Cotton's Week: October 7, 2005

In a joint letter to USDA Secretary Mike Johanns and USTR Ambassador Rob Portman, the chairmen of the House and Senate Agriculture Committees clearly spelled out their positions on the scope and role of agricultural negotiations in the Doha Round.

"We are concerned about reports of unbalanced and unreasonable negotiating demands from other countries regarding agriculture,” the letter stated. “Proposals from the European Union (EU) and others that would dramatically reduce U.S. farm support while doing little to create new trading opportunities for American producers cannot be the basis for an agreement."

The chairmen laid out the guiding principles they will apply in assessing the success of any agreement and closed by stating, “Let us caution you that the negotiations and modalities should not preempt the responsibilities and prerogatives of Congress. The agriculture negotiations can set the broad parameters of spending limits, but they should not write the next farm bill."

The letter’s full text is available at http://www.cotton.org/issues/2005/upload/portmanletter.pdf

The Senate Agriculture Committee will consider the budget reconciliation package after returning from Congressional recess.

Chairman Chambliss (R-GA) released a proposal, which if enacted, would comply with the Budget Resolution. He met with representatives of the nutrition, conservation, commodity and general farm organizations to review his proposal. He reminded the groups that he successfully negotiated for significantly lower budget cuts than proposed by the Administration. He advised the groups that the proposal he had developed after consultations with interest groups and members of the Committee were painful but balanced as he had promised throughout the debate.

The proposal would meet the $3 billion, 5-year savings target specified in the Budget Resolution by reducing spending as follows: nutrition, $574 million; conservation, $1.054 billion; research, $227 million; and commodities, $1.145 billion.

The savings in commodity programs would be achieved by reducing all payments made for commodity programs by 2.5% for the ’06-10 crop years. The proposal would reduce the amount of advance direct payments (DP) producers may request to 40%. Producers still would receive the full DP minus the 2.5% reduction. Dairy and sugar also would contribute. The Chairman’s markup would terminate the Step 2 program effective Aug. 1, ’06. His proposal would slow the increases in funding for the CSP and cap enrollment in the CRP to 36.4 million acres for ’06-10. Funding for EQIP would be reduced slightly.

The Committee was scheduled to markup on Oct. 6 but the meeting was postponed due to concerns expressed by several Senators that the proposal includes a 2-year extension of the National Dairy Loss Payment program through Sept. 30, ’07. Other Senators expressed concern about cuts to nutrition and conservation programs.

Chairman Chambliss reminded commodity groups that if the Agriculture Committee fails to meet the date set for completing reconciliation, the Budget Committee would be given responsibility to achieve the savings. He has pledged that he will convene the Committee the week of Oct. 17 to markup a reconciliation package and that he will continue to support a balanced approach.

NCC Chairman Woods Eastland called the proposed budget reconciliation package “painful, but equitable. This proposal calls on the U.S. cotton industry to make significant contributions to deficit reduction through cuts aimed at all commodities generally and cuts aimed at cotton specifically. Cotton is clearly doing its part to contribute to deficit reduction in this package.” The full statement is at http://www.cotton.org/news/releases/2005/budgetstate.cfm

The NCC’s Farm Policy Development Task Force, chaired by Woody Anderson, Colorado City, TX, producer, discussed the potential for a Step 2 “buyout” associated with a termination date of Dec. 31, ’05.

The Task Force, meeting in Memphis, TN, was joined by conference call with USDA Deputy Under Secretary Floyd Gaibler and Ralph Linden and Peter Bonner of USDA’s Office of General Counsel. 

Secretary Gaibler noted that he met in mid-September with representatives of the American Cotton Shippers Assoc. and later with a NCC delegation to discuss Step 2 program termination by Dec. 31 ’05. During those meetings, a compensation program for holders of Step 2 agreements was discussed. Secretary Gaibler reported that USDA is unable to offer a compensation program for early termination of the program but said USDA would not express opposition if some proposal were offered to Congress by the NCC. Gaibler further stated that funding for any compensatory program would have to be with Congressional approval from expected savings arising from the elimination of the Step 2 program. Further, USDA would oppose any proposal where costs exceeded the Step 2 savings. 

The USDA officials noted that the United States currently is not in compliance with the Dispute Settlement Panel’s rulings in the WTO Brazil case regarding prohibited export subsidies and actionable subsidies. USDA believes it is important that the United States come into compliance as quickly as possible to meet existing international obligations, reduce the risk of retaliation by Brazil and to avoid potential difficulties in the ongoing Doha negotiations.

The NCC’s Task Force recommended retaining the NCC’s present position in the absence of any compensation offer from USDA for termination of the Step 2 program prior to the current marketing year’s end. The NCC’s Executive Committee and officers met by conference call immediately following the conclusion of the Task Force meeting. The Executive Committee reaffirmed the NCC position of seeking to retain Step 2 for the life of the farm bill but acknowledged that if that is untenable to seek a termination date for Step 2 no sooner than July 31, ’06.

NCC Chairman Woods Eastland, joined by NCC Senior Vice President John Maguire and NCC President/CEO Mark Lange, met with USTR Ambassador Rob Portman and other officials in Washington, DC. The discussion centered on the continuing Doha negotiations and Step 2 compliance.

Ambassador Portman noted the critical importance of opening world markets for agricultural products. The United States is expected to deliver a comprehensive initiative for increased market access and domestic support disciplines in talks with European negotiators next week. Eastland outlined NCC priorities in the Doha Round and expressed the NCC’s appreciation for USTR’s support during the ongoing WTO Brazil case compliance action dealing with prohibited and actionable subsidies.

USDA announced enrollment for the ’06 Direct and Counter-Cyclical Payment Program (DCP) began Oct. 1, ’05 and continues until June 1, ’06. USDA will accept late applications through Sept. 30, ’06, when including a $100 late fee. Producers sign DCP contracts annually and can choose not to participate in the program in any given year.

Producers can visit any USDA Service Center, or their administratively-assigned center, to complete their ’06 DCP contract. In addition, sign-up can be done online, allowing producers to choose payment options, assign crop shares and sign and submit their contracts from any computer with Internet access. DCP participants can view and print out submitted contract options at any time.

The electronic service is available at http://www.fsa.usda.gov/egov/edcp_default.htm. To access the service, producers must have an active USDA eAuthentication Level 2 account, which requires filling out an online registration form at http://www.eauth.egov.usda.gov followed by a visit to the local USDA Service Center for identity verification.

FY06 crop year direct payment rates and maximum potential counter-cyclical rates:

The payment schedule for the ’06 DCP is as follows:

• Beginning Dec. ’05: 50% advance direct payment;
• Oct. ’06: 50% final direct payment;
• Oct. ’06: first partial counter-cyclical payment (up to 35% of projected payment);
• Feb. ’07: second partial counter-cyclical payment (up to 70% of projected payment less first advance);
• Dates vary by crop (in general, 30 days following the end of the marketing year): Final counter- cyclical payment (100% of actual payment, less any advances received).

Agriculture Secretary Mike Johanns announced USDA’s plans for re-enrollment in the Conservation Reserve Program (CRP) for acres expiring in ’07-10. Currently, there are more than 31 million acres of land enrolled in CRP and in ’07-10 nearly 21 million acres are set to expire. Earlier this year, USDA requested public comments on how the department should proceed on re-enrolling these acres and conducted a public forum. The NCC participated in both. 

In order to determine who might be able to re-enroll or extend their CRP contract, the Farm Service Agency (FSA) will use what is referred to as the Environmental Benefits Index or EBI that was in place when the contracts were first written. For additional details on CRP re-enrollment criteria, see latest issues area of NCC’s web site.

Rep. Lucas (R-OK) introduced legislation to stop the proposed closure by USDA of 30% of the more than 2,300 Farm Service Agency field offices. His bill would prohibit any local or countyFSA office closings at least until ’07, when the next farm law would take effect. Also, the Senate accepted an amendment offered by Sen. Talent (R-MO) into the FY06 Agriculture Appropriations bill that would require USDA to present a cost/benefit analysis to the House and Senate Agriculture committees before the USDA closure plan can move forward.

USDA recently unveiled “FSA for Tomorrow,” a plan to consolidate 30% of the FSA’s 2,351 county offices. The savings incurred from the closure of these offices would be put back into the program to upgrade computer systems and provide more staff training.

Net export sales for the week ending Sept. 29, ’05 were 315,000 bales (480-lb). This brings total ’05-06 sales to about 6.7 million bales. Total sales at the same point in the ’04-05 marketing year were slightly more than 5.9 million. Total new crop (’06-07) sales are 136,300 bales.

Shipments for the week were 164,400 bales, bringing total exports to date to 2.2 million bales, compared with the 1.2 million at the comparable point in the ’04-05 marketing year.