Cotton's Week: June 20, 2003

Cotton's Week: June 20, 2003

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NCC Weighs in On Payment Limits

In a statement before The Commission on the Application of Payment Limits to Agriculture, NCC President/CEO Mark Lange said payment limits are sufficiently restrictive, and further restrictions would be tremendously destabilizing to US cotton – a sector only in its 2nd year of recovery from the lowest prices in 40 years.

"We think it is advisable not to make changes to legislation governing size of the limits or eligibility rules as provided in the Farm Security and Rural Investment Act of ’02, and we would also advise against any changes in the accompanying regulations," Lange said.

Lange, who reminded the panel that the new farm legislation added an adjusted gross income test, said the NCC always has opposed payment limits and worked in the recent farm bill debate to keep any restrictions on benefit eligibility as reasonable as possible.

Lange said that "payment limits, within the context of prior and current farm programs, reduce efficiencies, are counter-intuitive and can work against US cotton’s international competitiveness. Further restrictions in payment limitations will upset the current structure of US agriculture, likely reduce land values, possibly cause shifts in production of cotton into wheat and feed grains and seriously undermine the Sun Belt agricultural economy."

Lange also commented on several misconceptions regarding payment limits, one of which is the perception that Southern agriculture, in particular cotton, rice and peanuts, has a "better deal" than other program commodities. He said cotton is not "better off" when program support is expressed as a percent of production costs for each commodity.

Lange said payment limits are confounding to the very principles of the latest farm legislation.

"When growers need the most protection in times of low prices, the limits deny them the very benefits aimed at precluding damage to the sector," he noted.

Among others who addressed the Commission’s public workshop were California producers Tom Teixeira, Mark McKean, John Bennett and Aaron Barcellos; Louisiana producer Tap Parker; and California merchants Ernie Schroeder and Bruce Allbright. All attendees who spoke at the open-mike session, including representatives of corn and rice, opposed any changes to farm legislation and payment limits.



Greene Testifies on Trade Policy Concerns

In testimony to the House Agriculture Committee, NCC Chairman Bobby Greene said that if US agriculture is to continue to support Administration trade policies, assurances must be provided that "our trading partners will adhere to their agreements."

One of the issues he addressed involves the US textile industry’s economic crisis - mainly attributable to dramatic increases in Chinese textile imports. Greene stated that: 1) during the past 15 months, textile imports from China to the US increased by 140%; 2) last year, in 8 cotton-containing textile categories, imports surged 641%; and 3) from January ’01 through May ’03, the textile industry lost 267,000 jobs, and hundreds of factories shut their doors.

"It has taken persistent efforts to get rules published for implementing a safeguard mechanism for this flood of Chinese imports," Greene testified. "The long delay has permitted imports to grow to levels where the safeguard, if implemented, will be less meaningful. Unless the Administration is willing to use this safeguard tool, our domestic textile industry will be decimated once all textile quotas are removed in January of ’05."

Meanwhile, he said, the NCC has tried unsuccessfully for more than a year to get China to open its market in keeping with the terms of the US-China World Trade Organization (WTO) accession agreement.

Greene said that in addition to the Doha Round, "the US has embarked on an unprecedented number of trade negotiations. In order to be successful, adequate resources must be devoted not only to the negotiations, but also to compliance with existing agreements."

He said that enhanced trade within the Western Hemisphere provides the greatest opportunity for the US cotton textile industry to produce apparel products that are competitive with Asian imports.

"Our priorities in the Central America and South America free trade negotiations are reciprocal market access, effective rules-of-origin, no tariff preference levels, strong Customs enforcement provisions and effective rules to protect intellectual property," he stated.



Draft FY04 Ag Appropriations Bill Approved

The House Appropriations Subcommittee on Agriculture, chaired by Rep. Bonilla (R-TX), approved a draft FY04 appropriations bill, clearing the measure for consideration by the full Appropriations Committee as early as June 25.

As approved by the subcommittee, the bill will provide $17.005 billion for programs that include USDA operations and conservation, nutrition, export promotion and farm programs.

According to reports, the subcommittee draft contains several controversial provisions, including a prohibition on USDA using any funds to implement the country-of-origin labeling (COOL) provision for meat and meat products included in the new farm law. The provision would not affect COOL requirements for fruits, vegetables, fish and peanuts. Reportedly, the draft also would prohibit USDA from implementing the Conservation Security Program (CSP) in FY04 as authorized by the new farm law. Several provisions were included in order to comply with spending limits established by the FY04 budget resolution.

The bill funds the Farm Services Agency at $1.017 billion, an increase of $46 million over last year, and funds conservation operations and programs at $850 million, an increase of $30.4 million above last year and $146 million above the President’s request. The NCC joined over 30 farm and conservation organizations in urging the members of the Appropriations Committee not to include provisions that amend the new farm law.



Subcommittee Addresses Technical Assistance Funding Issue

The House Agriculture Subcommittee on Conservation, Credit, Rural Development and Research approved legislation (HR 1907) designed to resolve a dispute over funding for technical assistance related to delivery of conservation programs.

The Office of Management and Budget (OMB) said the Administration would limit technical assistance funding for certain programs. Language included in the ’03 omnibus appropriations bill prohibited use of discretionary funds for technical assistance associated with entitlement funds, so USDA’s Natural Resources Conservation Service "raided" some programs, including the Environmental Quality Incentives Program (EQIP) to provide funds for technical assistance associated with other programs.

The subcommittee approved legislation, authored by Chairman Lucas (R-OK), that would prevent USDA from moving money from EQIP, the Farmland Protection Program, Grassland Reserve Program and Wildlife Habitat Incentives Program to provide technical assistance for the Conservation Reserve, Wetlands Reserve and other programs. The legislation does not totally resolve the problem because it does not identify an alternative source of funds for technical assistance.



Middle East Trade Program Gains Support

A senior US trade official says the Administration is willing to consider a trade preference program for Middle Eastern countries for which several members of Congress, including Sens. Baucus (D-MT) and McCain (R-AZ), have expressed support as a way to "engage Mideast countries economically" rather than the Administration’s focus on bilateral free trade agreements.

Baucus and McCain introduced S. 1121 on May 22 under which countries that demonstrate support for the war on terrorism and make progress on opening their economies would be granted duty-free access to the US market. Eighteen countries and the Palestinian authority would be eligible under the act, including Afghanistan, Bangladesh, Egypt, Iraq, Kuwait, Lebanon, Pakistan, Turkey and Yemen. Meanwhile, the Bush Administration proposed May 9 to establish a US-Middle East Free Trade Area by ’13 by negotiating a series of bilateral free trade agreements with individual countries in the region.



House Approves Permanent Repeal of Estate Tax

The House approved on a 264-163 bipartisan vote a $161 billion bill (HR 8) providing for permanent repeal of the estate tax. The legislation would eliminate the Dec. 31, ’10, sunset of the estate tax repeal, which was part of ’01 tax cut law.

The 2001 law included a provision to eliminate the estate tax gradually by ’10 but reinstates the tax in ’11 to comply with budget rules. The White House stated its strong support for House passage of HR 8 and urged the Senate to follow suit.

Sen. Kyl (R-AZ), lead co-sponsor of the permanent estate tax repeal in the Senate, said he expects an uphill battle in the Senate and may have to secure 60 votes for passage. He also said he is not prepared to consider a possible compromise, although Senate Minority Leader Daschle (D-SD) said he believes a compromise to exempt small businesses and family farms and increase the unified exemption amount could more easily secure the necessary votes for Senate approval.



Association Health Plan Approved in House

The House approved (262-162) legislation (HR 660) that allows small businesses to purchase health care coverage through associations. The legislation is supported by the Administration but faces an uncertain future in the Senate.

Sen. Snowe (R-ME) introduced a companion bill (S. 545) with 7 co-sponsors. Senate Health, Education, Labor and Pensions Committee Chairman Gregg (R-NH) has not indicated interest in taking up the legislation, which is opposed by Committee Ranking Democrat Kennedy (D-MA).

The House-passed Association Health Plan (AHP) bill amends the Employee Retirement Income Security Act (ERISA) to allow the Labor Department to certify AHPs, which can then operate under a uniform, federal framework of rules similar to plans sponsored by large employers and unions. Proponents argue that allowing small employers to operate under ERISA rather than having to comply with multiple state requirements will lower the number of uninsured, allowing small businesses in AHPs to purchase lower-priced health coverage. Opponents argue that the legislation would result in substandard health plans that lack coverage required by many states.

Rep. Dooley (D-CA) spoke in favor of the legislation pointing out that residents in rural areas and most agricultural employees do not have health coverage because of the prohibitive expense. He argued that the AHPs are an important first step for those who are currently uninsured.

Under the legislation, an APH would apply for certification through the Labor Department; would need 1,000 participants and beneficiaries; must maintain sufficient reserves; must obtain aggregate and specific stop-loss insurance and indemnification coverage for claims in case the plan is terminated; and must contribute at least $5,000 annually to an AHP fund to be made available to provide stop-loss coverage to participants in the event the AHP faces financial problems.



Sales Pass 12.8 Million-Bale Mark; Shipments at 10.2 Million

Marketing-year export sales climbed to more than 12.8 million bales following sales of 76,500 bales (480-lb.) in the week ending June 12. Total sales at the same point in the ’01-02 marketing year were approximately 12.5 million bales. Total new crop (’03-04) sales are 1.4 million bales.

Shipments for the week were 225,900 bales, bringing total exports to date to 10.1 million bales, slightly ahead of the 9.9 million bales at the comparable point in the ’01-02 marketing year. Based on the current pace, exports for the marketing year are expected to reach USDA’s projection of 11.4 million bales.



Prices Effective June 20-26, 2003

Adjusted World Price, SLM 1 /16

49.95 cents

*

Coarse Count Adjustment

0.00 cents

Current Step 2 Certificate Value

7.16 cents

Marketing Loan Gain Value

2.05 cents

Import Quotas Open

 1

Step 3 Quotas as of 4/24 (480-lb. bales)

 142,210

*No Adjustment Made Under Step I
 
Five-Day Average
 
Current 3135 c.i.f. Northern Europe

59.74 cents

Forward 3135 c.i.f. Northern Europe

63.05 cents

Coarse Count c.i.f. Northern Europe

61.53 cents

Current US c.i.f. Northern Europe

66.90 cents

Forward US c.i.f. Northern Europe

65.35 cents

 
Weighted Marketing-Year Average Farm Price  
 
Year-to-Date (August-April)

42.62 cents

**

**August-July average price used in determination of counter-cyclical payment

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