Cotton's Week: June 5, 2009

Cotton's Week: June 5, 2009

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No Farm Law Amendments Wanted

Agriculture groups urged the House Appropriations Committee to refrain from including amendments to the farm law in the FY10 appropriations measure.

The agriculture appropriations subcommittee is scheduled to mark up the FY10 agriculture appropriations, a measure which provides funds for discretionary programs and USDA and Commodities Futures Trading Commission administrative activities.  The NCC was joined by 42 commodity, general farm, banking, cooperative, conservation and crop insurance organizations in a letter urging that subcommittee not to include any provisions in the FY10 appropriations bill which would amend the new farm law. The letter is in the Issues area of the NCC’s website, www.cotton.org.

The groups pointed out that while the Administration has proposed more than $16 billion in agriculture spending reductions – which would require amending the farm bill – the final budget resolution does not require any cuts. The groups reminded appropriators that amendments to payment eligibility, conservation, crop insurance, rural development, research and export programs would undermine confidence in agriculture policy and likely create unnecessary difficulty for farmers and their lenders.

The agriculture appropriations subcommittee is scheduled to mark up the FY10 appropriations measure on June 11.



Leave Storage Credits Intact

A bipartisan group of Cotton Belt Congressional leaders is urging House Agriculture Appropriations Subcommittee members not to accept the Administration's proposal to terminate cotton storage credits.

In a letter to panel Chairman DeLauro (D-CT) and Ranking Member Kingston (R-GA), they also reminded the Subcommittee's leaders that storage credits have been available when the AWP is below the loan to ensure that cotton is competitive and to minimize forfeitures as required by the statute. Storage credits, which were made available through Administrative action, were mandated in the '08 farm law.

The members reminded their colleagues that the farm law codified reforms made in an Aug. '06 regulation and requires a 10% reduction in storage credit caps beginning in '09 and a 20% reduction beginning in '12. The letter explains that in the absence of storage credits, the value of the loan as a financing and marketing tool for producers would be significantly depreciated.

In a separate action, the NCC wrote Cotton Belt members of the Appropriations Committee urging them to reject any efforts to use the FY10 agriculture appropriations bill to amend farm law.

This letter specifically expresses the industry's strong opposition to amendments, such as those proposed by the Administration, to impose a $500,000 gross revenue test to determine eligibility for direct payments; to establish a $250,000 cap on all program benefits including the marketing loan; to cut MAP funding by 20%; to modify the crop insurance program; to modify certain conservation programs and to terminate cotton storage credits. The letter is in the Issues Members Only area of the NCC's website, www.cotton.org.



EPA Rejects CWA Case Review

EPA submitted its court-mandated opinion on the request by the parties involved in NCC v. EPA for the full court to rehear the Clean Water Act (CWA) case.

The Sixth Circuit issued its decision on Jan. 7, ’09 which vacated an EPA rule exempting pesticides applied on, over or near water bodies to obtain a National Pollutant Discharge Elimination System (NPDES) permit under the Clean Water Act. The implications of the decision, in view of the term ‘near’ and the broad interpretation of ‘navigable waters’ in the CWA, is that all pesticide applications would require an NPDES permit.

EPA has rejected the call for a rehearing and, instead, has asked for a two-year stay to allow for the development of and issuance of permits.

EPA contends that the parties in the case are interpreting the Court’s decision too broadly and claims that the Court does not have authority to issue binding legal opinions outside the scope of the rule under review. According to the EPA document, “EPA believes that the Panel’s statements should be read as being limited to the issues that were before it: pesticide applications to or over, including near, waters of the United States that were addressed by the Final Rule.”

The Sixth Circuit Court has yet to decide whether or not it will rehear the case.


GAO Crop Insurance Study Released

The Government Accountability Office (GAO) recently published a study regarding the Administration and Operating (A&O) allowances of crop insurers. A company’s A&O allowance is used to administer the program and includes agent commissions.

The GAO is concerned that between ’00 and ’09, companies’ A&O allowances nearly tripled. The A&O is tied to the value of the crop and therefore grew due to higher crop prices since ’06.

In the study, the GAO presented the Risk Management Agency (RMA) with four suggestions to reduce the cost of administering the program, three of which were accepted.

RMA has indicated that in line with GAO’s suggestion, it will evaluate potential alternative A&O calculation methodologies for establishing a reimbursement for services performed. In addition, RMA agreed to pursue a study to evaluate the costs associated with selling and servicing crop insurance polices in order to establish a standard method for assessing agencies’ reasonable costs in selling and servicing polices. RMA also agreed to clarify the expense reporting guidance to companies for the ’11 reinsurance year.

The NCC has urged that any changes made to the crop insurance program not hamper a company’s ability to offer policies  throughout the Cotton Belt or hamper a company's ability to fully service the provider.



Sales Steady, Shipments Strong

Net export sales for the week ending May 28 were 157,000 bales (480-lb). This brings total ’08-09 sales to about 13.4 million bales. Total sales at the same point in the ’07-08 marketing year were about 14.8 million bales. Total new crop (’09-10) sales are 806,500 bales.

 Shipments were 347,300, bringing total exports to date to 10.5 million bales, compared with the 10.7 million bales at the comparable point in the ’07-08 marketing year.

With a little more than two months remaining in the marketing year, weekly shipments must average roughly 227,000 bales to reach the USDA projection of 12.5 million bales.



Railroad Bill Consideration Postponed

The Senate decided to postpone consideration of a bill concerning the antitrust treatment of railroads. S. 146, the Railroad Antitrust Act, was introduced by Sen. Kohl (D-WI) and was passed by the Senate Judiciary Committee on March 5, 09.

Senate Commerce, Science and Transportation Committee Chairman Rockefeller (D-WV) and Sen. Kohl agreed to work together to include the bill in comprehensive railroad legislation being considered by that Committee. The comprehensive bill also would include provisions to reform the Surface Transportation Board.

S. 146 would eliminate a long-standing exemption to antitrust laws that allows railroads to gain approval from the Surface Transportation Board (STB) for rail mergers, acquisitions and collective rate-making agreements.

Because of mergers, four Class I railroads - the large freight carriers - provide 90% of rail transportation, leaving some areas of the country with service from only one railroad. Many Cotton Belt areas are captive shippers and companies have little choice but to pay the railroad's rate.

The NCC, along with other agricultural organizations, issued a statement commending the Senators on their decision and pledged to work with them to see comprehensive legislation passed this year.



FSA Nominations Start on June 15

Agriculture Secretary Vilsack announced that farmer and rancher candidate nominations will begin on June 15 for local Farm Service Agency (FSA) county committees. The nomination period continues through Aug. 3, with elections taking place this fall.

To be eligible to serve on a FSA county committee, a person must participate or cooperate in a program administered by FSA, be eligible to vote in a county committee election and reside in the local administrative area in which the person is a candidate.

Producers may nominate themselves or others, and organizations representing minorities and women also may nominate candidates. To become a candidate, an eligible individual must sign the nomination form, FSA-669A. The form and other valuable information about FSA county committee elections are available online at: http://www.fsa.usda.gov/elections. Nomination forms for the ’09 election must be postmarked or received in the local USDA Service Center by close of business on Aug. 3.

FSA county committee members make decisions on disaster and conservation programs, emergency programs, commodity price support loan programs and other important agricultural issues. Members serve three-year terms. Nationwide, there are about 7,800 farmers and ranchers serving on FSA county committees. Committees consist of three to 11 members who are elected by eligible producers.

FSA will mail ballots to eligible voters beginning on Nov. 6. The voted ballots are due back to the local county office either via mail or in person by Dec. 7. Newly elected committee members and alternates take office Jan. 1, ’10.



’09 PIE Program Tours Set

The NCC has scheduled dates and locations for the ’09 Producer Information Exchange (PIE) Program. Sponsored by Bayer CropScience through a grant to The Cotton Foundation, the program is in its 21st year of helping US cotton producer participants improve yields and fiber quality.

This season, Southwestern producers will see operations in Louisiana and Mississippi on July 12-17; Mid-South producers will visit Texas on July 26-31; Southeastern producers will travel to California on Aug. 2-7; and Far Western producers will tour Georgia, Alabama and Florida on Aug. 16-21.

Cotton Foundation President Mark Nichols, an Altus, OK, producer, said the PIE program enables cotton producers to improve yields and fiber quality along with boosting their overall operation’s efficiency by: 1) gaining new perspectives in such fundamental practices as land preparation, planting, fertilization, pest control, irrigation and harvesting and 2) observing firsthand the unique ways in which their innovative peers are using new and existing technology.

Upon completion of this year’s tours, the PIE will have shown more than 800 producers a variety of innovative production practices in growing regions other than their own.



Cotton’s Benefits Showcased in Asia

Cotton Council International’s (CCI) annual Cotton Day celebrations across Northeast Asia highlighted the intrinsic benefits of the world’s favorite fiber through COTTON USA Mark branded consumer events and executive interviews, and initial results indicate that media coverage this year was the most successful to date.

The Cotton Day events in Japan, Korea and Taiwan marked the 20th anniversary of promoting high quality US cotton through the COTTON USA Mark. Japan Cotton Day highlighted CCI’s partnership with the Japan Spinners’ Assoc., the Japan Cotton Promotion Institute and the Japanese textile industry. Cotton Day Korea highlighted cotton’s role in the family. Cotton Day Taiwan focused on cotton as a medium for expression. Cotton Day also provided an opportunity to highlight the proactive and positive role that the US cotton industry is taking on cotton’s sustainability.



Prices Effective June 5-11, '09
Adjusted World Price, SLM 11/16

44.93 cents

*

Fine Count Adjustment ('08 Crop)

 0.20 cents


Fine Count Adjustment ('09 Crop)

  0.00 cents


Coarse Count Adjustment

  0.00 cents


Marketing Loan Gain Value

 7.07 cents


Import Quotas Open

5


Special Import Quota (480-lb bales)

311,904


ELS Payment Rate

  6.23 cents


*No Adjustment Made Under Step I

 

Five-Day Average

 

Current 5 Lowest 3135 CFR Far East

61.70 cents


Forward 5 Lowest 3135 CFR Far East

67.39 cents


Coarse Count CFR Far East

61.87 cents


Current US CFR Far East

63.25 cents


Forward US CFR Far East

68.75 cents


 

'08-09 Weighted Marketing-Year Average Farm Price  
 

Year-to-date (Aug.-April)

49.08 cents

**

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



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