MEMPHIS – USDA has announced the release of regulations necessary to implement the cotton program provisions of the new farm law. Starting on October 31, the calculation of the adjusted world price (AWP) will be made in accordance with adjustments included in the new law, which are designed to ensure US cotton is available at competitive prices in domestic and international markets.
Importantly, the USDA announcement makes clear that the new AWP applies to both 2007 and 2008 crop cotton loans. This will ensure that 2007 crop loans maturing at the end of October can be redeemed at a competitive price and will return up to an additional $8.00 per bale to producers. Beginning October 31, any loan deficiency payments, available to producers who choose to forego the loan, will be based on the AWP as calculated in accordance with the new law.
NCC Chairman Larry McClendon welcomed USDA’s announcement as good news for producers, warehouses, manufacturers and merchandisers who are struggling to compete in a difficult and volatile market. Vienna, Georgia-based grower Chuck Coley, Chairman of the NCC’s American Cotton Producers, said special appreciation is due to Senator Saxby Chambliss (R-GA) for his effective leadership in drafting the legislation, shepherding it through the legislative process and working with the Administration to ensure that the cotton program was implemented in accordance with Congressional intent.
The new law mandates that USDA makes storage credits available whenever the AWP is below the loan. However, to reduce program costs, the new law also required that the maximum storage credit be reduced by 10% for the 2008-11 crops and 20% beginning with the 2012 crop. The USDA announcement clarifies that the reduced storage rate will not apply to redemptions of 2007 crop cotton. Beginning with the 2008 crop, the reductions will apply to the maximum rate established by USDA in August 2006 and not to individual warehouse rates which significantly reduces any adverse financial impact of cotton warehouses.
The adjustments in the calculation of the weekly AWP were made to enhance competitiveness and the modest projected costs were totally offset by changes in other provisions of the cotton program. The new law also includes an economic assistance program for US domestic textile mills. The regulations approved by USDA will establish the rules for participation in that program.
“Thanks to Senator Chambliss’ tireless efforts throughout the process, we have a program that provides the industry an opportunity to be competitive and continue to make a major contribution to Georgia’s economy,” Coley added. “Senator Chambliss’ advocacy for a regulation that treats Georgia’s growers, warehouses, manufacturers and merchandisers in a fair and equitable manner is critical to a robust and competitive cotton industry.”
“The efforts of Senator Chambliss were instrumental in the eventual publication of the rules. In addition, the cotton industry recognizes the key role played by USDA Under Secretary Mark Keenum in the development of the regulation,” noted NCC Chairman McClendon.