Cotton's Week: January 2, 2009

USDA published two long anticipated Federal Register notices on regulations regarding implementation of the ’08 farm bill.

One notice pertains to farm program payment limitations and payment eligibility for '09 and subsequent crop, program and fiscal years. The second notice includes provisions implementing the direct and counter-cyclical payment program (DCP) for the '08-12 crop years and the Average Crop Revenue Election (ACRE) program payments for the '09-12 crop years. Both regulations, which are interim final and effective upon publication, are posted on the NCC’s website at http://www.cotton.org/issues/index.cfm.

“The cotton industry is relieved to finally see the regulations published by USDA for implementation of the 2008 farm bill,” NCC Chairman Larry McClendon stated. “We have been calling on the Department for their release in order for producers to begin making their plans for this year.”

The interim final regulations on the direct and counter-cyclical and ACRE programs, as well as the payment eligibility provisions, allow for comments.

“The Council has begun its analysis of the regulations and will be sending in comments accordingly,” McClendon said.

The NCC had joined every major commodity and farm organization in conveying serious concerns about the significant delay in publishing the ’08 farm law implementing regulations.

In a Dec. 8 letter to Agriculture Secretary Ed Schafer, copied to Office of Management & Budget Director Jim Nussle and to Congressional leaders, the groups urged the Administration to release the regulations immediately. The letter reminded officials that the new farm law includes a requirement that implementing regulations be issued within 90 days of enactment (see 12/12 Cotton’s Week).

Enrollment for the ’09 Direct and Counter-cyclical Payment (DCP) Program for farms with base acres began Dec. 22 both online and at local USDA service centers and will continue until June 1, ’09.

In making the announcement late on Dec. 19, Secretary of Agriculture Ed Schafer urged producers to make use of the eDCP automated website to sign up; however, producers can visit any USDA Service Center or their administratively assigned center to complete their ’09 DCP contract. The June 1 signup deadline is mandatory for all participants. USDA will not accept any late-filed applications.

The USDA announcement said that the electronic DCP (or eDCP) service saves producers time, reduces paperwork and speeds up contract processing at USDA Farm Service Agency (FSA) offices. It is available to all producers who are eligible to participate in the DCP Program and can be accessed at http://www.fsa.usda.gov/dcp. To access the service, producers must have an active USDA eAuthentication Level 2 account, which requires filling out an online registration form at http://www.eauth.egov.usda.gov followed by a visit to the local USDA Service Center for identity verification.

USDA computes DCP Program payments using base acres and payment yields established for each farm. Eligible producers receive direct payments at rates established by statute regardless of market prices. For ’09, eligible producers may request to receive advance direct payments based on 22% of the direct payment for each commodity associated with the farm.

The announcement stated that USDA will issue advance direct payments beginning Dec. ’08. Counter-cyclical payment rates vary depending on market prices. Counter-cyclical payments are issued only when the effective price for a commodity is below its target price. The effective price for each covered commodity and peanuts equals the direct payment rate plus the higher of the national average market price received by farmers during the 12-month marketing year and the national average loan rate.

Producers who are eligible for the DCP Program also will be eligible to enroll in the Average Crop Revenue Election (ACRE) Program. The enrollment period for the ACRE Program will begin in the spring. Producers may first enroll in the DCP Program, elect to receive advance direct payments and then later modify their enrollment to include the ACRE program or they may wait and elect to enroll in DCP and ACRE at the same time in Spring ’09.

The optional ACRE Program provides a safety net based on state revenue losses and acts in place of the price-based safety net of counter-cyclical payments under DCP. A farm's payment is based on a revenue guarantee calculated using a five-year average state yield and the most recent two-year national average price for each eligible commodity. For the ’09 crop, the two-year price average will be based on the ’07 and ’08 crop years.

An ACRE payment is issued when both the state and the farm have incurred a revenue loss. The payment is based on 83.3% (85% in ’12) of the farm's planted acres times the difference between the state ACRE guarantee and the state revenue times the ratio of the farm's yield divided by the state expected yield.

The total number of planted acres for which a producer may receive ACRE payments may not exceed the total base on the farm. In exchange for participating in ACRE, in addition to not receiving counter-cyclical payments, a farm's direct payment is reduced by 20% and marketing assistance loan rates are reduced by 30%.

The decision to enroll in the ACRE Program is irrevocable. The farm owner and all producers on the farm must agree to enroll in ACRE. Once enrolled, the farm shall be enrolled for that initial crop year and will remain in ACRE through the ’12 crop year.

Upland cotton direct payment rates and maximum counter-cyclical rates for ’09 are:  target price (71.25 cents), direct payment rate (6.67 cents), loan rate (52 cents), minimum effective price (58.67 cents) and maximum CCP payment rate (12.58 cents).

USDA has approved enhancements for processing turn-around loans under National Payment Service (NPS) Centralization beginning June 1, ’09. Users will enter the loan in the normal manner, but the internal processing is streamlined by introducing a new “Process Turn-Around Loan” option. The new option eliminates the use of CCC-184.

Turn-around loans are nonrecourse marketing assistance loans (MALs) that are issued then immediately exchanged with a commodity certificate on the same day. Previously, when a

turn-around loan was issued, the loan principal was disbursed by CCC-184 and made payable

to the Commodity Credit Corp. (CCC). County offices then processed the commodity certificate repayment by using CCC-184. Any market gain that resulted from MAL was disbursed by CCC-184 or electronic funds transfer (EFT) directly through APSS.

For questions about this notice, contact Shayla Watson at shayla.watson@wdc.usda.gov  202-690-0013 or at cecile.wynne@wdc.usda.gov or 202-720-8413.

The NCC joined the National Council of Textile Organizations and other textile and apparel associations on a letter to Nancy Nord, acting chairman, and Thomas Moore, commissioner, U.S. Consumer Product Safety Commission (CPSC).  The associations were submitting comments on two draft notices of proposed rulemaking regarding lead content limits for materials and products pursuant to the newly-enacted Consumer Product Safety Improvement Act (CPSIA).

The associations’ letter expressed support for the efforts to ensure that only safe and compliant products are sold in the United States. The letter also agreed with the proposals’ recognition that many natural materials do not contain lead or do not exceed the CPSIA’s lowest lead limits. However, the associations stated the belief that the proposals can be greatly strengthened and made more meaningful if certain clarifications and modifications are incorporated before it is voted on or approved by the CPSC.

Specifically, the letter asked for clarification of the finding that no lead or insignificant trace amounts of lead for natural fibers should also apply to textiles that are created using the natural fibers specifically referenced, because the processing chemicals used in producing the textiles do not contain lead or do not introduce lead to the product above the CPSIA levels. The letter also asked that the proposed lead limit finding for natural fibers be extended to all manufactured fibers that do not contain lead.

In addition, the associations’ comments sought clarification for the proposal’s section regarding the scientific evidence that must support a determination that a product or material does not and would not exceed lead limits specified by CPSIA. The letter asked that acceptable scientific evidence include testing and information provided by the supplier used in processing chemicals.

Agriculture Secretary Ed Schafer announced the intention to establish a new USDA Office of Ecosystem Services and Markets (OESM) and the creation of a federal government-wide Conservation and Land Management Environmental Services Board.

The boards, being established to implement actions authorized by the ’08 farm law, are to assist the Secretary in the development of new technical guidelines and science-based methods to assess environmental service benefits. The goal is to promote markets for ecosystem services including carbon trading. Lacking a formal structure to market ecosystem services, producers generally are not compensated for providing these critical public benefits.

OESM will provide administrative and technical assistance to the Secretary in developing the uniform guidelines and tools needed to create and expand markets for these vital ecosystem services and will support the work of the Conservation and Land Management Environmental Services Board. As directed by the ’08 farm law, the first ecosystem services to be examined will be carbon sequestration.

The Secretary intends to name Sally Collins as OESM director. Organizationally, the office will be located within the Office of the Secretary providing direct access to the Secretary. Collins has been serving as associate chief of the USDA Forest Service for the past eight years.

The Conservation and Land Management Environmental Services Board will be comprised of the secretaries of Interior, Energy, Commerce, Transportation and Defense; the chairman of the Council of Economic Advisors; the director of the White House Office of Science and Technology; the administrator of the Environmental Protection Agency; and, the commander of the Army Corps of Engineers. The Secretary of Agriculture will chair that Board. The chairman of the White House Council on Environmental Quality and the administrator of Office of Information and Regulatory Affairs will serve as vice chairs.

According to the Commerce Dept., November (four-week month) total cotton consumption in domestic mills was 142.3 million pounds for a seasonally adjusted annualized rate of 4.02 million bales (480-lb). Last year’s November annualized rate was estimated at 4.81 million bales.

The October (four-week month) estimate of domestic mill use of cotton was lowered 279,000 pounds to 166.0 million. The revised seasonally adjusted annualized rate of consumption for October is 4.28 million bales. This is lower than last year’s October annualized rate of 4.76 million bales.

Preliminary December domestic mill use of cotton and revised November figures will be released by Commerce on Jan. 22.

Net export sales for the week ending Dec. 25 were 69,900 bales (480-lb). This brings total ’08-09 sales to slightly more than 8.0 million bales. Total sales at the same point in the ’07-08 marketing year were approximately 8.2 million bales. Total new crop (’09-10) sales are 99,600 bales.

Shipments for the week were 141,100 bales, bringing total exports to date to 5.0 million bales, compared with the 5.2 million bales at the comparable point in the ’07-08 marketing year.