Cotton's Week July 20, 2001

NCC Outlines Farm Bill Needs to Key Senate Panel

In testimony before Senate Agriculture Committee, NCC Chairman James Echols relayed recommendations for upland cotton title of next farm bill. Echols said industry supports continuation of non-recourse marketing loan, with redemption provisions keyed to world market price. He also urged continuation of 3-step competitiveness program for cotton with elimination of 1.25-cent threshold for Step 2 and continued issuance of marketing certificates.

"Elimination of the 1.25-cent threshold would not provide nearly enough adjustment to fully offset the adverse effects of a strong dollar," Echols said. "However, it would be a move in the right direction and one that our industry fully supports. Beyond this, we are continuing to explore other options that could help avert the devastating exchange rate impact on our industry."

Echols told panel NCC favors augmenting these programs with combination of fixed and counter-cyclical payments, which, together with returns from market, will provide producers with return equivalent to what they have received in recent years from all sources, including emergency assistance.

"We encourage you to retain as much cropping flexibility as possible," Echols testified. "We support base acreage provisions that will offer farmers the choice of keeping their current payment base or opting for an updated payment base."

Echols told panel NCC also supports: 1) retention of frozen yields as cost containment measure, 2) establishment of permanent program for cottonseed, 3) other adjustments in program provisions to offset unusually severe impact on cotton of strong dollar, 4) elimination of payment limits or, at minimum, retention of 3-entity rule and 5) separate and reasonable limits for each category of benefits.

Memphis cotton merchant said NCC also supports "a re-invigoration of our export assistance programs," including changes to export guarantee program and increased support for Foreign Market Development Program (FMD) and Market Access Program (MAP). That includes $43.25 million per year for FMD program and restoration of annual support for MAP to its ’92 level of $200 million.

Regarding conservation, Echols said NCC supports continuation of existing programs such as Environmental Quality Incentive Program, Conservation Reserve Program and Wetlands Reserve Program assuming adequate funding is available.

Echols told lawmakers that until commodity titles are amended, NCC urges Congress to continue to provide relief to cotton producers similar to emergency assistance provided during last 3 marketing years.

NCC Testimony Supports House Ag Committee Proposal

Policies outlined in House Agriculture Committee’s concept paper establish "a very credible foundation from which to build new farm programs that will contain an effective safety net for farmers and enhance their competitiveness," NCC Director Mark Williams said in testimony presented to committee.

From cotton’s perspective, there is little about paper’s concept with which to take issue, Farwell, TX, producer said. NCC supports many aspects of committee’s work, including: marketing loan keyed to world market price; retention of cotton’s 3-step competitiveness plan; retention of fixed, decoupled payments; new counter-cyclical payment program; option for growers to update payment bases; and retention of full planting flexibility without mandatory supply controls.

"The proposal offers other provisions that are important to our members," Williams said. "They include marketing certificates, the 3-entity rule for payment limitation, separate limits for each category of benefits and improvements in conservation and trade programs.

"Given the budget limitations within which you worked, you have done an excellent job to construct a long-term farm policy to help farmers cope with subsidized competition and changing market conditions."

Williams shared some NCC concerns, too. Because cottonseed prices continue to be weak and cotton producers rely on cottonseed revenue for about 13% of total returns, NCC supports continuation of cottonseed assistance program or inclusion of cottonseed in other oilseed programs discussed in concept paper.

Regarding trade, Williams said, NCC believes Trade Promotion Authority is worthwhile if Administration commits to negotiate in US agriculture’s best interest and will work closely with Congressional leaders. He commended committee members for registering dissatisfaction with Administration’s decision to report Marketing Loss Assistance as WTO amber box spending without discussing matter with Congressional leaders and urged panel to continue its involvement with Administration officials to help restore agriculture priority and commitment to WTO negotiations.

EPA Seeks Stay in Clean Water Lawsuit

Administration filed motions designed to stay proceedings in lawsuit brought by agricultural organizations, including NCC, and several states and municipalities challenging regulations issued in ’00 that subjected non-point sources of pollution (mainly agricultural sources) to potentially restrictive regulation by states and EPA. Agency has stated it will review regulation and revise it to make it more "workable."

In lawsuit, NCC and other organizations argued EPA regulation was contrary to provisions of Clean Water Act that required different regulatory framework for point sources of water pollution (mainly manufacturing) and non-point sources. States in suit had several concerns, most significantly that EPA was imposing new and burdensome enforcement requirements on states without adequate scientific data concerning water quality in all regulated waters covered by rule.

Regulation, which was set to become effective Oct. 1, put far greater emphasis on reducing runoff of agricultural waste, fertilizer and sediment, requiring states to develop plans covering about 21,000 bodies of water–from lakes and ponds to rivers and segments of streams–and start cleanup within 8 to 13 years. In response to objections by agricultural and state interests, Congress previously acted to delay effective date of regulation.

EPA and Justice Department asked DC Circuit Court to postpone action on lawsuit for 18 months to give agency time to engage states, municipalities and other stakeholders in comment process designed to improve regulation. EPA has indicated it will delay effective date of regulation for 18 months or more while it rewrites proposal. EPA Administrator Whitman said that regulation was deemed unworkable by many who would be affected by it and that new National Academy of Sciences study of issue needed to be considered in improving EPA’s attempts to regulate non-point sources of water pollution.

Some environmental groups involved in lawsuit have registered opposition to EPA’s action. NCC and American Farm Bureau are working to ensure that all aspects of litigation are stayed at same time and that court will ensure EPA moves forward in timely fashion with rewrite of regulation. "Our legal challenge to this regulation has resulted in EPA deciding to review its entire approach to regulating agriculture as a non-point source of water pollution," stated Gaylon Booker, NCC President and CEO. "EPA is essentially admitting there are serious flaws in its broad effort to use the Clean Water Act to impose these types of mandatory restrictions on agriculture. This is an important first step in convincing EPA to take a rational, reasonable approach to regulating non-point sources of water pollution."

Ag Funding Bill Approved by Senate Appropriations Committee

FY02 agriculture funding legislation, which would provide $73.9 billion for USDA, Food and Drug Administration and Commodity Futures Trading Commission programs and operations, was approved on voice vote by Senate Appropriations Committee. House approved its version of legislation July 11.

During relatively brief mark up, Senators withheld controversial amendments but may offer them when legislation reaches Senate floor. Bill would provide $31.8 billion for agriculture programs, $984 million for conservation and $2.7 billion for rural economic and community development. Nutrition and international programs are funded at $35.8 billion and $1.1 billion, respectively.

Vietnam Agreement Passes Senate Finance Committee

US-Vietnam bilateral trade agreement moves to full Senate for consideration under expedited procedure following Senate Finance Committee’s approval on voice vote. If agreement is approved, President will be authorized to extend normal trade relations status to Vietnam.

During consideration, Finance Committee Chairman Baucus (D-MT) expressed support for linking benefits under future textile agreement with Vietnam to Vietnam’s demonstration of improvement in labor rights.

Agreement was signed July ’00, following 4 years of negotiations.

USDA Announces Sign-up Dates for Quality Loss Program

Sign-up will begin Aug. 13 for Quality Loss Program (QLP), according to announcement by USDA, which did not establish ending date. Under ’00 Crop Disaster Program (CDP), some producers may have received payments for yield loss that included quality loss component. QLP offers additional coverage for crops when CDP payments are inadequate.

Any quality loss payment earned under CDP (instances where quality losses were converted to equivalent yield loss and paid as CDP) will be subtracted from QLP. Combined total payments for QLP and CDP are limited to $80,000 per "person." QLP compensates farmers who suffered at least 20% loss on affected production. QLP payment is calculated by multiplying 65% of affected production by 65% of loss in value due to quality.

Lugar Introduces Conservation Concept Paper

Sen. Lugar (R-IN), ranking member of Senate Agriculture Committee, discussed his new concept paper regarding conservation program improvements. "Working Lands Conservation Act" outlines 2 key goals: 1) Assist farmers in meeting short-term environmental challenges (water and air quality concerns, regulation of confined animal feeding operations, etc.) and 2) Enhance long-term sustainability of land.

Lugar's proposed changes would require approximately $2 billion per year above current conservation baseline. Proposed changes include increased funding and reforms to Environmental Quality Incentives Program (EQIP). Funding increases are also proposed for Wetlands Reserve Program, Wildlife Incentives Program and Farmland Protection Program. Plan maintains current cap of 36.4 million acres on Conservation Reserve Program.

Committee Chairman Harkin (D-IA) previously introduced proposal for conservation reform titled "Conservation Security Act (CSA)," which would provide incentive-based payments for conservation practices. Details of CSA where provided in June 1 issue of Cotton's Week.

Cotton Sales More than Double Previous Week

Net export sales for week ending July 12 were approximately 81,700 bales (480 lb.), approximately 49,500 bales higher than previous week’s sales, raising total ’00-01 sales to almost 8.37 million. Total sales at same point in ’99-00 marketing year were approximately 7.8 million bales.

Shipments for week were 218,100 bales, bringing total exports to date to approximately 6.37 million bales, down from 6.6 million at comparable point in ’99-00 marketing year.

Adj. World Price, SLM 1^1/16         31.23 cents*
Coarse Count Adjustment              0.00 cents
Current Step 2 Certificate Value     2.80 cents
Marketing Loan Gain Value           20.69 cents
*No Adjustment Made Under Step I

Five-Day Average