Cotton's Week: October 3, 2008

A bipartisan group of Cotton Belt Senators and House members, led by Sen. Chambliss (R-GA) and Reps. Etheridge (D-NC) and Emerson (R-MO), has written Agriculture Secretary Ed Schafer to stress that it is inappropriate and unnecessary for USDA to cause serious disruptions in current farming operations by proposing unwarranted changes in the way it makes actively-engaged-in-farming determinations. 

Twenty Senators and 62 House members signed separate letters that also request that the USDA publish rules and regulations pertaining to new adjusted gross income and payment limit reforms as soon as possible.

The letters remind the Secretary that the new law includes significant reforms in payment limitations and eligibility but does not require changes in the way individuals or entities are determined to be “actively engaged in farming.” Implementation of two new income tests and direct attribution will cause significant challenges and require adjustments for many farming operations.

Sign-up for ’09 should begin in October and the law requires that advance direct payments be available in December, meaning that the Farm Services Administration and farmers must know the rules before signing up and requesting payments.

NCC Chairman Larry McClendon expressed appreciation to Sen. Chambliss and Reps. Etheridge and Emerson along with the other Cotton Belt Senators and Representatives who signed the letters.

McClendon said, “It is vitally important that USDA move quickly to implement the new rules and that it make no changes to actively engaged eligibility rules, as none were required by the law.”

Chuck Coley, a Vienna, GA, producer who chairs the NCC’s American Cotton Producers, expressed appreciation to Sen. Chambliss for his efforts to insure the new law, which he co-authored and steered through a protracted debate, is implemented in the way Congress intended.

Max Denning, an officer of the North Carolina Cotton Producers Assoc., expressed appreciation to Rep. Etheridge -- who chairs the General Farm Commodities Subcommittee -- for urging USDA to publish rules necessary to allow farmers to begin ’09 programs signup as soon as possible. “In this time of market uncertainty and escalating costs, farmers and their lenders need access to a predictable safety net program to begin plans for 2009 and beyond,” Denning said.

USDA’s Risk Management Agency (RMA) authorized emergency loss adjustment procedures for crops damaged by Tropical Storm Fay in Florida; Hurricane Gustav in Louisiana and Mississippi; and Hurricane Ike in Arkansas, Louisiana and Texas.

By doing this, loss determinations would be streamlined to accelerate the adjustment of losses and issuance of indemnity payments to crop insurance policyholders in the affected areas. These expedited appraisals will limit unnecessary delays in processing claims by reducing paperwork and on-site inspections.

Recently, the NCC, along with other commodity groups, sent a letter to the RMA administrator requesting this expedited appraisal process. The full Manager’s Bulletin is at http://www.rma.usda.gov/bulletins/managers/2008/mgr-08-016.pdf.

Net export sales for the week ending Sept. 25 were 115,300 bales (480-lb). This brings total ’08-09 sales to approximately 5.7 million bales. Total sales at the same point in the ’07-08 marketing year were about 5.5 million bales. Total new crop (’09-10) sales are 72,200 bales.

Shipments were 242,300 bales, bringing total exports to date to 2.0 million bales, compared with the 2.5 million bales at the comparable point in the ’07-08 marketing year.

The House and Senate passed modified legislation to suspend the “10-acre rule.”

HR 6849, sent to and expected to be signed by the President, will suspend implementation of the 10-acre rule for the ’09 crop. Therefore, farms with fewer than 10 total base acres will not be denied direct, counter-cyclical or ACRE payments.

The legislation’s $9 million cost is offset by cutting $6 million from information technology, and $3 million is generated through technical changes to the permanent disaster program. Earlier legislation was approved by the House which would have suspended the provision for two years.

The compromise approved by the House and Senate suspends the provision for one year.

Rep. Etheridge (D-NC), who cosponsored the original legislation, said, “this is good news for thousands of farmers who rent or lease smaller tracks of land … I will begin working on a permanent solution.”

The legislation also makes technical changes to clarify provisions of the new permanent disaster program. It adds a requirement that to qualify for the program, a farm must have a 10% loss on at least one crop of economic significance due to disaster. It clarifies how USDA should measure a 50% loss of production on the farm to determine eligibility for the SURE program; removes crops (ghost crops) planted subsequent to the loss of the original crop from inclusion in the SURE guarantee calculation except where double-cropping is a normal practice; provides for a de minimis exception to the insurance linkage for crops not of economic significance on the farm; removes the grazing land insurance linkage requirement; and provides a waiver from insurance purchase for crops with a sales closing date prior to Aug. 14, ’08.

In a notice (DCP-198) to state and county Farm Service Agency (FSA) offices, John Johnson, FSA’s deputy administrator for Farm Programs, advised that final ’08 direct payments (DP) for covered commodities and peanuts can be issued beginning Oct. 6.

The total ’08 DP for cotton is 6.67 cents/lb., and producers were allowed to request a 22% advance. Final counter-cyclical payments (CCP) for the ’07 cotton crop are expected to be made soon after the National Agricultural Statistics Service publishes the national market-year average price received by farmers on Oct. 10.

Last year, the final CCP was made in September because it was certain that the payment would be at the maximum rate. For the ’07 crop, the total CCP will be less than the maximum so USDA has to wait until the national average price received is available before calculating the CCP rate.

In Feb. ’08, eligible producers were allowed to request a 40% partial CCP of 3.09 cents/lb based on the Secretary’s estimated CCP for the ’07 crop. For producers who elected to accept a partial CCP, the final payment will be the difference between the total CCP to be announced on or about Oct. 10 and the partial payment.

The ’08 farm law authorizes the Secretary to make a 22% advance ’09 DP available to producers beginning on Dec. 1. The ’09 DP for cotton is 6.67 cents/lb. However, in order to make the advance, the regulations necessary to conduct signup for ’09 and determine eligibility must be published.

The new law also allows the Secretary to offer a partial CCP payment for the ’08 cotton crop of up to 40% of the projected total CCP -- if a payment is projected. That partial, if any, would be available on Feb. 1, ’09.

Cotton Belt Congressional members joined their colleagues and the US cotton/textile industry in a call to broaden a key textile import monitoring program.

With the strong support of the NCC, textile associations and a labor union, 73 Representatives led by Textile Caucus Co-Chairs Coble (R-NC) and Spratt (D-SC) sent a letter to President Bush urging his Administration to extend and expand the Textile Monitoring Program (TMP) to cover US textile and apparel imports from China beginning on Jan. 1, ’09, the first day following the expiration of a US-China textile bilateral agreement signed in ’05. The TMP currently monitors US apparel imports from Vietnam for illegal dumping.

The NCC also joined 10 textile and fiber industry trade associations and the labor union, UNITE HERE, making the same request in a letter to US Secretary of Commerce Carlos Gutierrez and US Trade Representative Susan Schwab.

“U.S. cotton is encouraged by this bipartisan congressional support for stronger trade enforcement,” NCC Chairman Larry McClendon said. “Excessive textile and apparel imports disrupt the market and pose a threat to our industry.”

The expiration of Chinese safeguards next year has raised grave concerns among the US textile sectors and its workers, as well as the US preference partners in the Central America Free Trade Agreement (CAFTA) and African countries that rely on domestic components. To underscore this point, earlier this month, 17 international textile and apparel organizations sent letters to Secretary Gutierrez, Ambassador Schwab and the chairs and ranking members of the US Senate Finance and the US House Ways and Means Committees urging the extension and expansion of the TMP.

Concerns about dumping are not unwarranted, as the expiration of quotas in ’05 resulted in a 40% price drop for and a nearly 600% volume increase of US textile and apparel imports from China, severely disrupting the market. This led the US government to impose safeguards on numerous categories of US textile and apparel imports from China, which in turn, encouraged the United States and China to negotiate the bilateral that expires at year’s end.

The House and Senate approved legislation (HR 7222) to extend provisions of the Andean Trade Promotion and Drug Eradication Act (ATPDEA) for one year. The preferences program was first enacted in ’91 and was set to expire on Dec. 31, ’08.

The legislation provides duty-free treatment to certain exports from Colombia, Peru, Ecuador and Bolivia. Textile and apparel products assembled in those countries using US components are eligible for preferential US access.

In the case of Colombia, there is significant trade in US cotton yarn which would be threatened if the legislation had not been approved.

The US and Colombia have negotiated a Free Trade Agreement (FTA) which would replace the ATPDEA but Congressional approval of the FTA is uncertain. Some members had objected to the extension assuming it would force a vote on the FTA but USTR urged members to support the extension.

While the legislation provides a one-year extension for Colombia, it limits the extension to six months – subject to further review – for Ecuador and Bolivia because of their actions against US investors. USTR has taken separate action to strip Bolivia of ATPDEA benefits.

The legislation also includes a provision to compensate the Dominican Republic for a concession on certain pocketing material used in pants entering the United States duty-free under the Central America Free Trade Agreement (CAFTA). And, the legislation extends the Generalized System of Preferences which provides preferential treatment for certain products from developing countries.