Cotton's Week August 31, 2001

Mid-September Farm Bill Debate Scheduled by House

House Agriculture Committee staff advised agriculture commodity representatives that House is expected to take up HR 2646, The Farm Security Act of ’01, on Sept. 13. Congress returns from August district work period Sept.4.

Committee staff also advised that according to Budget Committee, HR 2464 is not subject to procedural challenge as result of new lower budget surplus projections recently published by Office of Management and Budget and Congressional Budget Office. Since HR 2646, as reported by committee on July 27, complies with provisions of budget resolution approved earlier this year, there are no procedural impediments to its consideration. However, lower budget surplus projections likely will cause some members of House to express concern about bill, which adds $73.5 billion to spending baseline over next 10 years, even though it is in full compliance with budget resolution.

"Members should be reminded that Congress has had to approve ad hoc emergency financial assistance for last 3 years, and new legislation would provide predictable assistance during times of low prices but would not require expenditures when prices recover," said NCC Chairman James Echols.

In related development, Rep. Kind (D-WI) is expected to offer amendment that would shift significant funds from commodity programs to conservation. His amendment is said to be undertaken with assistance of Environmental Working Group (EWG) and Natural Resources Defense Fund, environmental groups which consistently criticize farm programs as income transfers to large, profitable farming operations. Efforts by EWG in recent weeks have resulted in newspaper articles spotlighting farm program benefits made available to specific producers.

Bill is consistent with industry’s recommendations for program that maintains marketing loan, 3-step competitiveness program, fixed decoupled payment and target price-based counter-cyclical payment. For those concerned about conservation, bill increases funding for conservation programs by 80%, and, by providing financial stability in production agriculture, recognizes that financially secure farmers are able to be even better stewards of their land. NCC will send letter to members of House on Sept. 4 urging support for HR 2646.

Although legislation does not include elimination of 1.25-cent Step 2 threshold and does not include certain other industry priorities, on balance several Congressional staff think it likely represents high water mark for commodity programs.

Council Leadership Group Gets Update

Leadership group chaired by F. Ronald Rayner, producer, Goodyear, AZ, met in Memphis to hear situation updates regarding developments in farm legislation. John Maguire, NCC Vice President, Washington Operations, reported on recent discussions with House and Senate Ag Committee staffs concerning outstanding cotton issues, including elimination of 1.25 cent/lb. Step 2 threshold, cottonseed assistance, program base calculations, ELS loan floor and counter-cyclical provisions.

Maguire reported that Senate leadership has expressed dissatisfaction with certain aspects of House Ag Committee bill and is considering greater conservation focus and more restrictive limits on program benefits. Mark Lange, Vice President, Policy Analysis and Program Coordinator, provided estimates of expected CBO scoring on remaining cotton interests and potential program trade-offs facing industry. Craig Brown, Vice President, Producer Affairs, reported on wide range of crop insurance issues and initiatives being addressed by NCC.

Stephen Felker, CEO of Avondale Mills, Monroe, GA, gave insightful analysis of economic difficulties confronting textile industry, noting that considerable portion of recent downturn likely is due to business cycle inventory adjustment not experienced by industry in past 9 years. He indicated that elimination of 1.25-cent Step 2 threshold would provide important liquidity boost to mills experiencing cash flow problems.

NCC leaders agreed on high priority for elimination of 1.25-cent threshold and urged continuation of efforts to address all remaining cotton issues in House package. Expressing concern that Senate focus could harm production agriculture and agricultural infrastructure, leaders confirmed that efforts should be made to retain principles of House package in final farm legislation.

Cottonseed Assistance Payments Made One Week Early

According to USDA, $4.6 billion in market loss assistance payments have been made to farmers, and, on Aug. 30, cottonseed assistance payments were distributed well in advance of Sept. 7 target announced by Ag Secretary Veneman in early August.

Farm Service Agency estimates that average cottonseed assistance payment rate is $13.0058/ton or about $5.0665/bale of average weight. Payments were made to ginners based on applications made earlier this year under Agricultural Risk Protection Act of ’00 and are subject to same conditions of earlier application – ginners agreed to share payments with producers to extent low cottonseed prices were borne by producers. New payment, authorized as part of agriculture economic assistance package approved by Congress prior to August recess, has to be based on ’00 crop production so that funds can be distributed prior to end of ’01 fiscal year on Sept. 30. For more information, contact Gene Rosera (USDA-FSA) at 202-720-8481 or by e-mail at gene_rosera@wdc.usda.gov.

Different Look at Ag System Needed, Says Veneman

Administration is developing principles for farm policy that will emphasize number of issues besides farm payments, including food safety programs and efforts to prevent introduction of mad cow and foot-and-mouth diseases, Ag Secretary Veneman said in interview with The Associated Press. Environmental issues and food stamp program also will be addressed.

"We really need to look at the whole food system and the agriculture system much differently than we have in the past," said Veneman. While noting that grain and cotton account for about 20% of nation’s agricultural production, Veneman said, "If you don't look at the food and farm system today through a more holistic approach, you’re leaving out much of agriculture and much of our production."

Veneman declined to judge House committee's bill, which full House is expected to take up 2nd week of September. Nor would she discuss any details of policy principles Administration is developing.

However, she did say Administration would take no stand on whether benefits should be restricted to small- and medium-size farms, controversial issue in Congress.

Veneman is taking lead role within Administration in pushing Congress to give President new trade negotiating authority. White House wants power to enter into agreements that cannot be amended by lawmakers, only approved or rejected.

She said American farmers would lose foreign markets unless US can negotiate new trade agreements. "We are already seeing the loss of market share in certain areas.''

USDA Strengthening Crop Insurance Oversight

New measures are underway to improve oversight of federal crop insurance program, according to announcement by USDA. Risk Management Agency (RMA), Farm Service Agency (FSA) and private reinsured crop insurance companies who sell and service crop insurance policies have joined forces in nationwide effort to improve integrity of program.

With broad expansion of program in recent years and even more extensive expansion expected in near future, act has provided USDA greater ability to curb program abuse. More extensive monitoring of program will help to maintain its long-term viability as affordable way to mitigate farm risk, USDA said.

In order to discourage program abuse, violators are now subject to criminal prosecution, civil suit and administrative sanctions. Administrative sanctions can include fines, disqualification from crop insurance and other USDA programs and government-wide debarment and suspension.

Earlier this year, RMA began implementation of new oversight procedures that utilize broad-based assistance of FSA to carry out coordinated compliance plan that includes close monitoring and oversight of crop insurance program. Reinsurance companies will work closely with RMA and FSA in implementing new procedures. Companies will continue to play major role in oversight of crop insurance through their internal procedures and by taking prompt corrective action to identified problems.

USDA will continue to ensure that crop insurance policies and rates are statistically sound and appropriate for a given geographical area. By seeking input from State FSA committees, producers can be assured that recommended changes to crop insurance policies and insurance plans will help to further strengthen integrity of program.

CPSC Levies Fines for Children’s Sleepwear Violations

Consumer Product Safety Commission (CPSC) announced that The Limited, Inc., and its subsidiary, Mast Industries, have agreed to pay $500,000 civil penalty, settling CPSC allegation that companies violated federal Flammable Fabrics Act.

CPSC alleged that these companies placed children at risk by knowingly importing and selling 100% polyester pajamas with satin finish and 100% polyester fleece bathrobes that failed to comply with federal children’s sleepwear flammability standards. The Limited companies voluntarily recalled pajamas in September ’98 and robes in January ’99.

Texas Eradication Program Impact Sessions Set

Two additional listening sessions regarding National Boll Weevil Eradication Program’s impact on actual production history (APH) yields have been set, both in Texas (see Aug. 24 Cotton’s Week). Cotton producers and producer interest organizations are invited to attend sessions.

Purpose is to solicit, assimilate and report input from individual growers, grower groups and associations about proposed method(s) to adjust producers’ reported APH yields. Research methods and results will be reported. Texas times/locations are: Thursday, Sept. 6, 9:30-11:30, Griffith Center, City Bank Bldg., 5211 Brownfield Hwy, Lubbock. For information and RSVP: Shawn Wade, 806-792-4904; and Friday, Sept. 7, 9 am-11, Texas A&M Extension and Research Center, 7887 N. Hwy 87, San Angelo. For information and RSVP: Sid Long, 915-453-2222.

Cotton Sales Slip in Latest Week

Net export sales for week ending Aug. 23 were 152,000 bales (480 lb.), less than half previous week’s sales of 317,200 bales, raising total ’01-02 sales to slightly over 5.6 million. Total sales at same point in ’00-01 marketing year were slightly over 3.1 million bales.

Shipments for week were 229,500 bales, bringing total exports to date to approximately 642,400 bales, up from approximately 395,200 at comparable point in ’00-01 marketing year.

Effective Aug. 31-Sept. 6, ’01
Adjusted World Price, SLM 1 1/16                    28.47cents*
Coarse Count Adjustment                              0.00 cents
Current Step 2 Certificate Value                     5.88 cents
Marketing Loan Gain Value                           23.45 cents
*No Adjustment Made Under Step I
Five-Day Average
Current 3135 c.i.f. N. Europe                       42.50 cents
Forward 3135 c.i.f. N. Europe                          No Quote
Coarse Count c.i.f. N. Europe                       40.88 cents
Current US c.i.f. N. Europe                         49.63 cents
Forward US c.i.f. N. Europe                            No Quote