Cotton's Week: March 31, 2006

Sen. Conrad (D-ND) introduced the “Emergency Agricultural Disaster Assistance Act of 2006,” which would provide emergency production loss and economic assistance to producers for losses incurred during the ’05 production year. Cotton Belt Member co-sponsors include Sens. Bond (R-MO), Landrieu (D-LA), Lincoln (D-AR), Martinez (R-FL), Nelson (D-FL), Pryor (D-AR) and Talent (R-MO). 

The bill would provide crop production loss assistance in a manner similar to previous disaster programs. The loss threshold for eligibility is 35% and the payment rate is set at 50% of the established crop price. Quality loss assistance is based on the actual, local market discounts suffered by producers based on their crop sales receipts or as established by the State Farm Service Agency Committee.

The bill also provides supplemental economic disaster assistance in addition to the production loss payments. This assistance is designed to assist farmers throughout the nation who experienced rapidly escalating production input costs during the ’05 production year. All program crop producers would receive a supplemental direct payment equal to 30% of the direct payment paid for the ’05 crop under the provisions of the ’02 farm law.

USDA’s March Prospective Plantings Report indicates US producers intend to plant 14.63 million cotton acres in ’06/07, up 3.1% from last year. Upland area is projected to be 14.30 million acres, up 2.7% while ELS area is projected at 334,000 acres, a 23.5% increase. The NCC’s planting intentions survey, released in early February, indicated US farmers intend to plant 14.44 million acres in ’06/07, 14.12 million acres to upland and 312,000 ELS acres. The Southeast, Mid-South and Southwest are expected to increase upland acreage, while a decline is estimated for the West. State-level results are included in the table.

Net export sales for the week ending March 23 were 526,400 bales – a marketing year high. This brings total ’05-06 sales to 15.0 million bales. Total sales at the same point in the ’04-05 marketing year were more than 11.8 million bales. Total new crop (’06-07) sales are 365,900 bales.

Shipments were 502,200 bales – also a marketing year high, bringing total exports to date to 9.2 million bales, compared with the 7.4 million at the comparable point in the ’04-05.

The House Budget Committee approved, on a party-line vote, a $2.8 trillion FY07 Budget Resolution that omits most of the Administration’s proposed savings of $65 billion over five years; including rejecting cuts in agriculture programs.

The Resolution, as approved by the Committee, does include a cap on discretionary spending of $873 billion as proposed by the Administration and would require cuts of $6.8 billion in mandatory programs. Agriculture would achieve savings of $55 million over five years by modifying the GSM credit guarantee program to eliminate the cap on fees and by reducing fraud in the Food Stamp program to save $4 billion.

The Budget Resolution will be considered by the full House the week of April 3.

The House Budget Resolution would provide a $4.3 billion “rainy day” fund to cover natural disasters but any spending on natural disaster assistance that exceeds that level would have to be approved by the Budget Committee.

USDA extended the deadline for temporary use of outside storage of cotton pledged as collateral for Commodity Credit Corp. (CCC) marketing assistance loans until May 1, ’06.

On Jan.18, ’06, in Notice to the Trade BCD-117, USDA allowed cotton warehouse operators located in certain eligible counties to request approval for short-term outside storage of CCC’s loan collateral. The deadline initially established under this exemption was originally limited to the earlier of 90 days from the original outside storage date or April 1, ’06.

Under this extension, cotton may be stored outside at warehouses approved for this temporary storage until May 1. CCC will advance the maturity date of any cotton marketing assistance loans if the cotton securing the loan is stored outside as of May 1. After May 1, producers will be granted 15 days to redeem such cotton at the adjusted world price level, after which the loan must be repaid at principal plus interest.

USDA warehouse examiners will continue to conduct warehouse spot-checks of cotton pledged as loan collateral. If an examiner discovers loan bales stored outside without CCC approval in place, CCC will give the warehouse operator 15 days to either move the bales inside a CCC-approved warehouse or request approval for temporary outside storage until May 1. All producers with cotton at such a warehouse will be notified by letter of the situation.

Operators not previously approved to use temporary yard storage who do not rectify the situation within 15 days will be removed from the CCC list of approved warehouses the day after the 15-day grace period expires.

Producers with cotton at the warehouse cannot receive a CCC marketing assistance loan until approval is re-instated and the cotton is moved inside. Cotton that already is under loan but is stored outside at an unapproved facility is considered ineligible to be pledged as collateral for a CCC loan, and such loans are subject to repayment at principal plus interest without storage credit after the 15-day grace period. More information on the issue of outside storage of cotton under loan is available at local FSA offices.

Pavo, GA, cotton producer Wavell Robinson told members of the House Agriculture Committee’s general farm commodities and risk management subcommittee that the principle reasons for Georgia’s resurgence in cotton production are the successful eradication of the boll weevil and an effective farm program.

Robinson testified at the subcommittee’s hearing in Valdosta, GA. He was on a panel of six Georgia farmers, including cotton producers Mike Newberry, Arlington, and R. Lee Webster, Jr., Waynesboro.

Robinson, who has farmed cotton since ’64, told the panel, chaired by Rep. Moran (R-KS), that Georgia cotton producers strongly support the current farm bill.

“It is imperative that current law be allowed to operate, without major modification, through its scheduled expiration with the 2007 crop,” Robinson said.

He also urged the panel to: 1) protect the budget baseline for all titles of the farm bill and 2) to allow the current farm law structure to serve as the blueprint for the new farm bill.

“Existing law is balanced between titles and has provided a stable and effective farm policy for this country,” Robinson stated. “The combination of direct and counter-cyclical payments provides an effective means of income support without distorting planting decisions, especially in periods of low prices.

“We strongly support the continuation of the marketing loan without limitations so U.S. commodities can be competitive in international markets. In addition to sound farm program provisions, commercial sized operations must be eligible for program benefits. Limitations are particularly unfair to irrigated operations and to operations with certain high value cropping combinations. Conservation programs should be operated on a voluntary, cost-share basis and can be a valuable complement to commodity programs but are not an effective substitute for the safety-net provided by commodity programs.”

He also said that the US cotton industry could support continuation of the current farm bill for at least one additional crop year -- if negotiations in the WTO Doha round have not been completed to the point that the implications for future farm policy are clear by late summer.

Robinson urged support for the Market Access Program, the Foreign Market Development program and the WTO-compliant export credit guarantee program.

Rep. Kingston (R-GA) was instrumental in bringing the subcommittee to Georgia for the hearing, which also was attended by Rep. Etheridge (D-NC), the ranking member, and Reps. Neugebauer (R-TX), Conaway (R-TX), Marshall (D-GA), Bishop (D-GA), Barrow (D-GA), Scott (D-GA) and Larsen (D-WA).

With the self-imposed April 30 deadline approaching, trade ministers continue to try and push the Doha Round forward, despite any signs of real progress since the Hong Kong Ministerial in December. WTO Director General Pascal Lamy has urged WTO member countries to work hard to bridge the gaps in their negotiating positions stating that “the moment of truth is … fast approaching.” Negotiations continue in Geneva and trade ministers have had several informal meetings at various locations in efforts to intensify the negotiations. Thus far, however, there has been no breakthrough. 

The European Union (EU) refuses to move on agricultural market access until developing countries offer more on non-agricultural market access. Developing countries argue that current proposals on non-agricultural market access are far more ambitious than what is happening in agriculture. The United States is being urged to offer more on cuts in domestic support even though other countries have not matched the US demands on agricultural market access. The United States also is under pressure on the calculation of base rates for arriving at product-specific amber box caps.

The Cotton Subcommittee reviewed the latest proposal by the C-4, which called for cuts in cotton programs of at least 80%, even if the overall agricultural negotiations have much smaller cuts. The proposal also called for special cotton limits on the blue box category.

The United States’ response was that:  the latest C-4 proposal “would not lead to success,” that an ambitious result for cotton only could be achieved if there was an ambitious result in agriculture as a whole and that the cotton issue was diverting attention from the core agricultural negotiations.