Cotton's Week: December 8, 2006

Cotton's Week: December 8, 2006

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Mixed Signals Sent on Disaster

The Senate sent mixed signals on a disaster measuredue to content, complicated procedure and outlook.

The Senate rejected a motion to waive the budget rules on an amendment to the FY07 agriculture appropriations bill. The amendment offered by Sen. Conrad (D-ND) would have changed the disaster assistance provisions currently included in the agriculture appropriations bill that would provide assistance to producers who suffered weather-related yield and quality losses for ’05 crops.

The provision also authorizes a 30% supplemental direct payment to all producers who received a ’05 direct payment. The supplemental payment would provide much-needed assistance to producers who experienced increased costs and yield losses that do not meet a 35% loss threshold.

The substitute offered by Sen. Conrad retained the ’05 crop loss disaster provision and added a ’06 crop loss provision. Producers could receive benefits for qualifying losses for ’05 and ’06. The loss threshold would be 35% and the payment rate would be 45% of the target price.

The provision also retained a supplemental direct payment for producers. To qualify, though, producers would have to demonstrate a net income loss between ’04 and ’05 using a procedure to be established by the Secretary. The supplemental direct payment would be limited to the lesser of the actual proven net income loss or $10,000 per person.

Several Senators, led by Sens. Lincoln (D-AR) and Pryor (D-AR), explained that the 30% supplemental payment approved by the Appropriations Committee was critically important to producers who have experienced significant cost increases, low prices and “shallow” yield losses. They suggested the amendment be modified to add ’06 loss coverage to the existing provisions which cover ’05 crop losses and provide a 30% supplemental direct payment. The benefits could be prorated to meet budget targets if necessary.

Unfortunately, an agreement could not be reached on the modification. Further complicating matters was the advance notice by Senate leaders that: 1)work on the agriculture appropriations measure would not be completed this year and 2) funding for agriculture programs and USDA would be provided by a Continuing Resolution that would not include disaster assistance regardless of Senate action on the Conrad amendment.

Senators were faced with a complicated set of choices on an amendment to a bill that would not see further action and must be reintroduced in the new Congress. Some Senators supported the waiver and the amendment because it would add coverage for ’05 crop losses. Others were concerned that the amendment dropped the 30% supplemental payment which was important to their constituents and replaced it with a new income-tested provision.

An analysis of the final vote confirms that in the absence of a unified message and the complicated procedural situation, Senators made different decisions for different reasons. As a result, agriculture may have appeared unnecessarily divided just before beginning work on new farm legislation.

Disaster assistance is critically important to many who suffered devastating losses in ’05 and ’06 and to those who dealt with rapidly escalating costs and non-qualifying “shallow” yield losses.

Work will resume on a disaster measure when Congress returns in January.


Keenum Confirmation Hearing Held

The Senate Agriculture Committee conducted a hearing to consider the nomination of Dr. Mark Keenum to serve as Under Secretary for Farm and Foreign Agricultural Services. The Committee is expected to recommend that the full Senate confirm the nomination and efforts are underway to ensure that the Senate acts before Congress adjourns.

Keenum has a distinguished record of service in a variety of key positions, most recently serving as chief of staff to Sen. Cochran (R-MS). More than 80 farm and agribusiness organizations signed onto a letter urging confirmation of Dr. Keenum to this key USDA post where he would directly supervise the activities of the Farm Services Agency and the Foreign Agriculture Service as well as serve on the Commodity Credit Corp. board.



USDA Clarifies CMA Status

In response to recent concerns expressed by USDA regarding certain cooperative marketing agreements (CMA), Plains Cotton Coop Assoc. CEO Wally Darneille and Staplcotn General Counsel Kenny Downs, accompanied by National Council of Farmer Cooperative Chairman John Johnson, met USDA’s Deputy Secretary Chuck Conner.  

Secretary Conner assured the representatives that USDA does not have any plans to change the interpretation of regulations and there are no plans to publish a request for public comments on the interpretation of the regulations. Consequently, it will not be necessary for coops to adjust their CMAs for the ’06 crop or the foreseeable future.



Johanns to Address ’07 Beltwide

Secretary of Agriculture Mike Johanns will deliver the keynote address at the ’07 Beltwide Cotton Production Conference, Wednesday, Jan. 10.

Other presentations that day include the conference’s opening remarks by NCC Chairman Allen Helms, “Focus on Sustainability” by Cotton Incorporated’s Berrye Worsham, a review of cotton’s role in bio-fuels, a discussion of irrigation strategies and a producer panel offering experiences on farming with high input costs.

The next day’s general session will feature a biotech update, an overview of herbicide resistance, a “Cotton Fruiting to Finish” presentation and a report from NCC Vice Chairman John Pucheu and Memphis merchant John Mitchell on the recent US cotton leadership orientation trip to China.

More information on the program and the ’07 Beltwide Cotton Conferences, to be held at the New Orleans Marriott and Sheraton New Orleans hotels on Jan. 9-12, can be found at www.cotton.org/beltwide.


Congress Set to Consider Trade, Tax

Congress was set to consider an omnibus trade and tax package before adjourning.

In spite of strong opposition by textile and cotton interests to the inclusion of a provision which would provide almost unlimited access to the US market for apparel products assembled in Haiti regardless of the source of components, House and Senate leaders have prepared a package of tax and trade measures for consideration under an expedited process.

NCC joined the National Council of Textile Organizations (NCTO) in communicating serious reservations and opposition to inclusion of the Haiti provision, which would result in displacement of US cotton yarn and fabric exports to Haiti by Chinese products. NCTO and NCC leaders, including Andy Warlick (Parkdale Mills), Wally Darneille (PCCA) and John Johnson (PCCA), traveled to Washington to meet members of the House and Senate to express opposition to the provisions relative to Haiti.

The legislation also establishes a value-added rule of origin that, according to Customs, is unenforceable. The industry offered alternative measures, which would assist Haiti, but they were not considered.

House and Senate textile and cotton state members also have repeatedly asked leaders to drop the Haiti provision. However, the House began consideration of a package of trade and tax measures which includes Haiti. Textile-state Senators have informed Senate leaders that they object to the Haiti provision, but leaders have developed a procedure which provides for expedited consideration. The legislation also includes the following provisions, many of which are supported by the cotton industry:

  • Extending Tax Breaks - The package would extend through ’07 or ’08, and in some cases modify numerous tax breaks that expired at the end of last year or are scheduled to expire at the end of this year. The package also includes about $1.5 billion in energy tax breaks and extensions of provisions due to expire at the end of ’07. The package’s major tax provisions extend the research and development tax credit; deduction for state and local sales taxes in lieu of state and local income taxes; deduction for tuition and related expenses; and, shorter depreciation period for leasehold improvements.
  • Energy Tax Provisions - Extend renewable-electricity production credit, clean renewable-energy bonds, the deduction for energy-efficient commercial buildings, the credit for energy-efficient homes and the credit for business installation of alternative energy equipment and the excise tax break for methanol and ethanol produced from coal; new special depreciation allowance for cellulosic biomass ethanol plants; modification of the tax credit for coke and coke gas production.
  • Trade Provisions - The package includes:  Permanent Normal Trade Relations (PNTR) for Vietnam; extends rules relating to use of third country fabrics under the African Growth and Opportunity Act; provides new duty-free trade benefits for Haiti, applying the same criteria that apply under the African trade act; extends for one year the duty-free treatment of some products from Andean countries – including Bolivia, Colombia, Ecuador and Peru; and amends the US Harmonized Tariff Schedule to suspend or reduce the tariff rate on more than 500 products unavailable in the United  States.
There are also a number of health care and other provisions.


Cottonseed Disaster Deadline Near

Gins with eligible production are reminded that the application deadline for ’05 cottonseed disaster assistance is Dec. 29.

First handlers of cottonseed, defined as gins that have eligible payment quantities, may apply for ’05 Cottonseed Payment Program (CPP) funds. Congress provided $15 million in assistance to producers and first-handlers of the ’05 crop of cottonseed in counties affected by Hurricanes Katrina, Ophelia, Rita and Wilma, or a county contiguous to such a county (See Nov. 3 Cotton’s Week).

A fact sheet for the CPP program can be found at www.fsa.usda.gov/Internet/FSA_File/cpp06.pdf and links to the application worksheet and other related application information can be found at http://www.fsa.usda.gov/FSA/webapp?area=home&subject=prsu&topic=ldp-as. A map of eligible counties developed by NCC staff is available in the members only issues area of the NCC’s web site, www.cotton.org.



Peterson to Chair House Ag Committee

The House Democratic Caucus selected Rep. Collin C. Peterson of Minnesota as the chairman of the House Committee on Agriculture for the 110th Congress. Starting in January, Peterson will lead the committee, which is responsible for reviewing agriculture policy issues in the House.

"I am honored to have this opportunity to serve the great agricultural producers of our country," Peterson said. "There is a lot of work to be done, and I look forward to joining my dedicated colleagues on the Committee to give agriculture producers and all rural Americans a voice in Congress."

One of the major responsibilities that the Agriculture Committee will address in ’07 is the reauthorization of farm programs. The farm law authorizes commodity support, agricultural trade, marketing, food assistance, and rural development policies over several years. Many of the provisions in the ’02 farm law will expire in Sept. ’07.

Rep. Peterson represents the seventh district of Minnesota, a primarily rural and agricultural district reaching from the Canadian border almost to the Iowa state line along Minnesota's border with North Dakota and South Dakota. He grew up on a farm in Baker, MN, and now lives in Detroit Lakes, MN. Before his election to the House in ’90, he was a CPA and small business owner, and also served for 10 years in the Minnesota State Senate.


Sales, Shipments Steady

Net export sales for the week ending Nov. 30 were 167,000 bales (480-lb). This brings total ’06-07 sales to approximately 5.5 million. Total sales at the same point in the ’05-06 marketing year were approximately 9.1 million bales. Total new crop (’07-08) sales are 210,700 bales.

Shipments for the week were 157,800 bales, bringing total exports to date to 2.4 million bales, compared with the 3.8 million at the comparable point in the ’05-06 marketing year.


Prices Effective Dec. 8-14, '06

Adjusted World Price, SLM 11/16

44.64 cents

*

Coarse Count Adjustment

0.00 cents

Marketing Loan Gain Value

7.36 cents

Import Quotas Open

 5

Step 3 Quotas (480-lb. bales)

 528,432

ELS Payment Rate

 1.39 cents

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

60.74 cents

Forward 3135 c.i.f. Northern Europe

NA

Coarse Count c.i.f. Northern Europe

 NA

Current US c.i.f. Northern Europe

61.70 cents

Forward US c.i.f. Northern Europe

 NA

 
2005-06 Weighted Marketing-Year Average Farm Price  
 
Year-to-Date (August-October)

45.98 cents

**

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

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