Co-ops can play role for members
seeking trade adjustment assistance
Alan Borst,Ag Economist
USDA Rural Development
e-mail: alan.borst@usda.gov
ne service that many
cooperatives have long
provided to eligible
members is the application
and delivery of
government benefits. For example,
cooperatives have been obtaining
marketing assistance loans and loan
deficiency payments on behalf of
members for decades through the
Cooperative Marketing Agency program
of the U.S. Department of
Agriculture’s (USDA) Farm Service
Agency.
Members benefit from saving
time and effort in not having to
apply for benefits they receive, while
the cooperative can more efficiently
process and submit the applications
with much of the necessary information
having already been gathered
for other purposes. Another potential
opportunity of this kind has
opened up for some cooperatives
with members who have been economically hurt by import
competition.
The Trade Act of 2002 established a new program, Trade
Adjustment Assistance (TAA) for Farmers, for fiscal years
2003-2007. This program is administered by USDA’s
Foreign Agricultural Service (FAS). TAA provides technical
assistance and cash benefits to eligible producers of raw
products that have suffered reduced prices due to imports.
TAA has two main requirements that applicants must
meet in order to be eligible. First, the most recent marketing
year’s price must be less than 80 percent of the average of
the five preceding marketing years. Second, this price
decline must be shown to be due to an increase in imports.
Be aware that once a petition is approved, all producers in
the region for which the petition was filed are eligible for
TAA if they meet certain eligibility
requirements. If a producer did not
produce, could not demonstrate a
decline in net farm or fishing income,
has received TAA payments equal to
$10,000, or has received counter-cyclical
payments equal to $65,000,
they would be ineligible for TAA payments.
Co-ops qualified to apply
Growers must file a petition in
groups of three or more, or through
an authorized representative. A marketing
cooperative would qualify as
such a representative. Prospective
grower groups or their representatives
may submit TAA petitions between
Aug. 15, 2004, and Jan. 31, 2005.
Only one petition may be submitted
per marketing year. The TAA petition
form may be found on the Internet at:
www.fas.usda.gov/itp/taa/fas0930.pdf.
The petition form is only two
pages long and requires only basic
information and price data. Any group
of growers is likely to be able to fill it
out with little difficulty. In addition,
FAS has personnel who will help growers or their representatives
prepare their petitions. However, most petitioners to
date have been commodity associations.
There are a several important decisions that any growers
or their representatives must make in preparing a petition:
- The petitioner must be as specific as possible in identifying
the like or directly competitive imported product
that is being claimed as contributing importantly to the
commodity’s price decline. The inclusion or exclusion
of a particular class of product may make the difference
between the certification or denial of a petition.
- The petitioner must carefully consider whether the certification
is to cover a commodity produced nationally
or in a state. Again, this may influence the chances that
a petition will be certified and the size of the potential
payment rate for certified farmers. Price may have
declined by the required 20 percent in one state, but
not nationally, or vice versa. The greater the documented
decline in grower price in the petitioned year from
the average of the previous five marketing years, the
higher the potential cash benefit for the certified farmers.
FAS will ultimately select the best available price
series, which may be different from the one submitted,
but selecting the impacted area, whether it is a state or
the nation as a whole, with the greatest price decline is
in the interest of the petitioner.
- The petitioner needs to be careful in specifying the
marketing year for the product. The marketing year will
influence the boundaries of the price series, and thus
the chances of the petition’s success. The period identified
in the petition as the marketing year must be commercially
justifiable, especially if it is different from that
identified by the USDA’s Agricultural Marketing Service
(AMS). FAS may insist on using the AMS marketing
year if it is the logical choice. A marketing year may be
a varying length depending upon the commodity.
25 assistance requests approved by FAS in ‘03
FAS’ Import Policies and Programs Division receives and
processes the TAA petitions, reviews for basic eligibility, and
provides guidance to the petitioner, ensuring that the petition
meets the minimum tests. In 2003, the first year of the
program, 47 petitioners submitted petitions to the Division.
Twentyfive
of these
petitions were
accepted by the
Division after confirming
that the prospective growers’
prices had declined by the required
20 percent, while 22 were not accepted.
A notice for each accepted petition is
published in the Federal Register. For the first
year, program participants have included Maine wild
blueberry producers, Alaska and Washington salmon
fishermen, North Carolina, South Carolina, Georgia,
Alabama, Texas and Arizona shrimp farmers and shrimp
fishermen, Florida lychee growers and catfish farmers in 18
states.
Last October, a trade association with substantial cooperative
membership submitted a petition for adjustment assistance
with the intention of coordinating the producer petition
of its members. However, the petition was not accepted
because it failed to meet the basic eligibility criteria.
Once the petition has been found to be in order, the next
step is for the USDA’s Economic Research Service (ERS) to
study the case. ERS verifies the price information and analyzes
all economic and market factors that may have contributed
to the price decline. ERS then presents FAS with its
findings, which are then reviewed by an interagency committee
of senior economists.
This committee then recommends to the FAS administrator
that the petition be certified or denied. A notice of
certification or denial for each petition is published in the
Federal Register. The period of time between acceptance of
a petition and its certification or denial can be no more
than 40 days.
Petitioners have responded to import competition in two
ways that have caused rejection of their petition. In some
cases, growers recognize that a surge of imports has
occurred and reduce their production accordingly, thus better
balancing supply and demand and preventing a price
plunge. This has the effect of preventing the required 20-
percent price decline.
In other cases, growers increased
their production with the idea that they
each had to sell a larger quantity at the
lower price to make the same profit.
This domestic overproduction, however,
made it harder to conclude that
imports contributed importantly to the
price decline.
Price declines caused by
imports, or overproduction?
TAA petitioners have also been confronted
with the challenge of establishing
that their prices were declining
from imports of similar or directly
competitive products. When imports
consist of a processed product, the
petitioner is required to show how it
significantly contributed to the decline
in the price of the raw commodity produced
by the petitioner. In some cases
this has been hard to demonstrate,
especially when the raw commodity is
used in multiple ways.
A large California cooperative
looked at the program, evaluated the
odds that benefits could be obtained
for its members and decided against
applying. In such cases, co-ops need
to weigh the cost of pursuing TAA
help vs. the number of growers that
could benefit from it, and the likelihood
of success, FAS advises. In this
case, five determined growers got
together in February and filed a petition
on their own that FAS accepted.
Upon review, however, the petition
was denied because the price decline
was found to have resulted from
domestic overproduction rather than
import competition.
Once FAS certifies a petition, eligible
producers of the commodity in the
effected geographic region have 90
days to apply for technical assistance
and cash benefits. USDA FSA county
offices (often located in USDA Service
Centers) can help producers prepare
and submit their applications.
Technical assistance under the program
can provide access to a wide variety
of resources from USDA’s
Cooperative State Research,
Education, and Extension Service
(CSREES), in partnership with a county
Extension service. Farmers will
receive information regarding the feasibility
and desirability of substituting
one or more alternative commodities
and assistance with improving the
competitiveness of the production and
marketing of the adversely affected
commodity.
To qualify for a TAA cash payment,
producers must complete Form FSA-229, receive technical assistance from
the Extension Service and submit supporting
documentation by September
30. If an applicant has already received
$10,000 in TAA benefits, or $65,000 in
counter-cyclical payments for the year,
reported an increase in net farm or
fishing income in the most recent tax
year, or has an annual adjusted gross
income greater than $2.5 million, he
or she is disqualified from receiving a
TAA cash payment.
The amount of cash payment will
be equal to the quantity produced in
the most recent marketing year multiplied
by the approved payment rate.
The payment rate is one-half the difference
between the average price in
the most recent marketing year and 80
percent of the average price for the
five preceding marketing years.
Maine growers’ petition
for blueberries certified
Last January, a petition from Maine
wild blueberry growers was the first to
be certified. Wild blueberries grown in
Maine have been facing stiff import
competition from those produced in
Canada’s eastern provinces. Prices had
been so low that some growers were
afraid for their industry. One grower
commented that he could not even
afford to fertilize his crop.
A team of Extension specialists put
together a technical assistance curriculum
for the wild blueberry growers and
initiated an education effort. A payment
rate of 2.8 cents per pound was
established. The grower price of
Maine wild blueberries in the petitioned
year of 2002 was 28 cents.
The average price in 1997-2001 was
42 cents. Eighty percent of this fiveyear
average was 33.6 cents. The difference
between 80 percent of the five-year
average price and the petitioned
year price was 5.6 cents. The payment
rate is half of this figure, or 2.8 cents
per pound.
Prior to the anniversary of its original
certification, FAS must determine
annually if trade and economic
conditions justify a petition’s renewal.
FAS will begin evaluating the
approved fiscal year 2004 petitions
for recertification in fiscal year 2005.
Free-rider issue arises
When does it make sense for a
cooperative to petition for adjustment
assistance? Cooperatives and associations
submitting petitions should be
aware that all certified growers in a
state or production region are equally
eligible to receive benefits, regardless
of their membership or participation
in the organization preparing the
petition.
The work required in submitting a
petition may be quite high for one, or
even a few growers, when the imports
are not the same raw commodity produced
by the growers. It sometimes
makes sense for some representative
association of growers to petition for
TAA.
Where a cooperative has a large
enough membership of prospective
growers and a trade association is
either not organized or is lacking in
ability or willingness to manage the
petition process, it may present an
opportunity for a cooperative to provide
one more service for its members.
There are six wild blueberry cooperatives
in Maine with members who
benefited from the work of the petitioning
trade association-- the Wild
Blueberry Commission of Maine. One
of those cooperatives may well have
been the next most logical candidate
for preparing that petition.
