, and throw pillows.

The PYCO oil mills have quite a monopoly on acquiring seed from the region’s gins, which would appear to give the farmers little power in marketing their seed. But the Shallowater gin, along with about 175 other gins across the South, own PYCO, and the Reinsches, of course, own a piece of the gin. The income from the world’s largest oil mill, then, is paid to the region’s gins, which in turn pass it through in dividends to growers like Nelson and Ruth.

So, Nelson doesn’t throw away his cottonseed anymore. Instead, he gets a tiny dividend every time city folk spread peanut butter on their toast.

While his seed is trucked to the oil mill, Nelson’s baled cotton lint is trucked to the Farmer’s Cooperative Compress (FCC) not far from the cottonseed mill. In earlier times, cotton was compressed here, to reduce the space the cotton occupied in the ships bound for export markets. Now, however, most cotton is compressed at the gin, yet the FCC retains its name. The FCC is the distribution and warehouse point for Nelson’s cotton. The FCC stores and insures cotton until it is sold, and then ships it by rail or truck, and for exports, by ship, to its destination. Cotton bound for Chinese mills typically leaves the FCC by truck for Long Beach, California, where it is loaded onto ships bound for Shanghai or Guangzhou. The FCC handles over 15 percent of the Upland cotton grown in the United States each year, and it paid out more than $210 million in dividends to its members during the five years ending in 2007.¹²

Surprise: Nelson owns a piece of the Compress, too.

And there is one more thing. In Littlefield, a short drive through the emptiness from the Reinsch farm, smack in the middle of the cotton fields, the farmers have built a denim mill.¹³ The farmers made a deal in 1988: They promised to grow the cotton and Levi-Strauss promised to buy the denim. The established textile industry scoffed, called the mill “the farmer plant,” and refused to help. And the things that went wrong—from rattlesnakes burrowing in the denim, to denim of such poor quality it couldn’t even be sold as “thirds,” to month after month of returns from the meticulous Levi-Strauss inspectors, to trying to find a workforce in the Texas emptiness—did not bode well for the farmers’ foray into the textile industry. But by 1998, the Littlefield denim plant was winning Levi-Strauss quality awards. The Littlefield mill had started out producing a basic blue denim, but by 2007 it was producing more than 200 styles of fabric.

By the time I first visited the denim mill in 2007, the mill had upgraded its technology six times, and now employed the most advanced Belgian looms in the world. In the endless quest to address the labor challenges of the region, the new technology allowed each worker to man 50 looms, from 20 just a few years ago. The competition in the global denim market was fierce: Between 1988 and 2007 the selling price of denim had fallen by a third, and every one of the mill’s domestic customers had disappeared. While Levis once had four apparel factories within 200 miles of the Littlefield mill, today it has none, and so all of the mill’s denim is exported. Yet the mill buys more than 1 million pounds of cotton per week from the region’s farmers, and turns it into 68 million square yards of denim to be sold all over the world.

No More Handfuls

Once all of the cotton is in from the fields, it would seem, the farmer deserves a rest. The next step, however, marketing the cotton, takes the farmer out of his element and subjects him to vagaries every bit as cruel and unpredictable as the weather. Nelson remembers well the days of trying to sell his own cotton. He would take his neatly tied bales down to Avenue A in Lubbock, where the cotton buyers all had storefronts. The buyer would poke his hand right into the bale and pull out a big fistful, look it over and name a price, take it or leave it. Usually the farmers had to take it. The season’s bills had to be paid, and it was risky for the farmer to hang onto his cotton in the hope that the price would go up. It was the fistfuls that bothered Nelson, still do, thinking back. At the end of the season, Nelson suspects, the cotton buyers down on Avenue A had their own bales to sell.

Most older farmers I talked to had a similar memory. After months of work starting in March, after the planting, weeding, spraying, and harvesting, everything came down to one day, one handful, one man at the cotton buyer’s office. Many farmers—40 years later—remembered his name.

Ned Cobb remembered selling cotton, too, hitching up the mules and taking a bale into town. But he tried not to take his cotton right to the buyer. He let a white friend do that, as he found that this made a big difference in the price:

[C]olored man’s cotton weren’t worth as much as white man’s cotton less’n it come to the buyer in a white man’s hands.¹⁴

If cotton farmers everywhere had a tough time marketing their cotton each fall, nowhere was it tougher than in west Texas, where the cotton had a reputation, mostly but not entirely deserved, for poor quality. For one thing, the west Texas cotton was short fibered, averaging less than one inch; and for another, the fiber was weak. The cotton that was best suited to surviving the west Texas wind, hail, and sand was not, to discerning buyers from the textile mills, very good cotton. Many domestic mills wouldn’t touch west Texas cotton, which meant that most had to go for export. And when the cotton did compete, it was only because of its steeply discounted price. It was possible for the west Texas farmers to grow better cotton, but they had no incentive to do so because west Texas cotton was priced by its origin and not by its quality. Buyers simply assumed that the cotton was shorter and weaker than its competition.¹⁵

The virtuous circle was as effective in advancing cotton marketing as it was in advancing science. Clearly, banding together to improve the quality and reputation of the region’s cotton made sense. The Plains Cotton Cooperative Association was formed in 1953 with a $12,000 loan. In 1958, a media blitz on 2,100 radio programs and 50 area newspapers was directed at the west Texas farmers. The farmers were bombarded with the whys and hows of producing better, stronger, longer cotton. As the quality of the cotton improved, the PCCA took on the task of proving it to the textile world.

Most important, the “grab-a-handful” method of classing cotton gave way, under USDA leadership, to high-volume instrumentation (HVI) testing, in which samples from each bale were graded by computer for color, leaf content, fineness (or micronaire), strength, and length at the USDA classing office in Lubbock.

I visited the Lubbock classing office during the peak of the harvest season in late 2007. The classing facility was running 24/7, and grading approximately 45,000 cotton samples per day. I watched tufts of cotton pass through a sensor, where the cotton fibers were measured and graded into one of 20 length categories. The sensor also measured length uniformity: A bale containing very short fibers and very long fibers is less valuable than a bale containing mostly middle-length fibers. The strength of the cotton fibers is then measured by the weight it takes to break them, and the bales are graded into one of five categories for both uniformity and strength. A third, computer-driven technology is used to measure micronaire, which affects the ability of the cotton to hold dyes as well as the yarn manufacturing speed. Reflective technology is then used to measure the color of the cotton (how white? how yellow? how tinged? how spotted?) and to grade the color into one of 25 categories. Finally, optical scanners measure the amount of “non-lint” matter, such as leaf bits and bark, in each sample.¹⁶ After accounting for the various combinations, west Texas cotton can be graded into about a hundred different quality categories.

The virtuous circles linking Tech, Monsanto, and farmers continue the quest for this year’s cotton to “outclass” last year’s, and each year, west Texas cotton is a little longer, stronger, whiter, and cleaner.

Each of the 12 USDA cotton classing facilities in the United States sends a few samples by FedEx each day to the Memphis USDA cotton classing headquarters. There, specialists compare the classing results across facilities. The object of the game is to make sure that cotton classed in Lubbock would receive the same grades if it were classed in Corpus Christi or Birmingham, Alabama.

As I traveled around the world visiting textile mills during the past several years, cotton buyers everywhere sang the praises of the PCCA in Lubbock. They loved the west Texans as people, and found them, as I did, to be unfailingly gracious and brimming with hospitality. They loved the west Texans as business partners as well: the quiet integrity, the professionalism, and the handshake mentality. But the buyers especially loved the USDA classing system. Every textile mill manager I spoke with seemed to have a nightmare cotton story of bales that had arrived from China or India or Uzbekistan—bales that were opened to reveal one unhappy surprise or another. Someone had “grabbed a handful” and classed the cotton, but it was dirtier or dingier or weaker or shorter than it was supposed to be. That never happened, the mill managers told me, with American cotton.

The PCCA also took on the task of selling cotton. In the mid-1970s, the PCCA launched TELCOT, an electronic cotton exchange linking buyers and sellers. Today, electronic marketing takes place through a system called TheSeam, an Internet-based system that provides buyers from all over the world access to west Texas cotton, and allows textile mills to examine on the computer screen the classing results for millions of bales. This all beats hitching up the mule, or driving downtown to Avenue A.

PCCA also gives the farmers the option of not worrying about selling cotton at all. Many farmers, including Nelson, put their cotton into the PCCA’s marketing pool. The pool advances some cash as soon as the cotton is ginned, and then pools the cotton with that of other growers to sell throughout the year. Farmers receive periodic payments as cotton is sold from the pools. It is a risk-sharing arrangement that leaves no big winners or losers, as all of the farmers in the pool are assured of receiving “average” prices. Today, all Nelson has to do to sell his cotton is to tell Barbara Burleson at the Shallowater gin to “put it in the pool.” The next day, he gets his first check, and three more will come along as the cotton is sold. All told, the PCCA markets about 18 percent of the American cotton crop, about half of that through pools.

All This and Subsidies, Too

As we have seen, throughout American history, U.S. cotton farmers have solidified their political influence to manage virtually every business risk to shape the world in front of them. This political influence is striking, both in its repetitive pattern of protection from market risks and in the evolution of the relationships among researchers, government programs, and farmer resourcefulness. While farmers have long wielded significant political power in the United States, it seems that recently their power has grown even as the number of farmers has dwindled, especially in the case of cotton farmers. Texas cotton farmers had both a kindred spirit and a staunch ally in George W. Bush, who spent long weekends on his ranch in Crawford, Texas. Crawford lies 300 miles southeast of the Reinsch farm, an interminable drive but only a brief psychic distance from Texas cotton country.

According to at least some observers, the definitive source of U.S. cotton farmers’ comparative advantage is their ability to get help from friends in high places.¹⁷ On a per-acre basis, subsidies paid to cotton farmers are 5 to 10 times as high as those for corn, soybeans, and wheat, and subsidies for cotton are also 3 to 6 times higher relative to production than are subsidies for soybeans and corn.¹⁸ Even by the normally generous standards of U.S. farm policy, the 2002 Farm Bill went over the top for cotton.

Under the 2002 Farm Bill, cotton farmers received a direct payment of 6.66 cents per pound of cotton regardless of the market price. In addition, under the commodity loan program, farmers are guaranteed minimum payment at the “loan rate” that was fixed in the Farm Bill legislation at 52 cents per pound. Finally, growers are also entitled to countercyclical payments, which kick in when the farmer’s income per pound from the direct payment plus the loan rate (or market price, if it is higher) is less than the target price of 72.24 cents per pound.¹⁹ In total, the 2002 Farm Bill therefore brought the cotton farmer’s income up to a minimum of 72.24 cents per pound, though the world price of cotton for the 2002-2007 period ranged between 44 and 61 cents. For the 10-year period ending in 2006, the average U.S. cotton farmer received approximately 30 percent of his or her income from federal subsidies, though in some years the share was as high as 45 percent.²⁰ Thanks largely to the generous government payments, average annual household income for cotton farmers was $142,463 in 2003—approximately double that of non-cotton farmers.²¹

The 2002 Farm Bill and its antecedents protected cotton farmers from a wide variety of other business risks that most other industries must bear on their own, including bad weather, bad credit, bad luck, and tough competition. The Crop Disaster Program reimburses farmers for losses due to unusual weather or related conditions, while Farm Loan Programs provide financing to farmers who are unable to get credit from private sources. In addition, for cotton farmers, over 60 percent of crop insurance premiums are paid by the federal government.²² The government offers a variety of “Agricultural Trade and Aid” assistance programs to help farmers export cotton, including guarantees against customer default.

The Reinsch farm is located in Hockley County, Texas, which has a population of just 22,000. During the 2003-2006 period, subsidies to Hockley County cotton farmers totaled more than $70 million, though this figure does not include conservation program payments, payments to cotton buyers, subsidies on other crops, and other forms of indirect assistance.²³

The 2002 Farm Bill expired at the end of 2007, and, as expiration neared, it seemed that the gravy train for U.S. cotton farmers was pulling away. Voices from across the political spectrum called for a radical reform of the subsidy system. Indeed, as of mid-2007, it seemed that the 2002 Farm Bill had not a friend left in the world outside of the relatively small number of large commodity farmers, and that the 2007 Bill—to be authorized for another five years—would be a different animal, indeed.

Critics from the left, such as former President Jimmy Carter and “pro-poor” groups such as Oxfam and Bread for the World, argued for scrapping the subsidy system, both on the grounds of its largesse to the rich and its detrimental effects on the poor.²⁴ On the right, the libertarian Cato Institute, the conservative Heritage Foundation, and even President Bush put forth proposals for radical change, arguing that, at the very least, subsidies should be limited for very high income farmers.²⁵ Environmental groups also lobbied vigorously for change, opposing the generous support for what they argued was environmentally damaging industrial agriculture. The United Nations and the World Bank echoed these demands, as did coalitions of groups involved in health and nutrition. The farm subsidy program primarily supported large commodity “row” crops such as cotton, wheat, corn, and soy, and critics argued that support should be shifted to encourage production and consumption of fruits and vegetables, which were not eligible for most subsidies.

Every major newspaper in the United States jumped on the anti-Farm Bill bandwagon in early 2008, and each, it seemed, had a descriptive insult for the expensive subsidy programs embedded in the Farm Bill. The New York Times (“disgraceful”), the San Francisco Chronicle (“foolery”), the Boston Globe (“a cynical mess”), and the Wall Street Journal (“a scam”) were on the same page on the issue.

Perhaps, however, the bicoastal big-city journalists were out of touch with the views of middle America? It appeared that this was not the case. Even in the cities close to the corn and cotton belts, the sentiments opposed the generous subsidy programs. Editorialists from the Dallas Morning News (“misguided”), the Des Moines Register (“Veto, Mr. President”), and, my favorite, from the Birmingham News of Alabama (“a steaming pile of political manure”) seemed to agree on the program’s merit.

Yet Des Moines and Birmingham were still sizeable cities, and perhaps the support for reform was limited to urban areas. But, for better or worse, the urban and rural interests were aligned: The Lincoln Star (Nebraska), the Sioux City Journal (Iowa), and the Waco Tribune (Texas) added their own derogatory adjectives to those of hundreds other small-town editorials opposed to the Farm Bill’s so-called corporate welfare system.²⁶ Even the writers who argued for maintaining generous support were opposed to the high income caps ($1.5 million for married couples, not including up to $1 million in non-farm income) for program eligibility. And even Lubbock’s Avalanche Journal couldn’t quite bring itself to push for government payments to millionaires; it went only as far as to say that a “Viable Farm Bill Is Vital for This Region.”

Pretty Pigs

As Congress debated the 2007 Farm Bill well into the spring of 2008, President Bush gave up on his initiative for radical reforms but threatened his veto unless the bill contained at least significant limits on payments to high-income farmers. As it turned out, the threat was a fairly empty one: Bush’s veto was overridden by a comfortable margin in May 2008. Though the 2007 bill had nearly twice the budget as the 2002 bill, the major provisions for cotton growers were virtually unchanged from the 2002 version. All of the subsidies and safety nets remained in place, and an important additional safety net was added. Under the new ACRE program, growers can now opt for protection against declines in revenues from falling crop yields. Under the 2002 Farm Bill, the growers were protected only against falling prices.²⁷

How did the Farm Bill achieve overwhelming support from Congress in the face of such widespread calls for reform? The trick, according to Senator Charles Grassley, was to “smear lipstick on a pig.”²⁸ In exchange for leaving support for the large commodity crop farmers in place, House and Senate negotiators packaged support for nearly everyone else into the bill. There were new programs to help producers of peanuts, mohair, fruits, vegetables, honey, and sugar. There was help for racehorse owners in Kentucky and salmon fishermen in Oregon and for the red-cockaded woodpecker in Georgia. And there were billions for nutrition programs, foodstamps, and environmental programs. In the end, most of the 2007 Farm Bill had little to do with farming. The lipstick went on the pig district by district, and state by state, until lawmakers who opposed the bill were in a distinct minority.

“It’s not very pretty,” an agricultural lobbyist told me. “But that’s how we do it.”

No Lipstick for Africa

Of course, the billions of dollars channeled to U.S. cotton farmers by the U.S. government seems like a cruel joke to cotton farmers in the poorest countries of the world, where such sums are fantastic enough to lose meaning. In West Africa, cotton is a principal cash crop and export, and provides more than one-quarter of export earnings for 11 countries.²⁹ While decades behind the United States in technology, productivity, and yields, because of low-priced or even free family labor, African cotton farmers can produce cotton at significantly lower cost than Texas growers.³⁰ Though West Africa has many more players—18 million cotton farmers to America’s 25,000—the U.S. government’s deep pockets virtually assure the continued dominance of the United States. On average, U.S. cotton farms produce more than 400 times the cotton than the typical African farm.³¹ Remarkably, U.S. government subsidies under the cotton program—approximately $2.7 billion in 2006—exceed the entire GNP of a number of the world’s poorest cotton-producing countries, as well as America’s entire USAID budget for the continent of Africa.³² U.S. agricultural subsidies—much like U.S. military might—are simply a force too big for small countries to reckon with.

The primary effect of U.S. government subsidies is to increase the supply of cotton grown in the United States and therefore to decrease the world market price of cotton.³³ Declines in world cotton prices in turn lower the income of farmers outside of the United States. Virtually all studies on the topic have found that U.S. subsidies do indeed affect the world price of cotton, and that the removal of direct subsidies would increase the market price of cotton by anywhere from 3 to 15 percent. The removal of subsidies would also weaken U.S. cotton exports, to the advantage of producers elsewhere.³⁴

In the summer of 2004, the United States agreed to put agricultural subsidies generally, and cotton subsidies in particular, on the table for the current round of trade negotiations. In 2008, with the trade negotiations still stalled, virtually no progress had been made on the issue. But even if U.S. subsidies to U.S. cotton growers are cut dramatically, it is not at all clear that substantial benefits will then accrue to farmers in the poorest countries of the world, where the subsidies may be the least of farmers’ challenges.

Where Is the Competition?

So, 200 years after the story began, American cotton farmers still have the comparative advantage they seized in 1792. This dominance jumps out from any list, any table of data, any pie chart on the topic. In 200 years, the United States has rarely dropped below second place in production and export of cotton, and is the clear leader in yields, technology, farm income, and farm size.

Yet in trying to understand this comparative advantage, the pie charts only tease us, giving us nothing at all about the how.” And even the textbooks cannot help, as they explain the idea, but not the reality, of comparative advantage in a global industry. And the idea, as far as the international business textbooks can take it, is almost circular (a country exports what it has a comparative advantage in; look at all those exports—must be comparative advantage). Even when the idea is amplified, we are still in a circle, as it helps not at all to say that U.S. growers produce more cheaply, or that they are more productive. The how is not in the data; it is embedded in the story.

How did they do it? And what can American cotton’s story reveal about today’s globalization debate?

In The Lexus and the Olive Tree, author Thomas Friedman speaks about the winners in globalization as both lions and gazelles. The gazelles win by running faster and smarter than the competition, but the lions win by catching and eating their prey. U.S. cotton growers are both gazelles and lions, and sometimes have taken the high road but other times have not. We see the gazelles in the farmers’ entrepreneurial spirit and creativity—in how they squeeze income out of every step in the production chain, and feed cattle, fish, and finally people with their leftovers. This is a complex recycling and value creation that other cotton-producing countries can only dream about. We see the gazelles, too, in the research and scientific progress that freed Nelson Reinsch’s children from the farm, and that allows him to take a nap after lunch. We see the gazelles in the cotton farmers’ business practices in which the growers’ ownership of the gin, the oil mill, the textile factories, and the Compress gives the farmers power in their battle against world markets, and ensures that all of the extra pennies so creatively squeezed out of the cotton business flow into the farmers’ pockets. And finally, we see the gazelles in the relationships among farmers, universities, and the U.S. government.

But many see lions rather than gazelles in the political power of the cotton farmers, which has shifted risks from weather to prices onto the U.S. taxpayer. We also see lions in the long practice of dominating in one market in order to suppress another. Since the beginning, the U.S. growers have been avoiding the labor market. Yet at least for the first 150 years, cotton production was among the most labor-intensive industries in the country. Most of American cotton’s history—from plantation slavery to sharecropping to company towns to Bracero workers—is about yet another creative way of avoiding having to find workers and pay the market wage. Suppressing the labor market has been a central how of U.S. dominance in the global cotton industry. And in suppressing the labor market, basic freedoms were denied to generations of people—slaves, sharecroppers, and migrant workers. It was not the perils of the labor market but the absence of the market that doomed these generations of workers.

The subsidies to cotton farmers that have in recent years attracted so much attention are everything recent critics have charged: way too big, way too unfair, and embarrassingly hypocritical when practiced by the world’s self-proclaimed free trade champion. But they are also not the whole picture.

Competing with Nelson Reinsch requires a systematized method of factory cotton production. But cotton factories require capital, and profitable factories of any kind require functioning markets and both technical and basic literacy, as well as at least a semblance of the virtuous circle of institutions that support not just agriculture but broader development. At the close of the twentieth century, many poor cotton producers lacked capital, working markets, literacy, or all three. And in spite of our intuition, it is far from clear that cheap labor is an advantage at all. Labor costs are low when people have no choices, and people who cannot read have few choices indeed. It is worth remembering that Ned Cobb stuck it out through sharecropping and boll weevils and all God’s dangers and even the arrival of tractors. Cobb ultimately gave up only when the government introduced programs that required that he be able to read. Labor costs are low for people who cannot read, but people who cannot read can only do hand-to-hand combat with cotton’s enemies: weather and insects and picking and weeding—all of the enemies against which Nelson Reinsch has sophisticated weapons with complicated instructions. While critics of U.S. agricultural policy are quick to point the finger at U.S. cotton subsidies as the source of America’s advantage, the removal of the subsidies would do little—at least in the short term—to develop the literacy, property rights, commercial infrastructure, and scientific progress required to take on Nelson Reinsch in world markets.³⁵ Activists at Oxfam would do well to take on these causes as well.

Vicious Circles

If Nelson Reinsch is embedded in a system that protects and enriches him, cotton farmers in West Africa are embedded in a system that exposes and impoverishes them. According to Terry Townsend of ICAC, the state often controls the distribution of inputs to these farmers, and sometimes seeds and fertilizer come to the village and sometimes they do not. Most of the farmers are illiterate, and when they are blessed with pesticides or fertilizers, they often send their children barefoot down the rows with the toxic chemicals, or prepare food or carry drinking water with the same implements that are used to spread and carry the poison. The farmers rarely wear the protective gear recommended by the manufacturers of the chemicals, and pesticide-related health problems are epidemic. In Benin, dozens of deaths were attributed to pesticides that had been sprayed on cotton but then drifted over to the maize, which the villagers ate, and in Burkina Faso half of the cotton farmers surveyed by one researcher had pesticide-related health problems.³⁶

Even scientists cannot avoid value-laden descriptors of the African cotton farmers’ battle. According to agricultural specialists, the cotton farms in the poorest countries have a four-stage life cycle: subsistence, exploitation, crisis, and disaster.³⁷ According to Townsend, each cotton-producing village has a leader to deal with the cotton buyers: The leader can typically add and subtract, but not read, write, or multiply. The concept of percentages, then, critical to a range of activities in selling and growing cotton, is as foreign as a mechanical cotton stripper.

Lapierre-Fortin spent 10 months with cotton growers in Burkina Faso.³⁸ Surprisingly, the farmers did not blame U.S. subsidies for their challenges. Indeed, the farmers were admiring and impressed with the logic of government support of cotton farmers. “We would like such help,” the reaction seemed to be.

In their view, the challenges facing the cotton growers were not subsidies paid in America but instead were the myriad injustices much closer to home. The notion that the government could be on their side was a radical concept to the farmers, who often experienced the government and other institutions as the problem rather than the solution. The farmers experienced a corruption that sapped their spirit and their livelihood in virtually every aspect of their lives. Truck drivers needed to be bribed to pick up their cotton on time, lest it lose value sitting exposed to the elements. Once the cotton was on the truck, things were not much better: One study found that truck drivers on the main transport routes in West Africa were stopped for bribes and illegal tolls an average of 48 times per trip.³⁹ Graders needed to be bribed to grade the cotton correctly. When farmers became trapped in a cycle of debt, they had to sell their animals or equipment, and could not get credit the following year. Farmers waited and waited and waited to get paid for their cotton.

There are only two prices paid to farmers for their cotton in West Africa: the A price and the B price, and buyers decide which to pay by the grab-a-handful method that Nelson Reinsch remembers well but has not experienced in decades. Misgrading by unprofessional manual and visual inspectors is the rule, and, as a result, West African cotton suffers from the discrimination common in Lubbock a generation ago.⁴⁰ A prices and B prices are set once a year by the government and, in recent years, have averaged about half of the price for which the cotton is sold in the export market.⁴¹ In rough figures, then, if the international price of cotton is 50 cents per pound, West African farmers will receive 25 cents while U.S. farmers receive 72 cents per pound. Not only does this steep discounting impoverish the farmers and enrich the state-owned and private cotton traders, the exclusion from the market created by the A/B system gives the farmers no incentives to improve quality; all of the Eli Whitneys with better ideas have no reason to try. Cotton yields per acre in West Africa are barely half of those in the United States (see Figure 4.3).

Figure 4.3 West African vs. U.S. Cotton Yields

Source: UNCTAD.

While the PCCA (which is owned by the Texas farmers) is at work marketing the Reinsch cotton crop, most West African cotton is marketed by a handful of European companies that still enjoy the fruits of their colonial legacy. Indeed, all of the major cotton trading companies operating in West Africa are European, not African, and many have vertical monopoly power in ginning and other steps of the supply chain as well. Another set of monopolies supply inputs such as seed and fertilizer. Over and over again, with typical Texas understatement, farmers around Lubbock told me “the co-op’s been very good to us.” Over and over again, the institutions serving these purposes in West Africa are seen as the enemy: corrupt, inflexible, abusive, and opaque.⁴²

For West African cotton farmers, then, the political and economic power balance between the farmers and the government and agricultural institutions has been and remains almost symmetrically inverted from that in the United States. While rich country subsidies clearly have a role to play in the farmers’ difficulties, all God’s dangers are quite a bit more complicated.

Too Poor to Pollute

The low labor costs that might give the poor farmers an advantage are in fact their undoing. For while there may be worse ways to make a living than to bend in the blistering sun all day, pinching worm eggs between your fingers, it is hard to imagine what they are. Yet if labor costs are low enough, it makes sense to hire worm-egg squishers rather than to battle the insects with more sophisticated methods. Or, as experts from the World Bank point out, apparently with a straight face: “Hand collection of pests is feasible only in countries with a plentiful supply of cheap labor.”⁴³ Yet no matter how cheap and plentiful the egg squishers, it is difficult to imagine how they can have an advantage over Nelson’s Texas Tech entomologists, his pesticides, his chemicals, and his machines. And if they cannot, then in the end the cheap and plentiful labor is the downfall, not the advantage, of Nelson’s competition.

During the past several years, it seemed that there might be a silver lining in the cloud of poverty endemic to African cotton farmers. All of a sudden, a number of U.S. and European apparel companies began to request organic cotton from their suppliers. Marks and Spencer of the U.K., Levi-Strauss, Nike, and especially Patagonia all expressed an interest in sourcing organic cotton.

There are a handful of creative and contrary farmers growing organic cotton in west Texas, but they account for less than ⅓ of 1 percent of the cotton produced. (“It rounds up to zero,” one conventional grower sniffed.) Kelly Pepper, Manager of the Texas Organic Cotton Marketing Cooperative, told me that organic farmers in the west Texas area numbered just a few dozen. Their motives varied: “We don’t have any Greenpeace radicals,” Pepper said, but some of the growers had an environmental conscience, some saw a market opportunity, and still others enjoyed the management challenge of keeping the cotton, weeds, and insects in a natural balance. Pepper himself had watched his father and other relatives die young of cancer or Parkinson’s disease after a lifetime of applying agricultural chemicals. He does not believe the illnesses in his family were coincidence.

The organic growers in Texas have very few of the benefits of the virtuous circle. They do not use the chemical pesticides, defoliants, and GM seed developed at Tech or Monsanto, and there are no well-funded experts to turn to for advice on the weed, weather, and insect challenges. Even with non-GM cotton-breeding techniques, cotton was bred to be compatible with the chemical inputs used in conventional farming, so organic farmers figure things out as they go. (It’s “management-intensive,” Pepper told me.) The organic cotton growers in west Texas are sometimes outside not just the virtuous circle but the social circles as well. In the tiny towns amid the cotton fields, the organic growers are talked about at the gin, at church, and even inside the family. (“They’re growing boll weevils over on that farm.”)

In organic cotton farming, the growers still face labor challenges. Organic growers must find workers to hand-hoe stubborn weeds, and to use mechanical methods of weed control. Pepper told me that organic growers may have just a two-to-three-day window to get control of weeds, whereas a conventional grower equipped with herbicides would enjoy a three-week window. Workers may also be required to inspect the fields for pests and respond with treatments of organic pesticides or beneficial insects. Without defoliants, nature, not the farmers, decides when the freeze will come, so labor requirements at harvest are unpredictable as well.

The growing demand for organic cotton seemed an opportunity made in heaven for many poor countries. Because even in the United States organic cotton farming was relatively labor intensive, the abundant and low-cost labor would give poor countries an advantage. More important, many farms in the poorest parts of the world were already organic. They had been, as one writer noted, “too poor to pollute.”⁴⁴ The many de facto organic farmers had never used chemical pesticides because they couldn’t afford them, and defoliants were not needed because the cotton had always been handpicked.

In yet another cruel irony, however, this opportunity, too, seems to have passed Africa by. While some fair trade programs have succeeded in developing the organic production of Africa’s farmers, the majority of the world’s organic cotton is from Turkey. The organic certification standards were written in Europe and the United States, and most de facto organic growers in Africa find it difficult to twist themselves into the rich country model of what an organic farmer should be. The growers cannot afford the fees to become certified, they cannot afford to meet the complicated certification requirements, and they cannot fill out the forms that even the Texas organic growers find intimidating.

Like Ned Cobb, the African growers know cotton farming. The rich world’s paperwork is another challenge entirely.⁴⁵

Bt Cotton Comes to China

In China, where the textile factories suck in more cotton than any country in the world, cotton production is much closer to Ned Cobb’s world than to Nelson Reinsch’s. In 2008, China was the world’s largest cotton producer as well as consumer, but since the dismantling of the communes, virtually all of this production is at the level of the family, usually with an ox or maybe two, and about 10 acres, and typically no machines at all.

China was among the first developing countries to try the genetically engineered Bt seed, and adopted it on a large scale beginning in 1996. Hopes were high for the economic rewards and environmental benefits. One study found that before the adoption of Bt seed, the average Chinese farmer applied 20 chemical pesticide treatments per year, but within a few years of adopting Bt cotton, treatments had fallen to an average of just 6.6, and pesticide use by volume had fallen by over 70 percent.⁴⁶ This reduction in pesticide use led not only to environmental benefits but also to higher profits for the farmers. It seemed to be a case study on how poor countries could benefit from the science and technologies developed by the multinational corporations and universities in the West.

Shenghui Wang went to investigate this story as part of her doctoral research at Cornell University.⁴⁷ In 2004, she and a team of researchers traveled to China and interviewed nearly 500 cotton farmers. The happy story of Bt cotton in China disintegrated as Wang and her colleagues talked to the farmers.

The Bt seed had indeed been an effective weapon against one of cotton’s most threatening natural enemies, the bollworm. Compared to the bollworm, many other pests—so-called “secondary pests”—were thought to be minor threats to the cotton plant. But as the Bt toxins did their damage to the bollworm in China, minor pests became major ones. In particular, Mirid insects—once kept in check by the pesticides targeted at the bollworm—now had free rein in the Chinese cotton fields.

Wang learned that because of the exploding secondary pest population, by 2004, China’s Bt cotton farmers were spending 40 percent more on non-bollworm pesticides than their neighbors who grew conventional cotton. And the news got worse: Because Bt seed cost the farmers two to three times as much as conventional cottonseed, the Bt farmers were earning less than their conventional neighbors.

The environmental story was not much better. After bottoming out at 6 pesticide sprays per year in 1999, Wang found that by 2004 the pesticide applications for the Bt farmers averaged 18.2, nearly the same as the 20 applications used before the introduction of the Bt cotton. Neither the economic nor the environmental story was a happy one.

I spoke to Professor Per Pinstrup-Andersen, Wang’s dissertation advisor at Cornell. He was and remains an optimist about the benefits of GM technology for developing countries, and he fully expected that Wang would find both increasing economic and environmental benefits for Chinese farmers. “When I saw her results, I said, ’This can’t be,’ and sent her back to go over the data again. But the results are very strong. There was a problem in China.”

Why did a technology so economically successful in the United States (and at least arguably environmentally successful as well) fail to provide long-run benefits in China? Ned Cobb, I think, could answer. He’d say that without education and other elements of the virtuous circle, farmers are unlikely to understand the scientific complexity of introducing such technologies. Though Ned Cobb could not read or write, his biography shows a brilliant and intuitive understanding of nature’s balance among plant, insect, and animal. But with sudden innovations such as Bt seed, this intuitive understanding, developed over a lifetime and the basis of a livelihood, no longer serves the farmer.

If Ned Cobb had been given Bt seed, it is difficult to imagine that this would be a gift rather than a curse. How would he know what other pests would emerge and how to fight them? How could he afford to plant a refuge crop when he was already on the edge? What if there is no one from Texas Tech around to explain how the new world works? What if there is no money or time to follow their directions, anyway?

Without the virtuous circle of education, public support, and proper training, technologies such as Bt provide further gains for the rich but can backfire on the poor. Indeed, without education and training, Wang and her co-authors concluded, technologies such as Bt cotton “may only serve to exacerbate problems associated with poverty and scarcity.”⁴⁸

Other researchers have also found that the GM technology so successful for U.S. growers has had mixed effects in developing countries. One team of researchers reviewing research to date found that in developing countries “the overall balance sheet, though promising, is mixed,”⁴⁹ and that the scientific merit of the technology is often compromised by weaknesses in politics and institutions. Reviewing results from Asia, Africa, and South America, Smale and her co-authors discuss a plethora of problems—unfamiliar to the growers in Lubbock—that compromise the promise of GM technology: poor extension and farmer education, ill-functioning input systems and broken markets, and illegal and black-market seed. Some researchers estimate that half of the Bt seed planted in India is illegal. Extension services and technical support are absent for illegal seed, and yields are significantly lower.⁵⁰ While the scientific community is in general enthusiastic about the prospect for GM agriculture to improve both productivity and environmental profiles in the poorest countries, both access to and application of the technology remain significant challenges.⁵¹

While the virtuous circle connecting Monsanto, Tech, and the Lubbock growers has a good chance of staying one step ahead of the resistance of both weeds and insects to GM technology, each cotton-growing region has a unique ecology of weeds and pests, and resistance strategies that work in the United States cannot simply be exported to other countries, even if the farmers do have the capacity to implement evolving technical advice.⁵² Most of the GM research has been targeted to the capital-intensive farming practices in wealthy countries, with relatively little directed to the unique circumstances of small farmers in poor countries. Because of the high degree of agro-ecological specificity, research done by universities and corporations in the wealthy countries has limited spillover potential for the poorest.⁵³

Of course, we would expect that Monsanto would target its research dollars toward the wealthy countries. However, public sector support for agricultural research in poor countries is also weak. While traditional foreign-aid programs once targeted developing country agriculture, in recent years support for research directed at developing-country agriculture has fallen sharply.⁵⁴ In addition, research undertaken by the public sector is also heavily skewed toward wealthy countries. The World Bank reports that public agricultural research and development (as a percentage of agricultural GDP) in wealthy countries is more than four times as high as in poor countries.⁵⁵ In 2007, researchers reported that the fertilizer formulas being used in much of West Africa’s cotton regions were more than 35 years old.⁵⁶ Poor countries simply do not have the equivalent of lifetime-loyal Texas Tech fans steering funding into cotton research.

The Worms Win

Though India and Pakistan are also large cotton producers, Nelson and Ruth Reinsch would also find very little that seems familiar on a South Asian cotton farm. Ned Cobb, again, would recognize almost everything: the vise of the moneylender at 120 percent interest, the tiny number of acres, the illiteracy, the lack of government support or extension, the collapsed rural banking system, the backbreaking physical labor, and especially, life alone on the economic precipice, where little puffs of wind blow farmers right over the edge.

In 2001, for the first time in his life, Nelson Reinsch lost his entire cotton crop. It was June, the plants still young and tender, when a freak hailstorm showered icy bullets over the cotton fields around Lubbock. Nelson, ever the optimist, looked on the bright side. (“It melted. That’ll be water for next year.”) Nelson planted milo grain in the ravaged fields, which brought in some income to augment the government crop insurance and the disaster subsidy. In U.S. cotton farming, because of the variety of protections in place, disasters happen to cotton but not to people. Nelson Reinsch wasn’t happy to lose his cotton, but he did not lose sleep and he did not miss a meal.

Disasters happen to people in other cotton-producing countries. A short time before Nelson Reinsch lost his cotton crop, more than 500 cotton farmers in the Andra Pradesh region of India committed suicide as worms ate the last of their cotton. Over the next six years, thousands more farmers would follow them.⁵⁷ The farmers could hear the worms chomping, with a sickening click-click sound that kept the villagers awake all night. Dealers had “furnished” the farmers with pesticides at 36 percent interest, but it was the wrong pesticide with the wrong directions, and the farmers couldn’t read anyway. There was no government extension service to give the right advice, no federal financing to replace the moneylender, no public school where the farmers could learn to read, and, in the end, no way out. The pesticides so useless on the worms worked quickly as poison, and hundreds of farmers dropped twitching to the ground in the middle of the cotton fields. All of these cheap and plentiful people, working all day in the Andra Pradesh sun, just couldn’t squish the worms quickly enough. They never had a chance against Nelson Reinsch, the USDA, and Texas Tech.