Cotton's Week February 16, 2001

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NCC: Farm Programs Must Provide Income Support

In testimony before House Agriculture Committee, Robert E. McLendon, chairman of NCC's Executive Committee, outlined farm policy concepts industry can support when commodity titles are amended. Meanwhile, he urged Congress to continue providing economic assistance as it has during past 3 years by:

  • Supplementing existing Agriculture Market Transition Act (AMTA) payments with additional marketing loss payments at highest rates possible,
  • Allowing producers to receive supplemental payments on higher of existing crop bases or average of recent planting history, provided adequate funds are available,
  • Mitigating impact of limitations on supplemental payments, enabling producers to qualify for total payments of not less than amount of AMTA and marketing loss payments received for '00 crop, and
  • Reauthorizing cottonseed payments when seed prices are low.

McLendon, NCC Executive Vice President Gaylon Booker and Vice President for Policy Analysis and Program Coordination Mark Lange responded to questions from 26 members of committee who attended hearing. Chairman Combest (R-TX), Ranking Member Stenholm (D-TX) and Reps. Dooley (D-CA), Berry (D-AR), Chambliss (R-GA) and Clayton (D-NC) were among members who asked detailed questions about NCC proposal and its effect on farm income, US competitiveness and industry infrastructure.

With respect to longer-term policy, McLendon said NCC favors combination of fixed and counter cyclical payments, which, in conjunction with marketing loan and 3-step competitiveness plan, would return 80 cents to growers. While not offering industry consensus on loan rate, he said NCC believes its leadership will be able to provide timely recommendation with respect to loan formulas and/or rates during course of new farm bill discussions.

McLendon said NCC's recommended combination of fixed and counter cyclical payments would improve support levels in cost-effective manner and enable US to comply with its obligations under Uruguay Round of WTO.

"Our goal is income support from programs and the market that will provide cotton producers with a return equivalent to what they have received in recent years from all sources, including the market, farm programs and emergency assistance," he testified. "With the sharp jump in input and production costs we have seen recently, it is even more important that we craft an improved safety net for cotton farmers."

Concerning NCC's rationale for mix of coupled and decoupled payments, McLendon said, "Generally, the most cost effective support measures are those that are coupled to prices and production, since outlays under such programs are made only when prices and/or returns fall below an established threshold. Fixed, decoupled payments, on the other hand, are less cost effective but more WTO friendly. The multiple goals of income support, cost effectiveness and WTO compliance leads the NCC to propose new farm policy that relies on a combination of coupled and decoupled payments."

McLendon said counter cyclical programs "... share the important common advantages of cost effectiveness as compared to a purely fixed payment program and predictability as compared to the emergency assistance packages Congress has approved during the past 3 years." He also encouraged lawmakers to retain as much cropping flexibility as possible and to continue assistance to offset low cottonseed prices.

McLendon called for elimination of payment limits, or - at minimum - retaining 3-entity rule and provisions for Commodity Credit Corp. loan redemptions with marketing certificates and providing for separate and reasonable limits for each category of benefits.

"The NCC remains opposed to payment limits in any form," he said. "They are both counterproductive and discriminatory. Limiting farm program benefits on the basis of size tends to disadvantage the larger, more efficient farming units, causing them to be broken up into smaller units that are less efficient and less capable of surviving in a global market."

He also provided NCC's recommendations regarding ELS cotton policy: 1) continuation of ELS non-recourse loan program without amendment, 2) continuation of the ELS competitiveness provisions authorized in FY00 Agricultural Appropriations Bill - but with full funding for that program and 3) establishment of some form of counter-cyclical payments commensurate with those that may be established for upland cotton.

Rep. Chambliss, chairman, General Farm Commodities subcommittee, was particularly interested in basis on which future financial assistance is delivered, reminding committee that cotton producers in Georgia and Southeast have increased acreage but receive benefits on historical plantings, which are well below current levels.

Chairman Combest and Rep. Stenholm were complimentary of thoroughness of NCC analysis and detailed recommendations. Number of new members of committee from non-cotton producing areas were active participants in hearing. New member Osborne (R-NE) and Rep. Gutknecht (R-MN), member of Budget Committee, focused on budget issues and cautioned that it will be difficult to secure long-term funding at levels which have been expended in recent years.

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Cottonseed Assistance Payment Estimated at $15.53 Per Ton

With ginning season nearing completion, USDA soon will begin implementing `00-01 cottonseed assistance program. Given $100 million allocation for program, payment would be approximately $15.53 per ton of cottonseed ($5.89 per bale of lint) based on latest USDA estimates of cotton and cottonseed production. `00-01 cottonseed assistance program should work largely same as that of previous year with application form mailed to each individual gin, which then is required to verify number of bales ginned during season. Final determination of payment will be made once application deadline has passed. At this time, USDA has not announced program starting or ending dates.

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FARRM Accounts Bill Introduced in House

Reps. Hulshof (R-MO) and Thurman (R-FL) introduced legislation (HR 662) that would allow farmers to establish tax deferred savings accounts known as Farm and Ranch Risk Management (FARRM) accounts.

Hulshof and Thurman, with support from virtually all agriculture groups, including NCC, have been principal co-sponsors of similar legislation in recent years. Legislation authorizing FARRM accounts passed House and Senate during 106th Congress and was included in omnibus Taxpayer Relief Act of '00. However, legislation did not become law because Senate declined to consider conference report at end of last Congress, preferring instead to wait for new administration. FARRM accounts were endorsed by President Bush during his campaign.

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NCC Supports Newsome Appointment at CFTC

NCC joined agriculture community in urging President Bush to appoint Hon. James Newsome as chairman of Commodity Futures Trading Commission. Prominent Mississippi rancher and agriculture leader currently serves as acting chairman.

Newsome has been advocate for production agriculture throughout long debate on renewal of Commodity Exchange Act, which was enacted at end of 106th Congress. CFTC will play key role in implementation of legislation and has oversight responsibility for major futures exchanges, including NY Board of Trade.

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Bale Packaging Panel to Meet March 5-6

Joint Cotton Industry Bale Packaging Committee will convene March 5-6 at Ridgeway Inn in Memphis. General session will convene at 1:30 p.m. March 5. Tentative agenda includes: report from JCIBPC Chairman Keith Pendergrass, Donalson, GA, ginner; JCIBPC subcommittee update on naked bale program review; overview of '00 packaging use, '00 test programs and other activities, including recessed ties, bale size and density. Committee also will hear requests for '01 material approval and/or experimental test programs.

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Sleepwear Amendments Revocation Efforts Continue

Rep. Andrews (D-NJ) reintroduced legislation (H.R. 528) during Burn Awareness Week to revoke without going through rulemaking and without regard to any other law, `96 amendments to CPSC Children's Sleepwear Flammability standards. This is part of continued efforts by Task Force that includes Shriners Hospitals to overturn those amendments that were made after years and millions of dollars study by CPSC and reaffirmed in `99.

Shriners maintain that new data since amendments show increase in sleepwear-related burn injuries. CPSC review of data indicates increase is not due to sleepwear but caused by nature of fire.

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European Parliament Votes in Strict Biotech Rules

European Parliament voted this week to approve stringent new rules governing introduction and use of biotechnology enhanced crops. Rules authorize granting of 10-year permits as well as labeling of foods made from biotechnology enhanced commodities. Under new rules, all new biotech crops must pass through committee of experts from 15 European Union states. Biotechnology industry generally welcomed new rules. Europe has had de facto ban on new biotech crops since `99. Biotechnology group in Europe, EuropaBio, stated that "directive at last leads the way to establishing a more rigorous and coherent framework for the regulation and market supervision of biotechnology in Europe."

Six European countries, though, said new rules did not go far enough and announced they would not end their ban on new biotech products until additional laws are passed that would: 1) assure biotech products could be traced through food chain and 2) institute regime of environmental liability for any possible harm that might be done by biotech products. However, those 6 (France, Italy, Austria, Denmark, Greece and Luxembourg) will not be enough to veto new approvals for rest of Europe.

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Export Promotion Programs Face Possible Cuts

Bush Administration is planning broad cuts in government support to US businesses and US cotton industry's international market development programs, according to story in Wall Street Journal.

White House budget officials are telling government agency heads to expect that business-subsidy programs will be trimmed to provide money for such Bush priorities as education, defense and tax cuts.

Programs facing cuts include trade agreement enforcement, export promotion, farm subsidies and technology development. USDA also faces possible cuts in $90 million overseas marketing program.

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Market Research Team to Explore Opportunities in Africa

CCI and Cotton Incorporated, in cooperation with Importer Support Program of Cotton Board, will sponsor market research team to Sub-Saharan Africa Feb. 18-28. Team will explore opportunities available to US importers of cotton products as result of African Growth and Opportunities Act of 2000.

Act opens US market for exports from 48 Sub-Saharan African countries, with preferential access for initial period of 8 years. Team will travel to South Africa, Lesotho and Mauritius, with stops in Cape Town, Durban, Johannesburg, Maseru and Port Louis. Each stop will include visits to local companies and meetings with industry representatives, government officials and trade specialists.

Nine-member team includes: Werner Bieri (Buhler Quality Yarns Corp.); Stephen Bocsardy (The Limited, Inc.); Christopher Fisher (Wal-Mart Stores, Inc.); Peter Mulroy (SunTrust Banks, Inc.); John Pucheu (Pucheu Bros. Ranch); Miguel Rubiera (Cone Mills Corp.); Kevin Tierney (L.L. Bean, Inc.); Elizabeth King (Cotton Board); and Marsha Powell (CCI).

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Export Commitments Reach 5.7 Million Bales

Net export sales for week ending Feb. 8 were almost 142,000 bales (480-lb.), raising total '00-01 commitments to about 5.7 million. Mexico accounts for about 34% of total US commitments to date. Shipments for week were over 137,000 bales, bringing total '00-01 exports to slightly less than 2.9 million.

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Effective Feb. 16-22, '00

Adj. World Price, SLM 11/16........46.61 cents*
Coarse Count Adjustment............0.00 cents
Current Step 2 Certificate Value...5.04 cents
Marketing Loan Gain Value..........5.31 cents
Import Quotas Open..........................1
*No Adjustment Made Under Step I

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Five-Day Average

Current 3135 c.i.f. N. Eur........60.46 cents
Forward 3135 c.i.f. N. Eur...........No Quote
Coarse Count c.i.f. N. Eur........57.17 cents
Current US c.i.f. N. Eur..........66.75 cents
Forward US c.i.f. N. Eur.............No Quote

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