Cotton's Week: February 6, 2009

The NCC submitted comments on USDA’s Dec. 23-issued interim rule that made changes in payment eligibility and payment limitation rules.

Although the ’08 farm bill made several important changes to payment eligibility and payment limitation provisions, including the establishment of a system of direct attribution of payments, reducing and tightening the adjusted gross income means test, and ending the discriminatory treatment of spouses, the NCC comments focused on changes in the regulations that were not included or required by the ’08 bill. The comments stated that in many instances, the interim regulations went beyond the ’08 farm bill amendments and in some cases are arguably contrary to existing law.

The NCC’s comments focused on the following issues:   

• The interim regulations introduced significant new requirements for producers to be considered to be "actively engaged" in farming -- none of which were mandated by the statute. The interim regulations introduce vague, overlapping standards that cannot help but be implemented differently across the country. Among other things, the regulations introduce a new requirement that all members of a farming entity (partnership or corporation) must make a regular, identifiable, documentable, separate and distinct contribution of active personal labor or active personal management. Regarding corporations, the statute is clear that eligibility should be determined based upon the collective action of all shareholders and not based upon each shareholder's individual actions. With respect to partnerships, the "separate and distinct" requirements run contrary to normal farming operations where management is usually undertaken jointly by the partners.
• The regulation contains unreasonable restrictions on farm financing, which could prohibit any guarantee, cosigning or backing of a loan by any person, legal entity, or joint operation that has an interest in the underlying farming operation. It is common in husband and wife operations for both spouses to sign loan documents, thus, guaranteeing the loan of the other. Likewise, members of partnerships typically sign and guarantee the partnership loans. Disallowing such loan guarantees and financing arrangements ignores the economic and legal realities of how these farming entities operate and could make it impossible for many farming operations to secure necessary financing for ’09.
• The regulation introduces new "actively engaged" requirements for participation in certain conservation programs, even though this is not included in the law.
• The interim rule also narrowly construes the spousal eligibility amendments, effectively continuing a level of discrimination against spouses in family farming operations, treating spouses unfairly if the farming operation is structured as a corporation or a limited liability company. The rules ignore the importance of being able to organize farming operations appropriately to address liability and other legitimate business concerns.
• The interim rule also introduces a bright-line test for a substantive change in farming operations not involving family members that is not included in the ’08 amendments.  The new rule requires an increase of 20% or more of base acreage involved in a farming operation in order for such a change to be considered bona fide and substantive.  Under this provision, an increase of 3000% in base acreage would only support the addition of one person or legal entity to a farming operation, unless the state Farm Service Agency (FSA) office is convinced based on unspecified criteria that the increase supports additional persons or legal entities.

The NCC’s comments, in its website’s Issues section (members only), urged USDA to correct these and other deficiencies in the interim regulations. Also, in the Issues section (members only), the NCC posted worksheets to assist producers in evaluating their adjusted farm and non-farm income.

USDA also recently posted at www.fsa.usda.gov the handbook 4-PL, which provides guidance to state and local FSA offices in their application of the new rules.

Gary Taylor, a Tennessee merchant and NCC director, presented testimony to a House Committee on Agriculture hearing convened by Chairman Peterson (D-MN) to review the 2009 Derivatives Markets Transparency and Accountability Act.

Representing the NCC, the American Cotton Shippers Assoc. and AMCOT, Taylor stressed the severe financial strain placed on the cotton industry due to the unpredictable risk caused by a dysfunctional futures market. He also commended the Chairman for holding the hearing and conveyed the industry’s support for the legislation, which addresses many of the key concerns included in a resolution approved by NCC directors in Aug. ’08.

In his oral statement, the Cargill Cotton Company CEO acknowledged the importance of market liquidity and the essential function that speculative interests perform in commodity markets, but added that speculative participation must be tempered and monitored. He urged Congress and the CFTC to establish trading limits to prevent excessive speculation, subject all contract and over-the-counter market participants to speculative position limits, and subject speculative entities to the same weekly reporting requirements as the trade.

For further recommendations, the complete testimony is available at www.agriculture.house.gov.

USDA’s Natural Resources Conservation Service (NRCS) announced the availability of funding for Conservation Innovation Grants (CIG). Funds for single- or multi-year projects, not to exceed three years, will be awarded through a nationwide competitive grants process with applications accepted from all eligible non-federal government or non-government organizations or individuals.

CIG enables NRCS to work with other public and private entities to accelerate technology transfer and adoption of promising technologies and approaches to address pressing natural resource concerns.

Funding for CIG is made available through the Environmental Quality Incentives Program (EQIP). All proposed CIG projects must involve EQIP-eligible producers. CIG is not a research program, but rather a tool to stimulate the adoption of conservation approaches or technologies that have been studied sufficiently to indicate a high likelihood of success.

CIG will fund projects targeting innovative on-the-ground conservation, including pilot projects and field demonstrations. Technologies and approaches that are commonly used in the geographic area covered by the application, and which are eligible for funding through EQIP, are not eligible for funding through CIG.

The federal contribution for a single project cannot exceed $2 million. At least 50% of the total cost of the project must come from non-federal matching funds (cash and in-kind contributions) provided by the grantee.

Applications must be received in the NRCS National Headquarters by close of business March 2, ’09. The complete “Announcement of Program Funding” is at: http://www.nrcs.usda.gov/programs/cig.

NCC joined other agricultural groups in a listening session with the Dept. of Transportation (DOT) and the Federal Highway Administration (FHWA).

The session, entitled “Perspectives on Tomorrow’s Transportation,” initiated a FHWA series to advance understanding of agricultural issues including but not limited to: implications of alternative fuels; impacts of higher fuel costs; reform of surface transportation program and highway finance; coordination between transportation and land use; and reducing greenhouse gas emissions associated with freight movements. The session also included discussions about other modes of transportation, including challenges faced by agriculture in waterway and rail transportation.   

Many groups, including the NCC, are focused on transportation issues as Congress consider the reauthorization of transportation/highway law. In addition, several bills are expected to be introduced in Congress regarding rail issues and reorganizing the Surface Transportation Board.

The 42^nd meeting of the  Joint Cotton Industry Bale Packaging Committee will be held on March 3 at the Hilton Memphis Hotel in Memphis, TN.  On-site registration begins at 8:30 a.m.  The first general session will be held from 9:30 am-12 pm. The executive session is scheduled for 1:00-3:30 pm, followed by a second general session.

Online meeting pre-registration is available until Feb. 27. The online registration form is available on the NCC’s website at http://www.cotton.org/tech/bale/index.cfm. A room block is available at the Hilton Memphis Hotel. For room reservations, contact the hotel at 901-684-6664 or 800-445-8667 and ask for the "National Cotton Council" group block. The reservation cut-off deadline is Feb. 10.

Among topics to be discussed will be the addition of a Certificate of Analysis (COA) requirement to the cotton bale packaging specifications in ’08. Test programs involving woven polypropylene fabric, 100% cotton fabric and a PET (plastic) strap compatibility test program also will be reviewed.

For more information, contact Maxine Shepard or Dale Thompson at 901-274-9030.

In a memo to EPA employees, new EPA Administrator Lisa P. Jackson, who was confirmed by the Senate on Jan. 22, emphasized the values of scientific integrity, the rule of law and transparency.

She listed her priorities for EPA under her watch as reducing greenhouse gas emissions, improving air quality, managing chemical risks under the Toxic Substances Control Act, cleaning up hazardous-waste sites, and protecting America's water.

Jackson was the commissioner of the New Jersey Dept. of Environmental Protection and became New Jersey Gov. Jon Corzine's chief of staff on Dec. 1, just two weeks before her nomination by President Obama.

Rep. Leonard Boswell (D-IA), chairman of the House Agriculture Committee’s Subcommittee on General Farm Commodities and Risk Management, will address the Feb. 16 session of the NCC’s 71st Annual Meeting set for Feb. 12-16 at the JW Marriott Hotel in Washington, DC. He will be joined in that session by outgoing NCC Chairman Larry McClendon, who will address the state of the US cotton industry. The NCC’s ’08 activity report also will be presented.

On Saturday, Feb. 14^th, delegates will hear the NCC’s Economic Outlook, a report from Cotton Incorporated President Berrye Worsham and a presentation by Dr. Joseph Glauber, USDA chief economist. The “Saturday Luncheon” features Stuart Rothenberg, editor and publisher of The Rothenberg Political Report, which reports on and analyzes governmental developments, and who is a go-to authority on the House, Senate, Gubernatorial and Presidential elections. That afternoon, the National Cotton Ginners Assoc. will hold its annual meeting which will include a presentations on: 1) labor and immigration reform from Craig Regelbrugge, vice president for Government Relations and Research for the American Nursery & Landscape Assoc., and 2) the past, present and future of harvesting and ginning from Dr. Calvin Parnell, the Cotton Engineering and Mechanization chair at Texas A&M U.

Among other key convention sessions are Feb. 13 meetings of the Cotton Council International board and the American Cotton Producers -- where the NCC’s annual “Planting Intentions Survey” will provide insight into ’09 cotton acreage.

More Annual Meeting information is at http://www.cotton.org/news/meetings/amreg/.

Net export sales for the week ending Jan. 29, ’09 were 96,900 bales (480-lb). This brings total ’08-09 sales to approximately 9.1 million bales. Total sales at the same point in the ’07-08 marketing year were approximately 9.5 million bales. Total new crop (’09-10) sales are 127,000 bales.

Shipments were 201,700 bales, bringing total exports to date to 5.9 million bales, compared with the 6.3 million bales at the comparable point in the ’07-08 marketing year.