Cotton's Week: October 17, 2008

Cotton's Week: October 17, 2008


™®Trademarks of Corteva Agriscience and its affiliated companies.
Final ’07 Crop CCP Issued

Late on Oct. 10, Agriculture Secretary Ed Schafer announced that the final counter-cyclical payment (CCP) rate for the ’07 crop of upland cotton is 6.43 cents per pound.

Farmers who received the first partial payment of 3.09 cents per pound in Feb. ’08 will receive an additional 3.34 cents per pound.

According to USDA, the Commodity Credit Corp. will issue $384 million in final CCPs to eligible producers who have enrolled cotton base acres in the DCP program. The CCP rate is calculated as the amount the ’07 target price (72.4 cents per pound) exceeds the sum of the direct payment (6.67 cents per pound) and the higher of the national marketing year average (MYA) price or the national average loan rate (52.00 cents per pound). The payment is made on 85% of the farm’s base acreage times the counter-cyclical payment yield.

While growers appreciate the timely distribution of the final CCP, they are concerned by the significant upward adjustment that USDA’s National Agriculture Statistics Service made to the final average price received, which in turn, reduced the CCP.

NCC staff are in contact with USDA officials to discuss the methodology and data that led to the significant adjustment in the national MYA price compared to earlier estimates.

Congress Holds Credit Hearings

The House and Senate agriculture committees conducted hearings to review the role of credit default swaps (CDS) and derivatives in the current economic crisis and options to regulate the transactions.

Following the Senate hearing on Oct. 4, Chairman Harkin (D-IA) said he is considering introducing legislation that would give the Commodity Futures Trading Commission (CFTC) oversight over currently unregulated financial derivatives and would require that derivatives and swaps be conducted on a regulated exchange “so we know who owns them, how much there is, and what the values are.”

During the hearing, a CFTC official said because swaps and derivatives are not standardized but are customized by the parties involved, they are difficult to regulate. The official advocated a centralized clearing system as a way to gain transparency. CFTC Chairman Lukken made a similar proposal in an article published Oct. 10.

CFTC Commissioner Dunn submitted a statement in favor of the central clearing system but added “clearing is not enough because it does not address the lack of federal authority to adopt regulations necessary to mitigate risks related to swaps.

Congress must revisit its determination to exclude swaps markets from regulation and make sure that federal regulators are in a position to see and assess systematic financial risks.”

Commissioner Chilton said in a written submission, “we need to have a better window into these OTC markets in order to understand their scope and effect.”

During a hearing conducted by the House Agriculture Committee on Oct. 15, CFTC Chairman Lukken and Erik Sirri, director of the SEC’s Division of Trading and Markets, said central clearing would provide the greatest assurance against a default on a swap - which could otherwise lead to a systemic failure – and also would provide more transparency to regulators and market participants.

House Agriculture Committee Chairman Peterson (D-MN) said he supports prompt establishment of a central clearing mechanism.

In additional to advocating central clearing, CFTC Chairman Lukken also outlined a long-term plan which would seek to improve the transparency of over-the-counter markets “particularly when their size reaches a critical mass where they play a public pricing role and their failure might cause a systematic event.” He said enhanced transparency through reporting would enable regulators to police these markets for misconduct and concentration of risk and that reform measures probably should address the amount of capital held by dealer firms and provide clear enforcement authority against fraud and manipulation.

Law Suspends “10-Acre” Provision

President Bush signed into law legislation suspending the so-called “10 acre” provision for the ’08 crop year and extending the DCP signup to Nov. 26 for farms with 10 base acres or less of covered commodities and peanuts.

The legislation (HR 6849), passed by Congress on Sept. 29, suspends for one year a provision in the new farm law (The Food, Conservation, and Energy Act of 2008) which denied direct, counter-cyclical and ACRE (Average Crop Revenue Election ) program payments to farms with 10 or less total base acres.

USDA’s Farm Service Agency issued Notice DCP-201 on Oct. 14 providing guidance to state and county offices clarifying that farms with 10 acres or less may be enrolled until Nov. 26, using a CCC-509, and that farms with 10 acres or less of base will be eligible for payments. The notice makes clear that the legislation authorized an extension of sign-up only for farms with 10 acres or less. Sign-up for farms with more than 10 acres ended Sept. 30.

DOT Shortens Hazardous Materials List

NCC members, interest organizations, Cotton Foundation members and others are encouraged to support a proposed rule addressing risk-based adjustments to transportation security plan requirements. The proposal was published on Sept. 9 by the Federal Dept. of Transportation (DOT) Pipeline and Hazardous Materials Safety Administration (PHMSA), in consultation with the Transportation Safety Administration (TSA) of the Dept. of Homeland Security (DHS).

In addition to supporting the rule change, the NCC, in a separate action, intends to petition DOT to remove cotton from its list of hazardous materials.

The NCC’s support for the Notice of Public Rulemaking (NPRM) is based on what appears to be an effective and beneficial approach by DOT that prioritizes transportation security concerns by reducing the size of the list of materials subject to security plan requirements. Clarifications of security planning, training and documentation rules are based on current DOT Hazardous Materials Regulations (HMR; 49 CFR parts 171–180). The NPRM is viewed as an opportunity to reduce compliance burdens for individuals and companies whose products are not major security concerns.

PHMSA–06–25885 provides relief from security planning, training and documentation rules for all “Class 9” hazardous materials. It also extends the thresholds for other classes of hazardous materials and, in some cases, HMR requirements for certain classes of materials are eliminated altogether. The revisions allow DOT-PHMSA and TSA-DHS to focus limited resources in areas that do the most good.

A copy of DOT’s proposed rule as published in the Federal Register may be obtained from the Government Printing Office at Comments must be submitted by Nov. 10. Additional information regarding Hazardous Materials Transport Rules is available on the NCC website at

USDA Unveils Conservation Incentives

USDA has announced that additional payment incentives are being provided through the Conservation Reserve Program (CRP) to agricultural producers to encourage enhanced wetland and bottomland hardwood conservation. The ’08 farm law provides $25 billion to help states, communities, farmers and ranchers practice conservation. Those USDA conservation programs help reduce nutrient runoff, control erosion and sedimentation, protect and restore wetlands, enhance wildlife habitat, sequester carbon, improve air quality, manage livestock waste, and preserve farm and ranch land.

Wetlands conservation is a prominent feature of the CRP, which includes general sign up, continuous sign up, Conservation Reserve Enhancement Program and Farmable Wetlands Program. These initiatives target wetland restoration and bottomland timber establishment.

Farm Service Agency (FSA) county offices take offers for these CRP practices on a continuous signup basis, and the offers are automatically accepted provided the acreage and producer meet certain eligibility requirements. Under CRP, farmers and ranchers enroll eligible land in 10- to 15-year contracts with the Commodity Credit Corp. (CCC). Participants plant appropriate cover such as grasses and trees in crop fields and along water bodies.

CRP participants receive annual rental payments -- generally based on weighted average dry-land cash rent and practice maintenance -- plus up to 50% cost share to establish and manage conservation practices on the enrolled land. In addition, CRP participants restoring wetlands, establishing bottomland hardwood forests and creating duck nesting habitat now can receive a practice incentive payment (PIP) equal to 40% of the cost of installing the practice. A signing incentive payment of $100 per acre is made after the contract is approved. A soil rental rate incentive equal to 20% of the weighted average soil rental rate will be added to the annual rental payment.

A fact sheet is at:

Air Quality Panel Members Named

Agriculture Secretary Schafer recently renewed the USDA’s Agricultural Air Quality Task Force (AAQTF) and named 25 to serve as members for two-year terms ending Sept. 30, ’10.

AAQTF advises the Secretary on agricultural air quality issues. Its mandate is to strengthen and coordinate USDA's air quality research efforts and identify cost-effective ways to help the agriculture industry improve air quality and meet federal and local air quality emissions requirements. AAQTF membership includes representatives from various production agriculture organizations, air quality researchers from USDA research agencies and from universities, representatives from state environmental regulatory agencies and from EPA, and other parties interested in agricultural air quality. Arlen Lancaster, chief of USDA’s Natural Resource Conservation Service (NRCS), chairs the AAQTF.

The newly appointed task force’s membership includes six newly-appointed and 19 re-appointed members. Re-appointments include: Bryan Shaw, Austin, TX; Kevin Rogers, Mesa, AZ; Roger Isom, Fresno, CA; and Robert Avant, Austin, TX. New appointments include Bill Norman, NCC vice president, Technical Services, Cordova, TN.

More AAQTF information is at

Biotech Regulatory Revisions Proposed

The Biotechnology Regulatory Service (BRS) of USDA-APHIS published in the Federal Register its proposed regulatory changes for agricultural biotechnology products. The proposed rule is at One of the major reasons for these changes is to allow the BRS to utilize statutory authorities in the Plant Protection Act of 2000 to keep pace with the advances in the biotechnology sciences and to improve their regulations.

While most of the proposed regulatory changes affect the process for technology providers, some aspects of the proposed rules are of interest to growers and the market.

The BRS is proposing to strengthen its compliance and enforcement authority in order to better deal with unintentional co-mingling of regulated traits. The proposed rules would require field trial permit holders to establish and maintain records related to their permit conditions as well as allow APHIS to review such records. In addition, these regulatory revisions also would include a policy for dealing with low level presence of regulated genetically modified material in commercial crops, food, feed or seed. This policy directs APHIS to respond with actions appropriate to the level of risk. In cases in which the low level presence poses no risk, APHIS can determine not to take any remedial action.

APHIS is seeking public comment on the proposed rule and has scheduled public meetings at the U. of California, Davis on Oct. 28; in the Hilton Kansas City Airport, Kansas City, MO on Oct. 30; and in Washington, DC, at the APHIS Riverside Offices on Nov. 13. For more information on these meetings, go to 

Written comments can be submitted on or before Nov. 24.

Sales Soar, Shipments Steady

Net export sales for the week ending Oct. 9 were 411,100 bales (480-lb). This brings total ’08-09 sales to approximately 6.4 million bales. Total sales at the same point in the ’07-08 marketing year were about 5.8 million bales. Total new crop (’09-10) sales are 81,600 bales.

Shipments were 244,100 bales, bringing total exports to date to 2.5 million bales, compared with the 3.1 million bales at the comparable point in the ’07-08 marketing year.

Prices Effective Oct. 17-23, '08

Adjusted World Price, SLM 11/16

44.44 cents


Coarse Count Adjustment

0.00 cents

Marketing Loan Gain Value

7.56 cents

Import Quotas Open


Limited Global Import Quota (480-lb bales)


ELS Payment Rate

0.00 cents

*No Adjustment Made Under Step I
Five-Day Average
Current 5 Lowest 3135 CFR Far East

61.41 cents

Forward 5 Lowest 3135 CFR Far East


Coarse Count CFR Far East

58.05 cents

Current US CFR Far East

59.80 cents

Forward US CFR Far East


'07-08 Weighted Marketing-Year Average Farm Price  
Final Marketing Year Average Price

59.30 cents


Error in element (see logs)