Cotton's Week: September 7, 2007

Cotton's Week: September 7, 2007

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Commodity Title Proposal Released

Senate Agriculture Committee Chairman Harkin (D-IA) released a proposed Commodity Title – including payment limitations provisions for consideration by Committee members. He also indicated it is unlikely that the Committee will markup new farm legislation during September.

Finance Committee Chairman Baucus (D-MT) has indicated his committee may meet during September to consider a package of spending off-sets which could be used to provide funds for a disaster relief fund and possible other farm bill related provisions.  Baucus also indicated that an earlier proposal to save money by requiring immigrant workers to be accountable for Social Security payments is unlikely to be considered because the immigration debate is too controversial. He indicated there is consideration of an option to allow farmers to forego payments for conservation programs and receive a tax credit instead.

There are eight members of the Finance Committee who also are members of the Agriculture Committee. They reportedly have been meeting to develop spending off-sets for programs which could be included in the new farm bill.

Chairman Harkin’s draft includes significant modifications to current farm policy and is considerably different than the House-passed bill.

The proposal would set loan rates at 85% of the Olympic average price received over the last five crop years, but year-to-year changes would be limited to 1%. The proposal would substitute a national target revenue plan for the current target price-based counter-cyclical program. Direct payments would continue to be made at current rates. Base and yields used to calculate direct and counter-cyclical benefits would be unchanged from current law. A supplemental crop insurance program designed to replace ad hoc disaster assistance would be available to producers who purchase buy-up coverage. The supplemental coverage would be triggered by a county disaster declaration and would be available to eligible farmers at no additional cost.

The proposed legislation would eliminate the three-entity rule and combine spouses as one person. New limitations would be $50,000 for direct payments and $50,000 for counter-cyclical payments. There would be a limit of $150,000 for marketing loan gains and loan deficiency payments. There no longer would be separate limits for peanuts and the total payments for all benefits for all crops to any household would be $250,000. Farmers with a three-year adjusted gross income (AGI) exceeding $250,000 ($500,000 for married couples) would be ineligible to receive commodity program benefits in the following year. The current $2.5 million AGI remains in effect for conservation programs.

Chuck Coley, a producer-ginner from Vienna, GA, who serves as vice chairman of the American Cotton Producers, and NCC President/CEO Mark Lange joined national commodity group representatives in Washington to discuss the status of the farm bill debate. They then met with Sens. Chambliss (R-GA) and Conrad (D-ND) as well as staff for Sens. Baucus and Harkin. The commodity group representatives urged the Senators to move expeditiously to approve new farm legislation that provides balanced support for commodities.


Sales, Shipments Stay Healthy

Net export sales for the week ending Aug. 30 were 287,200 bales (480-lb). This brings total ’07-08 sales to slightly more than 4.9 million bales. Total sales at the same point in the ’06-07 marketing year were approximately 2.4 million bales. Total new crop (’08-09) sales are 140,500 bales.

Shipments for the week were 344,600 bales, bringing total exports to date to 1.5 million bales, compared with the 787,700 bales at the comparable point in the ’06-07 marketing year.



Cotton Payments Timing Noted

USDA announced it will begin distribution of final ’06-crop upland cotton Counter-cyclical Program (CCP) payments to eligible producers with enrolled base acres. The final ’06-crop upland cotton counter-cyclical rate is at the maximum rate of 13.73 cents per pound. The accelerated distribution, which is approximately one month earlier than the original time, is possible since the market-year average (MYA) price is expected to be well below the 52-cent-per-pound loan rate.

The CCP rate is the amount by which the target price exceeds the effective price. The effective price equals the direct payment rate plus the higher of: (1) the national MYA price, or (2) the national average loan rate.

For the ’06 crop, the ’02 farm bill authorized partial CCP payments in Oct. ’06 and in Feb. ’07. Producers who accepted the two partial payments received a total of 9.61 cents per pound. They are now due an additional 4.12 cents per pound.

As a reminder, the ’02 farm bill specifies a different schedule for the ’07 crop CCP. A partial CCP of up to 40% of the projected total CCP is available after the first six months of the marketing year, which would be in Feb. ’08. If market conditions warrant, the final ’07 crop CCP would be available in Oct. ’08.

Eligible producers will receive the ’07 crop direct payment (DP) after Oct. 1, ’07. Producers who took the advance DP of 1.467 cents (which was 22% of the total and available starting in Dec. ’06) will be eligible for the remaining portion, approximately 5.2 cents.

The status and timing of any ’08 crop payments will be determined by the next farm legislation.


Chinese Exports Focus of Testimony

Jim Chesnutt, former chairman of the National Council of Textile Organizations (NCTO) and current President/CEO of National Spinning, Inc., testified before the US-China Economic and Security Review Commission regarding the threat posed by China in textile and apparel manufacturing and how current trade remedies have performed in addressing the China threat.   

The hearing examined the effect of Chinese exports of clothing, textiles and furniture on North Carolina’s economy. As a hearing component, the Commission also considered the effectiveness of current policies in addressing the problems created by subsidized imports from China, including whether trade remedies, such as antidumping penalties, are adequate to protect jobs from unfair competition.

As part of his testimony, Chesnutt released a NCTO analysis showing that the Chinese government offers its textile manufacturers 73 different subsidies. He explained that through its vast array of subsidies, China has been able to gain a nearly 50% share of world trade in apparel since ’00.

Chesnutt proposed a nine-step program that would lead to a revitalization of US manufacturing. Key steps include: 1) pass strong currency legislation, 2) extend or replace the current China textile safeguards, 3) create a comprehensive subsidy database on China for use by US manufacturers, 4) increase dumping and CVD assistance to small and medium-sized manufacturers, 5) increase and re-prioritize enforcement efforts at USTR and the Commerce Dept., 6) review China’s government support of its state-owned industrial sectors, including textiles, and penalize illegal transactions, 7) increase and reform customs enforcement efforts targeting China, 8) develop a more effective enforcement system that holds US importers responsible for the products they import and provides for stronger penalties for those who violate the law, and 9) impose penalties on companies that import products which were made by companies who pollute the environment.


No-Match Rule Blocked

Last week, a federal court in San Francisco blocked the Dept. of Homeland

Security’s (DHS) no-match rule from taking effect as scheduled. The court’s ruling provides employers with additional time to make sure that they are ready to comply if and when the no-match rule does become effective.

As reported in the Aug. 17 Cotton’s Week, DHS issued its rule on how an employer should respond to a no-match letter received from the Social Security Administration (SSA). In a lawsuit filed on Aug. 29 in the federal district court in San Francisco, a number of labor organizations challenged the rule and asked the court to prevent the rule from taking effect on Sept. 14, ’07. The organizations also asked that the court temporarily block the rule so that the court would have sufficient time and information to consider all the legal issues. The court indefinitely delayed the effective date of the no-match rule and ordered DHS and SSA not to implement it as scheduled. The court also set an Oct. 1, ’07 hearing date for consideration of the organizations’ request to block the rule.

The court’s ruling only indicates that the court wanted to take a closer look at the legal arguments than time allowed. It does not necessarily mean that the no-match rule is invalid or that the rule necessarily will be deemed to be invalid in whole or in part. It is possible that, after more complete consideration, the court will uphold the rule in its entirety.

In the meantime, employers should continue to prepare for complying with the rule. DHS has taken a rigid approach to the rule and will not necessarily provide employers additional time for compliance if the court rules in its favor. Moreover, DHS will not view favorably employers who do not appear to take seriously their obligation to not employ unauthorized workers. In this respect, it is important for each employer to ensure that its I-9 procedures comply with the law and are being properly implemented.

By continuing preparations to comply with the no-match rule even when the status of the rule is uncertain, employers will show that they do take this obligation seriously and they will be ready to comply immediately if the court rules in DHS’ favor.


Phyto Certificate eAuthentication Finalized

For two weeks, information has been on the Phytosanitary Certificate Issuance and Tracking (PCIT) web site regarding the upcoming implementation of “eAuthentication” (electronic signature). Effective on Sept. 8, ’07 with the upload of Version 2.5, PCIT becomes an e-Authenticated system. Those who do not have an eAuthentication ID and password at that time will be locked out of the system until one is obtained. Additional information is available at https://pcit.aphis.usda.gov/pcit/faces/contactus.html.

The PCIT Version 2.5 will provide additional functions. Webinars will be conducted on Sept. 10-14, ’07 in an effort to familiarize industry users with the new site. Version 2.5 contains a wide range of functionality (e-Authentication, federal payments, reporting and other miscellaneous changes).

Details on the USDA-APHIS webinars can be found on the NCC’s Cotton Flow page at http://www.cotton.org/tech/flow/index.cfm. These interactive sessions will allow participants to come and go as necessary. The schedule for Sept. 14 will be an open forum for questions and answers.


Referendum Poll Being Conducted

USDA’s Farm Service Agency (FSA) announced that through Nov. 30, ’07, cotton producers can request a referendum on whether to continue the ’91 amendments to the Cotton Research and Promotion Program. Cotton producers may submit their requests at local FSA service centers. FSA is polling cotton producers on behalf of USDA's Agricultural Marketing Service.

USDA published a decision in the March 6, ’07 Federal Register stating that a referendum was unnecessary. However, the Cotton Research and Promotion Act requires such a decision to be followed with an opportunity for cotton producers and importers to request a referendum.

For more information about the Cotton Research and Promotion Program, visit: http://www.ams.usda.gov/Cotton/r&pguide.htm.



Prices Effective Sept. 7-13, '07

Adjusted World Price, SLM 11/16

50.90 cents

*

Coarse Count Adjustment

0.00 cents

Marketing Loan Gain Value

1.10 cents

Import Quotas Open

NA

Step 3 Quotas (480-lb. bales)

 NA

ELS Payment Rate

0.00 cents

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

67.44 cents

Forward 3135 c.i.f. Northern Europe

NA

Coarse Count c.i.f. Northern Europe

NA

Current US c.i.f. Northern Europe

66.85 cents

Forward US c.i.f. Northern Europe

NA

 
2006-07 Weighted Marketing-Year Average Farm Price  
 
Year-to-Date (August-July)

47.25 cents

**

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

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