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Multi-Million Farm Payments to Cotton Companies Told

April 15, 1987

WASHINGTON (AP) _ Hundreds of merchants, textile companies and others shared one-time cotton subsidies worth $728,088,642 in 1986, with one Memphis trader topping $89 million in payments, government figures showed Wednesday.

The payments were an outgrowth of a 1985 farm law that was sold in Congress as a way to save the family farmer but in many cases soared many times above the ceilings on subsidies that family farmers actually receive.

Agriculture officials said the payments did not represent the largest one- time, farm-related subsidies in recent years but that the amounts paid to individual companies could constitute the biggest in that category.

The cost of the entire farm program, which takes in a wide array of payments to producers, reached $26 billion this year.

Congress approved the one-time payments in an effort to offset the impact on the companies of a dime-per-pound drop in cotton prices brought on by the 1985 law as a way to spur exports. Without the subsidies, the value of their holdings would have plunged.

″We were merely implementing the law - we didn’t have any choice,″ Michael Masterson, an Agriculture Department aide, said after the figures were released. ″Obviously, there are some very large payments there.″

″You see news stories that make it look like we got some tremendous windfall,″ said William Zarfoss, administrative vice president of the Allenberg Cotton Co. of Memphis. ″There was no windfall.″

Allenberg, a closely held company founded in 1921, received $83,563,371 from the Agriculture Department’s Inventory Protection and First Handler programs. Zarfoss declined to give 1986 sales figures for the firm, which appeared to be the No.2 beneficiary. The leader was Memphis-based Dunavant Enterprises Inc. and its Fresno, Calif. subsidiary, W.B. Dunavant & Co., with $89,774,002.

Despite arguments from the cotton industry that the payments were needed, it appeared likely that the sheer amounts of taxpayers money received by individual firms would put them in the spotlight when Congress resumes debate over subsidies in the 1985 farm law.

The Agriculture Department waited six months to release the figures, saying that doing so earlier would put some of the companies at an unfair disadvantage in the cotton market. The payments, themselves, for the most part were in certificates redeemable in cotton held in government warehouses. They averaged $195 for a 500-pound bale.

Other major recipients of multi-million-dollar payments included Calcot Ltd., Bakersfield, Calif., $54.5 million; Hohenberg Brothers Co., Memphis, $28.6 million; Conticotton, Fresno, Calif., $25.1 million; Cone Mills Corp., Greensboro, N.C., $16.5 million; Burlington Industries, Greenville, N.C., $14.8 million; the Julien Co., Memphis, $12.8 million; Esteve Brothers & Co., Dallas, $13.7 million; Westpoint-Pepperell, Valley, Ala., $12.4 million; Toyo Cotton Co., Dallas, $14.7 million; Greenwood Mills Inc., Greenwood, S.C., $11.3 million.

The more than 900 companies that shared in the $728,088,642 in payments ranged from the top names in the textile and cotton industries to small-town companies that received only a few thousand dollars. And there were others. A textile subsidiary of B.F. Goodrich received $760,622 and the Texas Department of Corrections received $458,860.

The American Textile Manufacturers Institute issued a statement in advance of the release of the figures saying that ″as much as 75 percent of government expenditures for cotton inventory protection payments will be recovered″ through reduction of government stocks and other federal expenses.

U.S. cotton exports have skyrocketed since the 1985 farm program lowered federal price supports, thus deliberately depressing the price. Stocks in government warehouses and private warehouses paid by the Agriculture Department have accordingly been lowered.

The textile institute also said that ″the major benefit of the inventory protection payments was the continuous operation of cotton-textile marketing and manufacturing sectors, thereby adding hundreds of millions of dollars in wages and revenues to the national economy and increasing U.S. businesses’ share of both domestic and world markets.″

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