Legislation now being considered by the Senate to extend all of the existing tax rates from the ’01 and ’03 tax cuts retains the major provisions of President Obama's agreement with Republicans, including the 35% estate tax rate.
The version under consideration by the Senate now includes an extension of the 45 cents/gal ethanol blenders tax credit through Dec. 31, ’11 and the 54 cents/gal tariff on imported ethanol. The legislation would extend the biodiesel credit retroactively to cover all of ’10 and would be extended through Dec. 31, ’11. The bill extends the $1.00 per gallon production tax credit for biodiesel, the small agri-biodiesel producer credit of 10 cents per gallon and the $1.00 per gallon production tax credit for diesel fuel created from biomass. The $0.50 per gallon alternative fuel tax credit is extended through ’11. A summary of the Senate legislation can be accessed from the NCC website’s Issues area at http://www.cotton.org/issues/index.cfm.
Majority Leader Reid (D-NV) said he intends to file a cloture motion that would set the Senate up for a Dec. 13 vote to limit debate on the bill. If the cloture motion receives 60 or more votes, Senate passage is virtually assured. House Democrats went on record as rejecting the agreement negotiated by President Obama, and congressional Republicans requested that it not be brought to the House floor.
One amendment that is expected to be offered during the Senate debate would return the estate tax rate to the ’09 level of a 45% rate with a $3.5 million-per-person exemption, compared to the 35% rate and $5 million exemption level in the agreement between the President and Republicans (See 12-3-10 Cotton’s Week story on the NCC’s estate tax statement at press briefing). Despite criticism from House Democrats, President Obama and White House officials continued to press their case for passage of a tax compromise negotiated with Republicans, even in the face of opposition by the House Democratic caucus.
Key provisions are:
Tax Cuts -- The bill provides a two-year extension of all of the existing tax rates from the ’01 and ’03 Bush tax cuts for taxpayers, regardless of income. The extension encompasses the 10%, 15%, 25% and 28% tax brackets, and part of the 33% bracket; the 35% bracket, which would otherwise return to 39.6% for top earners; capital gains and dividends tax rate cuts, which otherwise would be taxed as ordinary income rates; and the $1,000 child tax credit, education incentives, and marriage penalty relief.
Estate Tax -- A two-year estate tax fix would reduce the top rate to 35% and the exemption level would be increased to $5 million per person. The stepped up basis is preserved, the exemption is indexed to inflation and any unused exemption is transferable to a spouse. Estates of those dying in ’10 are given a choice of the new exemption and rate or current ’10 law (no estate tax and modified carryover basis). In the absence of action, the estate tax rate would return to its pre-’01 level of 55% and the exemption level would fall to $1 million per person.
AMT -- The alternative minimum tax exemption “patch” is extended for two years under the bill to keep taxes from rising on an additional 20 million taxpayers.
Extenders -- A two-year extension is applied to all short-term expired or expiring tax extender provisions, including the research and development tax credit, deductions for state and local taxes, and the subpart F active financing exemption.
Social Security Payroll Tax --The bill cuts two percentage points off of the Social Security payroll tax.
’10-11 Production Estimate Lowered Slightly
In its December crop report, USDA projects the ’10-11 US cotton crop to be 18.27 million bales, down about 150,000 bales from its November report. Upland production was estimated at 17.77 million bales and extra-long staple (ELS) production at 498,000 bales. Harvested area was estimated at 10.77 million acres, implying an abandonment rate of 2.40%. The national average yield per harvested acre was estimated to be 814 pounds, 12 pounds less than the five-year average.
The Southeast crop is estimated at 4.24 million bales based on 2.58 million harvested acres and a regional average yield of 787 pounds, five pounds lower than the region’s five-year average.
In the Mid-South, expected production is 3.90 million bales. Harvested area is estimated to be 1.91 million acres with an expected yield of 979 pounds per harvested acre.
The Southwest upland crop is estimated at 8.56 million bales. Expected harvested area is 5.71 million acres and the regional average yield is 719 pounds, four pounds above the region’s five-year average of 715 pounds per harvested acre.
Upland production in the West is projected at 1.08 million bales with an estimated harvested area of 359,000 acres and a regional average yield of 1,437 pounds, 87 pounds higher than the region’s five-year average.
The ELS crop is an estimated 498,000 bales. Harvested area is pegged at 207,000 acres with an average yield of 1,154 pounds per harvested acre.
State-level estimates are included in the accompanying table.
Source: USDA-NASS December Crop Production Report. 1/ Updated from June Acreage Report.
USDA Sees Lower US Stocks
In its December report, USDA raised the US mill use estimate by 100,000 bales from its November report to 3.55 million bales. With exports unchanged at 15.75 million bales, total ’10-11 offtake is estimated at 19.30 million bales. Ending stocks for ’10-11 are projected to be 1.90 million bales for an ending stocks-to-use ratio of 9.8%.
USDA’s December report raised ’10-11 world production by 280,000 bales from the November report to 115.53 million bales. World mill use was lowered 570,000 bales from the November report to a projected 116.25 million bales. Consequently, world ending stocks for ’10-11 are projected to be 43.39 million bales for a stocks-to-use ratio of 37.3%.
Cottonseed Insurance Endorsement Ready
Officially known as the Cottonseed (Pilot) Endorsement, a new cottonseed insurance product will be available for purchase as an optional insurance endorsement to cotton producers (upland or extra-long staple) who purchase a qualifying buy-up insurance policy on their cotton lint through the federal crop insurance program for the ’11 growing season.
Made possible by a two-year effort by Plains Cotton Growers, the nationwide pilot is a companion endorsement that extends yield-only coverage to growers who purchase a qualifying APH-based buy-up plan of insurance (yield or revenue) under the new Combo Policy provisions for cotton. The endorsement will not be available to growers who purchase CAT, GRIP or GRP cotton policies.
Premiums for the Cottonseed Endorsement will be calculated using a national cottonseed price (which has been set by USDA’s Risk Management Agency (RMA) at $0.09 per lb, or $180 per ton, for the ’11 growing season) and the premium rate applicable to a grower’s approved lint yield for yield coverage under RMA’s Combo Policy provisions. Growers purchasing Revenue coverage on their cotton lint also will have their Cottonseed Endorsement premium calculated based on the rate applicable to Yield only coverage at their approved yield level. Premiums applicable to the Cottonseed Endorsement will qualify for the same level of federal premium subsidy as the grower’s underlying cotton lint policy.
To ease the record-keeping burden on growers, cottonseed yields used to establish coverage under the endorsement will be calculated using a state-based cottonseed conversion factor multiplied by the producers approved cotton lint yield. The cottonseed production guarantee then will be determined by multiplying the resulting approved cottonseed yield by the coverage level selected by the grower for their cotton lint policy (yield or revenue). Multiplying the cottonseed production guarantee by the national cottonseed price established by the RMA will determine the total value of coverage provided under the endorsement.
In the event of a loss, growers incurring losses to their cotton lint sufficient to trigger an indemnity would be paid for the corresponding level of loss on cottonseed. Cottonseed losses will be determined by subtracting the cottonseed production to count (determined by multiplying the total production to count of cotton lint before quality adjustment by the cottonseed conversion factor) from the cottonseed production guarantee.
For more information about the Cottonseed (Pilot) Endorsement, growers are encouraged to contact their insurance agent or crop insurance provider to learn how the endorsement can work for their operation.
Novel Sustainable Approach Asked By EPA
EPA is asking a National Academy of Sciences' (NAS) panel to provide suggestions on how to build an operational framework for the agency to move beyond narrow risk assessments to a more sustainable approach, which EPA Administrator Lisa Jackson says represents the "new approach" to environmental issues. The panel’s chair, though, is warning that a clearer definition of sustainability is needed for NAS to respond to the agency’s charge.
Jackson, along with NAS President Ralph Cicerone, and Bernard Goldstein, who will chair the panel, announced on Nov. 30 that the NAS has agreed to an agency request to craft a "Green Book." That “book” would recommend ways to integrate existing sustainability efforts within EPA's Office of Research and Development (ORD) into agency decision-making and move the current risk assessment and risk management paradigm into a more holistic, sustainable framework that considers multiple environmental stressors simultaneously.
The agency says the new Green Book is modeled after the so-called Red Book, the ’83 NAS study that put EPA on its current risk assessment approach as the driver for environmental regulations.
Goldstein cautioned, though, that responding to the agency's charge by the projected ’11 deadline will involve a need to more clearly define what the term sustainability is meant to convey, i.e. "clarity of definition and key concepts." The NAS panel also will develop recommendations on how EPA should develop "strategic metrics and indicators" to measure the success of agency sustainability initiatives and "assessment techniques and accounting protocols" to aid ongoing efforts to improve sustainability practices and procedures.
Senate Food Safety Bill Included in FY11 Spending Measure
A Senate food safety bill that stalled in the House after running afoul of a constitutional requirement was included in the FY11 spending bill passed by the House.
House leaders said they could not take up the Senate-passed food safety measure (S. 510) on its own because the Constitution requires bills that raise revenue must originate in the House. The continuing resolution offered a vehicle to return the measure to the Senate.
During House debate, Rep. Barton (R-TX), the top Republican on the Energy and Commerce Committee, said the food safety bill should go to conference to reconcile differences between the Senate version and the House-passed companion (HR 2749). However, the House bill’s sponsor, Rep. Dingell (D-MI) said the Senate bill did not drastically diverge from what the House had passed and urged colleagues to pass the measure.
Several GOP members, including incoming House Agriculture Committee Chairman Lucas (R-OK), complained of the process. In a letter to House members, Reps. Lucas and Barton said that legislation should be based on “transparency, openness and regard for regular order” rather than rushed into law.
The bill also contains the Tester amendment which exempts small farms from provisions of the bill and is opposed by a number of agricultural groups.
On the Senate side, Sen. Harkin (D-IA), chairman of the Senate Health, Education, Labor and Pensions Committee, has stated the Senate omnibus spending bill also would include the food safety language.
In addition to food safety, the House spending measure (HR 3082) would set discretionary spending for USDA, Food & Drug Administration (FDA) and related agencies at $22.6 billion, $724 million below the FY10 level. The bill would provide the FDA with more funding to increase inspections of food, medical devices and drugs, and would boost funding for nutrition assistance programs and the Commodity Futures Trading Commission, which assumes new authority to regulate over-the-counter derivatives.
Agriculture Groups Organize Nutrient Policy Council
A number of national agriculture and livestock groups, including the NCC, have launched a coalition to facilitate joint efforts to counter several proposed EPA initiatives aimed at reducing nutrient pollution in waterways under the Clean Water Act (CWA). The coalition’s members believe the proposals could have an unnecessarily negative economic impact on production agriculture.
The Agricultural Nutrient Policy Council (ANPC) includes the NCC, the American Farm Bureau Federation, National Corn Growers Assoc., The Fertilizer Institute and the National Pork Producers Council. The ANPC is especially concerned about proposed numeric nutrient criteria in Florida, which may be finalized later, as well as EPA’s effort to establish a total maximum daily load (TMDL) for nutrients and sediment in the Chesapeake Bay, which may be finalized by the end of the year.
Although the Chesapeake Bay Initiative does not directly affect cotton producing states, the presidential executive order, which mandated EPA to intervene in ongoing state efforts, specified that EPA was to develop policies and procedures that could be applied to other significant water bodies. The Chesapeake Bay TMDL is the largest ever attempted, encompassing a 64,000 square mile watershed.
The proposed numeric nutrient standards for Florida have raised significant concern. A numeric standard sets a quantifiable threshold for pollutants. The establishment of these standards could result in more stringent regulations and monitoring for agricultural runoff of nitrogen, phosphorous, and sediments.
The Florida Dept. of Agriculture and Consumer Services estimates that EPA’s proposed nutrient criteria will impose $902 million-$1.6 billion in total recurring annual expenditures and revenue reductions for Florida agriculture. State water regulators are opposed to adoption of numeric criteria, calling on EPA earlier this year not to use the methods created in Florida on a national scale because of the lack of scientific data linking the health of aquatic ecosystems with nutrient discharges.
However, environmental activist organizations already are considering expansion of these policies into other watersheds. They say the issue is critical in the Mississippi River basin and other large watersheds, where high levels of nitrogen and phosphorous contribute to elevated levels of algal bloom, which eventually eutrophy, lowering dissolved oxygen levels and contributing to large "dead zones" in the Gulf of Mexico and elsewhere.
Sales, Shipments Continue Strong
Net export sales for the week ending Dec. 2 were 370,100 bales (480-lb). This brings total ’10-11 sales to approximately 13.8 million bales. Total sales at the same point in the ’09-10 marketing year were approximately 5.4 million bales. Total new crop (’11-12) sales are 1.5 million bales.
Shipments for the week were 346,300 bales, bringing total exports to date to 3.1 million bales, compared with the 3.0 million bales at the comparable point in the ’09-10 marketing year.
Effective December 10-16, ’10
Adjusted World Price, SLM 11/16
140.85 cents
*
Fine Count Adjustment ('09 Crop)
0.00 cents
Fine Count Adjustment ('10 Crop)
0.00 cents
Coarse Count Adjustment
0.00 cents
Marketing Loan Gain Value
0.00 cents
Import Quotas Open
8
Special Import Quota (480-lb bales)
553,875
ELS Payment Rate
0.00 cents
*No Adjustment Made Under Step I
Five-Day Average
Current 5 Lowest 3135 CFR Far East
157.69 cents
Forward 5 Lowest 3135 CFR Far East
110.30 cents
Coarse Count CFR Far East
NA
Current US CFR Far East
156.45 cents
Forward US CFR Far East
112.35 cents
'10-11 Weighted Marketing-Year Average Farm Price
Year-to-Date (August-October)
77.46 cents
**
**August-July average price used in determination of counter-cyclical payment
