CURRENT ISSUE ARTICLES

President Sends Deficit-Reduction Plan to Congress

Senators Propose New Farm Policy Proposal

NCC Comments on Area-Wide Insurance Rule

China Currency Bill Introduced

Vilsack Announces Key Appointments

Vision 21 Project Status Communicated

Sales, Shipments Steady

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President Sends Deficit-Reduction Plan to Congress

The President sent a $4.4 trillion deficit-reduction plan to Congress. According to a White House fact sheet, the total reductions include $1.2 trillion in cuts to discretionary spending already enacted; $580 billion in cuts from mandatory programs; $1.1 trillion from troop withdrawals; $1.5 trillion from tax reform; and $430 billion in interest savings.

The proposal, which includes $33 billion in savings from agriculture subsidies, noted that, "Farm income has been high and continues to increase, with net farm income forecast to be $103.6 billion in 2011, up $24.5 billion (31%) from the 2010 forecast—the highest inflation-adjusted value for net farm income recorded in more than 35 years. The top five earnings years for the past three decades have occurred since 2004, attesting to the profitability of farming this decade. The Administration remains committed to a strong safety net for farmers, one that protects them from revenue losses that result from low yields or price declines, and strong crop insurance programs. But there are programs and places where funding is unnecessary or too generous."

The Administration is proposing to:

(I.) Eliminate direct payments. The Administration noted, "The direct payment program provides producers fixed annual income support payments for having historically planted crops that were supported by Government programs, regardless of whether the farmer is currently producing those crops—or producing any crop, for that matter. Direct payments do not vary with prices, yields, or producers' farm incomes. As a result, taxpayers continue to foot the bill for these payments to farmers who are experiencing record yields and prices; more than 50% of direct payments go to farmers with more than $100,000 in income. Economists have shown that direct payments have priced young Americans out of renting or owning the land needed to enter into farming. In a period of severe fiscal restraint, these payments are no longer defensible, and eliminating them would save the Government roughly $3 billion per year."

(II.) Reduce subsidies to crop insurance companies. The Administration noted, "Currently 83% of eligible program crop acres are enrolled in the program. However, the program continues to be highly subsidized and costs the Government approximately $8 billion a year to run: $2.3 billion per year for the private insurance companies to administer and underwrite the program and $5.7 billion per year in premium subsidies to the farmers. In 2010, the U.S. Department of Agriculture (USDA) and the crop insurance companies agreed to changes that saved $6 billion over 10 years from administrative expense reimbursement and underwriting gains while also improving service to underserved States. A USDA commissioned study found that when compared to other private companies, crop insurance companies' rate of return on investment (ROI) should be around 12%, but that it is currently expected to be 14%."

(a)The Administration is proposing to lower the crop insurance companies' ROI to meet the 12% target, saving $2 billion over 10 years.

(b)The current cap on administrative expenses is based on the '10 premiums, which were among the highest ever. A more appropriate level for the cap would be based on '06 premiums. The Administration, therefore, proposes setting the cap at $0.9 billion adjusted annually for inflation, which would save $3.7 billion over 10 years.

(c)The Administration proposes to price more accurately the premium for catastrophic (CAT) coverage policies, which will slightly lower the reimbursement to crop insurance companies. This change will save $600 million over 10 years.

(d)The Administration proposes changes in premium subsidies for producers. "Today, producers only pay 40% of the cost of their crop insurance premium on average, with the Government paying for the remainder. The Congress increased the subsidy for most insurance coverage by more than 50% at the time to encourage greater participation. Today, participation rates are 83% on average, and the rationale for high subsidy rates has weakened. The proposal would shave two basis points off any coverage premium subsidy levels that are currently offered above 50%, saving $2 billion over 10 years. Farmers who have premium subsidies of 50% or less would not be affected.

(III.) Better target agricultural conservation assistance. The Administration noted, "The Administration is very supportive of programs that create incentives for private lands conservation and has made great strides in leveraging these resources with those of other Federal agencies towards greater landscape-scale conservation; however, the dramatic increase in funding (roughly 500% since enactment of the Farm Security and Rural Investments Act of 2002) has led to difficulties in program administration and redundancies among our agricultural conservation programs. At the same time, high crop prices have both strengthened market opportunities to expand agricultural production on the Nation's farmlands and decreased producer demand for certain agricultural conservation programs. To reduce the deficit, the Administration proposes to reduce conservation funding by $2 billion over 10 years by better targeting conservation funding to the most cost-effective and environmentally beneficial programs and practices."

Senators Propose New Farm Policy Proposal

Sens. Brown (D-OH), Thune(R-SD), Durbin(D-IL) and Lugar(R-IN) have released a new farm policy proposal which would eliminate direct and counter-cyclical payments and replacethe current ACRE and SUREprograms with a consolidated revenue protection program called the Aggregate Risk and Revenue Management (ARRM) program.The marketing loan would be retained.

According to various reports, "the bipartisan Aggregate Risk and Revenue Management (ARRM) program builds on the concept of the Average Crop Revenue Election program and makes it more responsive by determining losses more locally than at current state levels, reduces overlap with crop insurance and simplifies the application and administrative processes, while saving billions of taxpayer dollars."

In summary, the ARRM Program would: 1) eliminate direct payments and counter-cyclical payments and replace SURE for Commodity Title Crops; 2) cost $28.469 billion (CBO score) and saves $19.810 billion over 10 years (CBO score); 3) provide better protection for farmers by targeting revenue rather than price (uses actual planted acres vs. base acres, a rolling average of revenue and recent market prices and up to date yields to set its guarantee); 4) rely on existing data that the Farm Service Agency and Risk Management Agency (RMA) already share whenever possible; 5) as an initial eligibility trigger, employ Crop Reporting Districts rather than the entire state; 6) use RMA harvest price so payment amounts are determined more promptly; and 7) limit payments to 15% of the program guarantee.

There are no payment limitations in the proposal, but it is assumed that the current Adjusted Gross Income test would remain in effect.

NCC Comments on Area-Wide Insurance Rule

The NCC submitted comments to a Federal Crop Insurance Corp. (FCIC) proposed rule that will expand the availability of area-wide insurance products. Currently, area-wide insurance products for revenue and yield, known as Group Risk Income Protection (GRIP) and Group Risk Plan (GRP), respectively, are offered on a limited basis.

The NCC expressed support for FCIC's efforts to expand the offering of area-wide insurance products. In the comments, the NCC urged that the new area-wide protection be available for all counties with upland cotton production. For certain counties, it may be necessary to aggregate counties into a larger geographical area. In those cases, FCIC should aggregate by the minimum amount necessary in order to allow the area-wide program to remain as localized as possible.

In voicing their agreement with FCIC's decision to broaden the sources of yield data beyond the estimates produced by USDA's National Agricultural Statistics Service, the NCC stressed that there be sufficient transparency regarding any adjustments to the yield data or methods used to resolve discrepancies between various USDA data. In addition, FCIC is urged to review expected county yields with a goal of insuring that long-term trends produce expected county yields that are indicative of current levels. With the use of additional data sources, FCIC is encouraged to explore the ability to expand the number of counties for which separate area-wide products can be offered for irrigated and non-irrigated practices.

Among other points, the NCC urged FCIC to offer the area-wide products at coverage levels up to 95%. Complete comments can be viewed from the NCC's home page, www.cotton.org.

China Currency Bill Introduced

A bipartisan group of 20 senators introduced the Currency Exchange Rate Oversight Reform Act of 2011 that combines elements of China currency legislation passed by the House last year with those of a Senate currency bill previously introduced by Sens. Schumer (D-NY) and Graham (R-SC).

"Passage of the bill would put China on notice that undervaluation of the renminbi (RMB) would no longer go unchallenged by the United States," the cosponsors said.

Senate Majority Leader Reid (D-NV) said the Senate will act "quickly" on a bill to counteract China's undervalued currency as a jobs measure. He said the vote on the currency bill will precede any action on the President's jobs package, which he introduced in the Senate.

"The first major jobs bill we're going to have will send a message to the Chinese, where we've lost 2.8 million jobs during the last eight years, and that is we're going to do something about Chinese currency," Sen. Reid said. Co-sponsors are: Sens. Schumer, Graham, Brown (D-OH), Sessions (R-AL), Burr (R-NC), Stabenow (D-MI), Bob Casey (D-PA), Hagan (D-NC), Snowe (R-ME), Whitehouse (D-RI), Reed (D-RI), Blumenthal (D-CT), Conrad (D-ND), Collins (R-ME), Cardin (D-MD), Levin (D-MI), Gillibrand (D-NY), Menendez (D-NJ), Manchin (D-WV) and Nelson (D-NE).

In advance of the introduction, 51 US businessand agricultural groups urged senators to oppose any currency bill because passage would be "counterproductive," according to a letter coordinated by the US-China Business Council. Using provisions of previous Schumer-Graham legislation, the new bill would establish criteria by which the Treasury Dept. would define fundamentally misaligned currencies and misaligned currencies for priority action in a semi-annual report to Congress. If a country's currency is designated for priority action and the country fails to adopt "appropriate" policies as a remedy, the administration would be obligated to take immediate action. If no policy changes occur after 360 days the US Trade Representative must request dispute settlement consultations on the currency policy in the World Trade Organization.

The bill puts pressure on the Commerce Dept. to investigate claims made as part of countervailing duty petitions that China's currency bestows an unfair subsidy. The bill also puts into statute a new standard that Commerce must investigate whether a currency undervaluation by a government provides a subsidy if a US industry requests such an investigation in its petition and provides the proper documentation for doing so.

Vilsack Announces Key Appointments

Agriculture Secretary Tom Vilsack announced that Max Holtzman will serve as acting deputy undersecretary for Farm and Foreign Agricultural Services, when Darci Vetter, the deputy undersecretary, takes maternity leave in mid-October.

Holtzman, currently senior adviser to the secretary, advises Vilsack on biotechnology, international trade and aquaculture issues.

Juan M. Garcia is named as deputy administrator for Farm Programs at the Farm Service Agency (FSA). Garcia has been acting deputy administrator since May. Before that, he served as the FSA state executive director for Texas, and also has served as FSA's agricultural program manager for Texas.

Ann Wright was named as deputy assistant secretary for Congressional Relations, a position she held on an acting basis. Wright previously served as deputy secretary for Marketing and Regulatory Programs starting in June '09.

Vision 21 Project Status Communicated

As part of the planned effort to communicate progress of theCotton Foundation's"Vision of U.S. Cotton's 21^st Century"(Vision 21) project,Cotton Incorporated distributed a news release to the trade media announcing the completion of a comprehensive life cycle inventory and life cycle analysis of cotton products.

The release noted that the two-year inventory/analysis, managed by PE International, was designed to establish current and accurate benchmarks of potential environmental impacts across the global cotton supply chain. The peer-reviewed data and assessment methodology will help direct sustainability research efforts for the cotton industry, as well as to aid textile decision-makers in achieving their own sustainability goals. The entire release containing more details on project specifics can be viewed at www.cottoninc.com/PressReleases/?articleID=556.

Sales, Shipments Steady

Net export sales for the week ending Sept. 15 were 68,300 bales (480-lb). This brings total '11-12 sales to approximately 6.9 million bales. Total sales at the same point in the '10-11 marketing year were approximately 8.4 million bales. Total new crop ('12-13) sales are 185,800 bales.

Shipments for the week were 61,700 bales, bringing total exports to date to 724,500 bales, compared with the 1.3 million bales at the comparable point in the '10-11 marketing year.

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