Cotton's Week: December 18, 2009

House Ways and Means Chairman Rangel (D-NY) said that the inability of Congress to modify the estate tax could have political consequences, especially for Democrats seeking re-election next year. However, he indicated that any disturbance would be mitigated if lawmakers make adjustments to the tax shortly after the new year.

The House acted to give taxpayers consistency with the estate tax, passing a bill (H.R. 4154) on Dec. 3 by a vote of 225-200. But the Senate has failed to garner support for anything other than current law. Absent action by the Senate, the tax will be repealed in ’10 and return to pre-’01 levels in ’11, which includes a $1 million exemption per person and a 55% tax rate for amounts exceeding that level. It seems unlikely the Senate will act on the tax before adjourning for the holidays.

Senate Majority Leader Reid (R-NE) attempted for a second time to capture unanimous consent and proceed to H.R. 4154, the House-passed bill that would make permanent the ’09 estate tax rules. His measure would have amended the House bill by substituting language from Senate Finance Chairman Baucus (D-MT) that provided a two-month extension of current law. Republicans objected to the motion and are expected to object to future motions on the estate tax in order to ensure that next year's repeal goes into effect.

By a voice vote, the House approved a measure extending for one year the expiring Generalized System of Preferences (GSP) and the Andean Trade Preferences Act (ATPA) for Colombia, Ecuador and Peru. The bill’s total cost is $785 million, which will be paid for by extending user fees.

In ’02, the Andean Trade Promotion and Drug Eradication Act (ATPDEA) amended the ATPA to provide benefits for certain products previously excluded under ATPA, subject to additional eligibility criteria such as evaluating the extent to which each beneficiary country is providing internationally-recognized worker rights. Under current law, the US trade representative must conduct a review of the ATPA program and submit a report to Congress by April 30, ’11. H.R. 4284 moves up the deadline for the next report to June 30, ’10, according to the summary of the legislation.

The NCC urged House and Senate members to approve an ATPA extension. The Senate is expected to take up the measure before the two programs expire Dec. 31, ’09.

Beginning on Jan. 8, ’10, the Cotton’s Week newsletter will be distributed to NCC members by email only and no longer by regular mail. NCC members who have not yet provided the NCC with their email addresses should send them to memberservice@cotton.org as soon as possible.

The newsletter will continue to be posted on the NCC’s website, www.cotton.org, under the News and Events section, but will require a password. Passwords will be provided upon completion of the short form located at http://www.cotton.org/register/request-password.cfm.

The NCC’s annual survey of ‘10 planting intentions recently was distributed to upland and ELS cotton producer across the Cotton Belt. The survey, conducted each year to aid with industry planning and policy deliberations, provides the basis for the economic outlook presented to delegates during the NCC Annual Meeting in early February. Survey results initially will be presented to members of the American Cotton Producers on Feb. 5.

To enhance the survey’s accuracy, producers are encouraged to respond by the Jan. 19 deadline. The current survey was distributed through a combination of regular mail and email with the intent of reaching all cotton farms across the Belt. Growers who did not receive a survey may contact the NCC via email at econsurvey@cotton.org for survey instructions.

The House approved on Dec. 11 by a 223-202 vote the “Wall Street Reform and Consumer Protection Act of 2009” (H.R. 4173). No Republicans voted in favor of the measure.

The measure overhauls the US system of financial services regulation with new controls on large and systemically significant institutions, and creates a new consumer protection agency focused on financial practices. The wide ranging bill also includes provisions to curtail predatory mortgage lending, set limits on executive pay, enhance enforcement powers at the Securities and Exchange Commission (SEC), and create new federal oversight of derivatives markets and credit rating agencies.

The bill would mandate that the risk management products be cleared -- if a clearinghouse accepts them. It would be up to a clearinghouse to decide whether to accept any such contract. The Commodity Futures Trading Commission (CFTC) and SEC -- depending on the type of derivative -- could initiate a review as to whether a particular contract should be cleared, but according to the Agriculture Committee, the decision of the regulator would not be binding because a clearinghouse should not be forced to take on risks if they are not comfortable doing so.

Cleared derivatives would have to be traded on a board of trade or “swap execution facility.” Derivatives not accepted for clearing still would have to be reported to a repository or a regulator. Under the bill, the SEC and CFTC would share jurisdiction of derivatives, but would split their duties depending on the product underlying the contract.

The SEC would handle security-based swaps and the CFTC would handle most others. As part of its oversight mandate, the CFTC would be required to set position limits for swaps under its jurisdiction that perform “significant price discovery functions.” The CFTC also would set aggregate position limits across all markets.

The most controversial amendment would limit a swap dealer's or major swap participant's potential ownership stake in a clearinghouse to 20%.

Members rejected amendments that would have created authority for regulators to set margins for swaps traded by those hedging commercial risk, and would have required all non-cleared swaps to be traded on an exchange or swap execution facility.

USDA’s Risk Management Agency (RMA) announced that the Group Risk Program (GRP) and Group Risk Income Protection (GRIP) program will be dropped for selected counties and states for the ’10 cotton crop.

The deletions resulted, in part, from recent modifications by the National Agricultural Statistics Service (NASS) to publication standards for county estimates. NASS county and district estimates for a given crop must be supported by at least 30 reports where the respondent reported both harvested acreage and yield, or the production from reports with respondent reported yields must account for a minimum of 25% of the current year’s production estimate for that county or district. Implementation of these standards has increased the reliability of NASS’ published county level estimates, but has resulted in fewer publishable county estimates.

For cotton, the areas for which GRP/GRIP will not be offered for ’10 include all counties in Alabama, Arizona, California, Florida, New Mexico, Oklahoma and South Carolina. Also for cotton, the programs were dropped in selected counties in Arkansas, Georgia, Louisiana, Mississippi, North Carolina, Tennessee and Texas. Along with cotton, RMA also announced deletions for corn, soybeans, grain sorghum and peanuts. Full details are available at http://www.rma.usda.gov.

In a  Dec. 11 conference call, NCC Chairman Jay Hardwick, Vice Chairman Eddie Smith and past NCC Chairman Larry McClendon were briefed on the latest developments in the ongoing Brazil WTO case by USDA Under Secretary Jim Miller. Since the Arbitration Panel ruling on Aug. 31, US and Brazilian officials held two bilateral discussions regarding the case. To date, Brazil has not indicated what actions they expect from the United States in order to avoid retaliation.

Brazil has published a list of 222 tariff lines that could be subject to countervailing duties on imports from the United States. However, it appears that no decision on specific products will be announced before late January. Brazil also is considering cross-retaliation in areas such as intellectual property rights, but doing so might require legislative changes in Brazil. The extent of cross-retaliation depends on calculations of total damages relative to a determined threshold. Additional background material is available at the NCC website, www.cotton.org.

During the call, Under Secretary Miller pledged to keep the cotton industry appraised of new developments.

In other news concerning export credit programs, USDA announced new limits on Brazilian banks’ use of the program. The move ultimately will reduce damage calculations using the Arbitration Panel formulas.

Sen. Murkowski (R-AK) announced on the Senate floor that she would file a disapproval motion to overturn last week’s EPA finding that greenhouse gas (GHG) emissions pose a danger to human health. That “endangerment finding,” announced on the first day of the Copenhagen talks, requires the agency to regulate emissions under the Clean Air Act (CAA).

The potential for EPA regulation of GHG emissions has been viewed as a threat by the administration to Congress, as well as negotiators in Copenhagen, if cap-and-trade legislation fails. It is unclear how much support Murkowski’s resolution may garner, although at least one moderate Democrat, Sen. Lincoln (D-AR), has expressed concern about the EPA finding.

Meanwhile, another White House effort to strengthen the US negotiating position in Copenhagen appeared to fall flat. Energy Secretary Steven Chu unveiled a joint $350 million effort to share clean energy technology with the governments of Australia, India and Italy, with the United States committing $85 million. The offer follows growing tensions over the level of contributions by rich countries to help developing nations adapt to climate change and develop clean technology.

Later in the talks, Secretary of State Hillary Clinton announced support of an annual $100 billion climate protection fund. Included in the conditions for the US contributions, Clinton demanded that China’s emissions reductions be scrutinized independently and that 193 countries sign a climate deal by Dec. 18.

Those planning to attend the ’10 Beltwide Cotton Conferences (BWCC), Jan. 4-7 in New Orleans, are reminded that the "early" registration deadline has been extended to Dec 23. NCC and Cotton Foundation members along with researchers, consultants, Extension personnel and association representatives can register for $125 through that date. After that, the registration cost is $150 for those groups.

For those who have not made arrangements and are planning to attend, registration and housing reservations can be done easily online by visiting the BWCC website, www.cotton.org/beltwide, and clicking on the respective registration and housing links. The New Orleans Marriott is no longer taking reservations but rooms can be reserved at the other headquarters hotel, the Sheraton New Orleans, either online or by calling 504-525-2500.

Net export sales for the week ending Dec. 10 were 246,900 bales (480-lb). This brings total ’09-10 sales to about 5.7 million bales. Total sales at the same point in the ’08-09 marketing year were about 7.8 million bales. Total new crop (’10-11) sales are 162,700 bales.

Shipments for the week were 168,800 bales, bringing total exports to date to 3.2 million bales, compared with the 4.6 million bales at the comparable point in the ’08-09 marketing year.